SCOTTSDALE, Ariz.--(BUSINESS WIRE)--Nuverra Environmental Solutions, Inc. (NYSE American: NES) (“Nuverra,” the “Company,” “we,” “us” or “our”) today announced financial and operating results for the third quarter and nine months ended September 30, 2019.

SUMMARY OF QUARTERLY RESULTS



  • Third quarter revenue was $43.1 million, a decrease of approximately 4.7%, or $2.1 million, when compared with revenue of $45.2 million in the second quarter of 2019.


  • When compared to the same period in the prior year, third quarter revenue decreased 13.2%, or $6.6 million.


  • Net loss for the third quarter was $6.1 million as compared to net losses of $5.0 million in the second quarter of 2019 and $7.1 million in the third quarter of 2018.


  • Adjusted EBITDA for the third quarter was $4.6 million, a decrease of $0.7 million compared with $5.3 million in the second quarter of 2019.


  • Adjusted EBITDA for the third quarter increased by $0.6 million over the same period in the prior year.


  • Total liquidity available as of September 30, 2019 was $19.9 million.

“In the third quarter of 2019, we are seeing more of the effects of the industry slowdown on our revenues,” said Charlie Thompson, Chief Executive Officer. “The biggest impacts were felt in the Rocky Mountain division third party trucking, lay flat and landfill businesses. Fewer fracs and flowbacks in our geographies impacted the third party business and we saw less drilling near our landfill. The Northeast division continued to be impacted by the reuse trend and the Haynesville market saw declining activity with the lower natural gas prices. Related to this decline in activity is greater pricing pressure from our customers and our competitors. We continue to work on cost reduction measures and operating efficiencies and are accelerating those measures as we start the fourth quarter. We have noticed an increase in Northeast disposal volumes since the middle of September and are optimistic that trend will continue in the fourth quarter. We expect continued pressure in the Rocky Mountain and the Southern divisions, but are focused on efficient customer service and safety to preserve customer relationships.”

THIRD QUARTER 2019 RESULTS

Third quarter revenue was $43.1 million, a decrease of $2.1 million, or 4.7%, from $45.2 million in the second quarter of 2019. Of this 4.7% decrease, approximately 3.4% is attributable to a decrease in activities and 1.3% to pricing decreases.

When compared to the third quarter of 2018, third quarter 2019 revenue decreased by 13.2%, or $6.6 million, primarily due to decreases in activity levels for water transfer services for all three divisions, partially offset by increases in disposal services in the Northeast and Southern divisions. In the Rocky Mountain division, the decrease in water transfer and disposal service revenues was primarily due to a $3.0 million decrease in water transfer revenues from lower trucking volumes outsourced to third parties, a $1.3 million reduction in water transfer revenues from lay flat temporary hose, and a $1.1 million decrease in disposal service revenues from our landfill. In the Northeast division, the reuse of production water in customer completion activities during the third quarter continued to negatively impact our activity levels for water transfer services with total billable hours down 12% from the prior year. Offsetting this decrease in the Northeast was an increase in disposal services primarily due to the acquisition of Clearwater Solutions in the fourth quarter of 2018, which contributed revenues of $2.2 million in the third quarter of 2019. In the Southern division, the lower activity levels for water transfer services is due to a decrease in trucking volumes primarily from one major customer.

Total costs and expenses for the third quarter were $48.1 million. Total costs and expenses, adjusted for special items, were $47.7 million, or a $1.6 million decrease when compared with $49.3 million in the second quarter of 2019. Total costs and expenses, adjusted for special items, decreased 14.6% compared with $55.9 million in the third quarter of 2018 as a result of lower activity levels, as well as a favorable service mix due to growth in higher margin disposal services and active cost reduction efforts over the past year.

Net loss for the third quarter was $6.1 million as compared to a net loss of $5.0 million in the second quarter of 2019. Net loss for the third quarter of 2018 was $7.1 million. For the third quarter of 2019, the Company reported a net loss, adjusted for special items, of $5.7 million. Special items in the third quarter primarily included gains on the sale of underutilized assets, offset by stock-based compensation expense and long-lived asset impairment charges for assets classified as held for sale in the Rocky Mountain division. This compares with a net loss, adjusted for special items, of $5.3 million in the second quarter of 2019 and $7.4 million in the third quarter of 2018.

Adjusted EBITDA for the third quarter of 2019 was $4.6 million, a decrease of $0.7 million compared with $5.3 million in the second quarter of 2019. Of the 13.7% decrease in adjusted EBITDA, 12.2% related to pricing decreases, 2.3% related to a decrease in activity levels, both of which were partially offset by a 0.8% reduction in corporate expenses. When compared to the third quarter of 2018, adjusted EBITDA increased $0.6 million, or 16.2%. The 16.2% increase is comprised of a benefit of 44.7% for acquisitions/closures and 23.3% for corporate items, partially offset by 39.0% for decreases in activity levels and 12.8% for decreases in pricing. Third quarter 2019 adjusted EBITDA margin was 10.6%, compared with 11.7% in the second quarter of 2019 and 7.9% in the third quarter of 2018.

YEAR-TO-DATE RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 (“YTD”)

YTD revenue was $131.0 million, a decrease of $17.3 million, or 11.7%, from $148.3 million for the same period in 2018. The decrease in revenues is primarily due to decreases in water transfer services in all three divisions, partially offset by increases in disposal services in all three divisions. Additionally, $1.8 million in revenues associated with the Eagle Ford Shale area were included in revenues in the prior year but did not reoccur in the current year due to management’s decision to exit the Eagle Ford Shale area as of March 1, 2018.

In the Rocky Mountain division, the decrease in water transfer service revenues was primarily due to a $9.9 million decrease in revenues from lower trucking volumes outsourced to third parties and a $4.8 million reduction in revenues from lay flat temporary hose. In the Northeast division, the reuse of production water in customer completion activities during 2019 negatively impacted our activity levels for water transfer services with total billable hours down 9% from the prior year. Offsetting this decrease in the Northeast was an increase in disposal services primarily due to the acquisition of Clearwater Solutions in the fourth quarter of 2018, which contributed revenues of $6.7 million in 2019. In the Southern division, the lower activity levels for water transfer services is due to a decrease in trucking volumes from several key customers in the division.

YTD net loss was $17.4 million, an improvement of $33.1 million when compared with a net loss of $50.5 million for the same period in 2018. YTD net loss, adjusted for special items, was $17.1 million, an improvement of $12.9 million when compared with a net loss, adjusted for special items, of $30.0 million for the same period in 2018. YTD special items primarily included gains on the sale of underutilized assets, offset by stock-based compensation expense, continued reorganization expenses related to our 2017 chapter 11 filing and long-lived asset impairment charges for assets classified as held for sale in the Northeast and Rocky Mountain divisions.

YTD adjusted EBITDA was $14.4 million, an increase of $3.9 million, or 37.8%, when compared with the same period in 2018. Adjusted EBITDA margin for the 2019 YTD period was 11.0%, compared with 7.0% in 2018.

CASH FLOW AND LIQUIDITY

Net cash provided by operating activities for the nine months ended September 30, 2019 was $4.6 million, while capital expenditures net of asset sales consumed cash of $2.5 million. Asset sales were related to unused or under-utilized assets. The proceeds have been reinvested in 2019 in returns-driven growth projects, including the purchase of new trucks for our fleet.

Total liquidity available as of September 30, 2019 was $19.9 million. This consisted of cash and available revolver borrowings of $14.2 million, plus an additional $5.7 million delayed draw borrowing capacity under our second lien term loan. As of September 30, 2019, total debt outstanding was $36.9 million, consisting of $18.8 million under our senior secured term loan facility, $9.5 million under our second lien term loan facility, and $8.6 million of finance leases.

About Nuverra

Nuverra Environmental Solutions, Inc. is a leading provider of water logistics and oilfield services to customers focused on the development and ongoing production of oil and natural gas from shale formations in the United States. Our services include the delivery, collection, and disposal of solid and liquid materials that are used in and generated by the drilling, completion, and ongoing production of shale oil and natural gas. We provide a suite of solutions to customers who demand safety, environmental compliance and accountability from their service providers. Find additional information about Nuverra in documents filed with the U.S. Securities and Exchange Commission (“SEC”) at http://www.sec.gov.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. You can identify these and other forward-looking statements by the use of words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “might,” “will,” “should,” “would,” “could,” “potential,” “future,” “continue,” “ongoing,” “forecast,” “project,” “target” or similar expressions, and variations or negatives of these words.

These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including statements regarding market and industry trends and developments, and any forward-looking statements contained herein are based on information available to us as of the date of this press release and our current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. Future performance cannot be ensured, and actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include, among others: financial results that may be volatile and may not reflect historical trends due to, among other things, changes in commodity prices or general market conditions, acquisition and disposition activities, fluctuations in consumer trends, pricing pressures, transportation costs, changes in raw material or labor prices or rates related to our business and changing regulations or political developments in the markets in which we operate; risks associated with our indebtedness, including changes to interest rates, decreases in our borrowing availability, our ability to manage our liquidity needs and to comply with covenants under our credit facilities; the loss of one or more of our larger customers; difficulties in successfully executing our growth initiatives, including identifying and completing mergers, acquisitions, combinations and divestitures, successfully integrating merged, acquired, or combined business operations, and identifying and managing risks inherent in mergers, acquisitions, combinations and divestitures, as well as differences in the type and availability of consideration or financing for such mergers, acquisitions, combinations and divestitures; our ability to attract and retain key executives and qualified employees in key areas of our business; our ability to attract and retain a sufficient number of qualified truck drivers in light of industry-wide driver shortages and high-turnover; the availability of less favorable credit and payment terms due to changes in industry condition or our financial condition, which could constrain our liquidity and reduce availability under our revolving credit facility; higher than forecasted capital expenditures to maintain and repair our fleet of trucks, tanks, equipment and disposal wells; control of costs and expenses; changes in customer drilling, completion and production activities, operating methods and capital expenditure plans, including impacts due to low oil and/or natural gas prices or the economic or regulatory environment; risks associated with the limited trading volume of our common stock on the NYSE American Stock Exchange, including potential fluctuation in the trading prices of our common stock; risks and uncertainties associated with our completed restructuring process, including the outcome of a pending appeal of the order confirming the plan of reorganization; risks associated with the reliance on third-party analysts, appraisers, engineers and other experts; present and possible future claims, litigation or enforcement actions or investigations; risks associated with changes in industry practices and operational technologies and the impact on our business; risks associated with the operation, construction, development and closure of saltwater disposal wells, solids and liquids transportation assets, landfills and pipelines, including access to additional locations and rights-of-way, permitting and licensing, environmental remediation obligations, unscheduled delays or inefficiencies and reductions in volume due to micro- and macro-economic factors or the availability of less expensive alternatives; the effects of competition in the markets in which we operate, including the adverse impact of competitive product announcements or new entrants into our markets and transfers of resources by competitors into our markets; changes in economic conditions in the markets in which we operate or in the world generally, including as a result of political uncertainty; reduced demand for our services due to regulatory or other influences related to extraction methods such as hydraulic fracturing, shifts in production among shale areas in which we operate or into shale areas in which we do not currently have operations; the unknown future impact of changes in laws and regulation on waste management and disposal activities, including those impacting the delivery, storage, collection, transportation, treatment and disposal of waste products, as well as the use or reuse of recycled or treated products or byproducts; risks involving developments in environmental or other governmental laws and regulations in the markets in which we operate and our ability to effectively respond to those developments including laws and regulations relating to oil and natural gas extraction businesses, particularly relating to water usage, and the disposal, transportation and treatment of liquid and solid wastes; and natural disasters, such as hurricanes, earthquakes and floods, or acts of terrorism, or extreme weather conditions, that may impact our business locations, assets, including wells or pipelines, distribution channels, or which otherwise disrupt our or our customers’ operations or the markets we serve.

The forward-looking statements contained, or incorporated by reference, herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s views as of the date of this press release. The Company undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, changes in expectations or otherwise. Additional risks and uncertainties are disclosed from time to time in the Company’s filings with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.


NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(In thousands, except per share amounts)



(Unaudited)



 



Three Months Ended



 



Nine Months Ended



 



September 30,



 



September 30,



 



2019



 



2018



 



2019



 



2018



Revenue:



 



 



 



 



 



 



 



Service revenue



$



38,862



 



 



$



45,694



 



 



$



119,101



 



 



$



136,541



 



Rental revenue



4,236



 



 



3,962



 



 



11,864



 



 



11,732



 



Total revenue



43,098



 



 



49,656



 



 



130,965



 



 



148,273



 



Costs and expenses:



 



 



 



 



 



 



 



Direct operating expenses



34,297



 



 



39,753



 



 



101,371



 



 



120,449



 



General and administrative expenses



4,774



 



 



5,849



 



 



15,529



 



 



31,183



 



Depreciation and amortization



8,928



 



 



10,018



 



 



27,340



 



 



36,731



 



Impairment of long-lived assets



120



 



 



100



 



 



237



 



 



4,563



 



Other, net



(4



)



 



49



 



 



(10



)



 



1,117



 



Total costs and expenses



48,115



 



 



55,769



 



 



144,467



 



 



194,043



 



Operating loss



(5,017



)



 



(6,113



)



 



(13,502



)



 



(45,770



)



Interest expense, net



(1,279



)



 



(1,241



)



 



(3,997



)



 



(3,695



)



Other income, net



280



 



 



169



 



 



457



 



 



683



 



Reorganization items, net



10



 



 



137



 



 



(200



)



 



(1,609



)



Loss before income taxes



(6,006



)



 



(7,048



)



 



(17,242



)



 



(50,391



)



Income tax expense



(46



)



 



(69



)



 



(171



)



 



(69



)



Net loss



$



(6,052



)



 



$



(7,117



)



 



$



(17,413



)



 



$



(50,460



)



 



 



 



 



 



 



 



 



Earnings per common share:



 



 



 



 



 



 



 



Net loss per basic common share



$



(0.39



)



 



$



(0.61



)



 



$



(1.11



)



 



$



(4.31



)



 



 



 



 



 



 



 



 



Net loss per diluted common share



$



(0.39



)



 



$



(0.61



)



 



$



(1.11



)



 



$



(4.31



)



 



 



 



 



 



 



 



 



Weighted average shares outstanding:



 



 



 



 



 



 



 



Basic



15,715



 



 



11,696



 



 



15,657



 



 



11,696



 



Diluted



15,715



 



 



11,696



 



 



15,657



 



 



11,696



 



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS



(In thousands)



(Unaudited)



 



September 30,



 



December 31,



 



2019



 



2018



Assets



 



 



 



Cash and cash equivalents



$



3,028



 



 



$



7,302



 



Restricted cash



1,384



 



 



656



 



Accounts receivable, net



31,045



 



 



31,392



 



Inventories



3,137



 



 



3,358



 



Prepaid expenses and other receivables



3,224



 



 



2,435



 



Other current assets



386



 



 



1,582



 



Assets held for sale



4,502



 



 



2,782



 



Total current assets



46,706



 



 



49,507



 



Property, plant and equipment, net



197,911



 



 



215,640



 



Operating lease assets



3,133



 



 






 



Equity investments



38



 



 



41



 



Intangibles, net



765



 



 



1,112



 



Goodwill



29,518



 



 



29,518



 



Other assets



99



 



 



118



 



Total assets



$



278,170



 



 



$



295,936



 



Liabilities and Shareholders’ Equity



 



 



 



Accounts payable



$



6,745



 



 



$



9,061



 



Accrued and other current liabilities



13,023



 



 



16,704



 



Current portion of long-term debt



6,657



 



 



38,305



 



Current contingent consideration



500



 



 



500



 



Total current liabilities



26,925



 



 



64,570



 



Long-term debt



30,134



 



 



27,628



 



Noncurrent operating lease liabilities



1,479



 



 






 



Deferred income taxes



385



 



 



181



 



Other long-term liabilities



7,577



 



 



7,130



 



Total liabilities



66,500



 



 



99,509



 



Commitments and contingencies



 



 



 



Shareholders’ equity:



 



 



 



Common stock



158



 



 



122



 



Additional paid-in capital



337,342



 



 



303,463



 



Treasury stock



(436



)



 






 



Accumulated deficit



(125,394



)



 



(107,158



)



Total shareholders’ equity



211,670



 



 



196,427



 



Total liabilities and shareholders’ equity



$



278,170



 



 



$



295,936



 



NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



(In thousands)



(Unaudited)



 



Nine Months Ended



 



September 30,



 



2019



 



2018



Cash flows from operating activities:



 



 



 



Net loss



$



(17,413



)



 



$



(50,460



)



Adjustments to reconcile net loss to net cash provided by operating activities:



 



 



 



Depreciation and amortization



27,340



 



 



36,731



 



Amortization of debt issuance costs, net



287



 



 






 



Accrued interest added to debt principal






 



 



119



 



Stock-based compensation



1,740



 



 



11,492



 



Impairment of long-lived assets



237



 



 



4,563



 



Gain on sale of UGSI






 



 



(75



)



Gain on disposal of property, plant and equipment



(1,828



)



 



(919



)



Bad debt recoveries



(65



)



 



(164



)



Change in fair value of derivative warrant liability



(32



)



 



(323



)



Deferred income taxes



204



 



 



11



 



Other, net



322



 



 



541



 



Changes in operating assets and liabilities:



 



 



 



Accounts receivable



412



 



 



1,423



 



Prepaid expenses and other receivables



(689



)



 



487



 



Accounts payable and accrued liabilities



(7,240



)



 



1,028



 



Other assets and liabilities, net



1,320



 



 



(234



)



Net cash provided by operating activities



4,595



 



 



4,220



 



Cash flows from investing activities:



 



 



 



Proceeds from the sale of property, plant and equipment



4,826



 



 



19,066



 



Purchases of property, plant and equipment



(7,341



)



 



(9,687



)



Proceeds from the sale of UGSI






 



 



75



 



Net cash (used in) provided by investing activities



(2,515



)



 



9,454



 



Cash flows from financing activities:



 



 



 



Payments on First and Second Lien Term Loans



(3,600



)



 



(2,132



)



Proceeds from Revolving Facility



139,661



 



 



172,336



 



Payments on Revolving Facility



(139,661



)



 



(172,336



)



Payments on Bridge Term Loan



(31,382



)



 






 



Proceeds from the issuance of stock



31,057



 



 






 



Payments on finance leases and other financing activities



(1,701



)



 



(1,399



)



Net cash used in financing activities



(5,626



)



 



(3,531



)



Change in cash, cash equivalents and restricted cash



(3,546



)



 



10,143



 



Cash and cash equivalents, beginning of period



7,302



 



 



5,488



 



Restricted cash, beginning of period



656



 



 



1,296



 



Cash, cash equivalents and restricted cash, beginning of period



7,958



 



 



6,784



 



Cash and cash equivalents, end of period



3,028



 



 



15,077



 



Restricted cash, end of period



1,384



 



 



1,850



 



Cash, cash equivalents and restricted cash, end of period



$



4,412



 



 



$



16,927



 


NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES

NON-GAAP RECONCILIATIONS

(In thousands)

(Unaudited)

This press release contains non-GAAP financial measures as defined by the rules and regulations of the United States Securities and Exchange Commission. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations or balance sheets of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures are included in the attached financial tables.

These non-GAAP financial measures are provided because management of the Company uses these financial measures in maintaining and evaluating the Company’s ongoing financial results and trends. Management uses this non-GAAP information as an indicator of business results, and evaluates overall performance with respect to such indicators. Management believes that excluding items such as acquisition expenses, amortization of intangible assets, stock-based compensation, asset impairments, restructuring charges, expenses related to litigation and resolution of lawsuits, and other charges, which may or may not be non-recurring, among other items that are inconsistent in amount and frequency (as with acquisition expenses), or determined pursuant to complex formulas that incorporate factors, such as market volatility, that are beyond our control (as with stock-based compensation), for purposes of calculating these non-GAAP financial measures facilitates a more meaningful evaluation of the Company’s current operating performance and comparisons to the past and future operating performance.

Contacts

Nuverra Environmental Solutions, Inc.

Investor Relations

602-903-7802