Nuverra Announces First Quarter 2019 Results

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 first quarter ended March 31, 2019.

SUMMARY OF QUARTERLY RESULTS

  • First quarter revenue was $42.6 million, a decrease of approximately
    13.4%, or $6.6 million, when compared with revenue of $49.2 million in
    the fourth quarter of 2018.
  • When compared to the same period in the prior year, first quarter
    revenue decreased 14.2%, or $7.0 million.
  • Net loss for the first quarter was $6.4 million as compared to $8.8
    million in the fourth quarter of 2018 and $32.2 million in the first
    quarter of 2018.
  • Adjusted EBITDA for the first quarter was $4.5 million, a decrease of
    $1.6 million compared with $6.1 million in the fourth quarter of 2018.
  • Adjusted EBITDA for the first quarter increased by $2.1 million over
    the same period in the prior year.
  • Total liquidity available for capital spending and other purposes as
    of March 31, 2019 was $18.7 million.

We continued to make progress in the first quarter on many of our
important initiatives: improving operating efficiencies, reducing costs,
implementing a centralized dispatch system in our Rocky Mountain
division, expanding our services to include oil hauling and broadening
customer coverage, to name a few. Adjusted EBITDA increased over the
same period in 2018; however, revenues decreased due to particularly
difficult weather in the first quarter of 2019 in some of our operating
regions and the trend toward more use of lay flat temporary hose for
fresh water delivery replacing trucking as a delivery service provider
and increased competition for that service. We also saw a very
competitive trucking market in our Northeast division due to a decrease
in customer activity. We continue to focus on improving our service and
had a strong quarter from a safety perspective. With better weather
conditions in the second quarter, we are beginning to see improved
activity, particularly in the Rocky Mountain division, and are working
hard on expanding what we do with our larger customers,” said Charlie
Thompson, Chief Executive Officer.

FIRST QUARTER 2019 RESULTS

First quarter revenue was $42.6 million, a decrease of $6.6 million, or
13.4%, from $49.2 million in the fourth quarter of 2018. Of this 13.4%
decrease, approximately 12.5% is attributable to decreases in activities
and 0.9% to pricing decreases. We typically see a slow down in activity
levels during the first quarter, as compared to the fourth quarter, due
to weather conditions in the Rocky Mountain and Northeast divisions.

When compared to the first quarter of 2018, first quarter 2019 revenue
decreased by 14.2%, or $7.0 million, primarily due to decreases in
activity levels for water transfer services in the Rocky Mountain and
Southern divisions, offset by increases in disposal services in all
three divisions. In the first quarter of 2018, the Rocky Mountain
division benefited from a number of large completion projects that
utilized third-party drivers, which did not repeat during the current
year resulting in the decline in revenue for the Rocky Mountain
division. In the Southern division revenue decreased as a result of
management’s decision to exit the Eagle Ford Shale area as of March 1,
2018. The first quarter of 2018 included $2.1 million in revenues from
the Eagle Ford Shale area prior to the exit. In the Northeast division,
the acquisition of Clearwater Solutions in the fourth quarter of 2018
contributed revenues of $2.4 million in the first quarter of 2019.

Total costs and expenses for the first quarter were $47.3 million. Total
costs and expenses, adjusted for special items, were $47.3 million, or a
$5.6 million decrease when compared with $52.9 million in the fourth
quarter of 2018 due primarily to lower revenues from third-party drivers
which have higher costs. Total costs and expenses, adjusted for special
items, decreased 23.8% compared with $62.1 million in the first quarter
of 2018 as a result of favorable product mix and active cost reduction
efforts that started in 2018 and continued into 2019. The favorable
product mix was driven by the reduction in lower margin third-party
driver revenue, as well as growth in higher margin disposal services.

Net loss for the first quarter was $6.4 million, an improvement of $2.4
million when compared with a net loss of $8.8 million in the fourth
quarter of 2018. For the first quarter of 2019, the Company reported a
net loss, adjusted for special items, of $6.1 million. Special items in
the first quarter primarily included gains on the sale of underutilized
assets, stock-based compensation expense, and long-lived asset
impairment charges. This compares with a net loss, adjusted for special
items, of $6.0 million in the fourth quarter of 2018 and $13.6 million
in the first quarter of 2018.

Adjusted EBITDA for the first quarter of 2019 was $4.5 million, a
decrease of $1.6 million compared with $6.1 million in the fourth
quarter of 2018. Of the 26.2% decline in adjusted EBITDA, 18.0% related
to a decrease in activity levels, 7.3% related to a decrease in pricing
and 0.9% related to corporate items. When compared to the first quarter
in 2018, adjusted EBITDA increased $2.1 million, or 91.3%. The 91.3% net
increase is comprised of a benefit of 136.9% for acquisitions/closures
and 8.5% for corporate items, offset by 37.7% for decreases in pricing
and 16.4% for decreases in activity levels. First quarter 2019 adjusted
EBITDA margin was 10.6%, compared with 12.4% in the fourth quarter of
2018 and 4.7% in the first quarter of 2018.

CASH FLOW AND LIQUIDITY

Net cash used in operating activities for the three months ended March
31, 2019 was $0.5 million, while asset sales net of capital expenditures
provided proceeds of $39.0 thousand. 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 water
transfer trucks for our fleet.

Total liquidity available for capital spending and other purposes as of
March 31, 2019 was $18.7 million. This consisted of cash and available
borrowings of $13.0 million, plus an additional $5.7 million delayed
draw borrowing capacity under our second lien term loan. As of March 31,
2019, total debt outstanding was $36.3 million, consisting of $20.8
million under our senior secured term loan facility, $10.1 million under
our second lien term loan facility, and $5.4 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, 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 acquisitions and divestitures, successfully
integrating acquired business operations, and identifying and managing
risks inherent in acquisitions and divestitures, as well as differences
in the type and availability of consideration or financing for such
acquisitions 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; the effects of our completed restructuring on the Company and the
interest of various constituents; 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 analyst and expert market
projections and data for the markets in which we operate; 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 treatment and
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
March 31,
2019   2018
Revenue:
Service revenue $ 39,001 $ 45,527
Rental revenue 3,626   4,142  
Total revenue 42,627 49,669
Costs and expenses:
Direct operating expenses 32,557 41,627
General and administrative expenses 5,475 19,320
Depreciation and amortization 9,135 14,744
Impairment of long-lived assets 117 4,131
Other, net   599  
Total costs and expenses 47,284   80,421  
Operating loss (4,657 ) (30,752 )
Interest expense, net (1,421 ) (1,250 )
Other income (expense), net 25 (73 )
Reorganization items, net (223 ) (92 )
Loss before income taxes (6,276 ) (32,167 )
Income tax expense (79 )  
Net loss $ (6,355 ) $ (32,167 )
 
Earnings per common share:    
Net loss per basic common share $ (0.41 ) $ (2.75 )
   
Net loss per diluted common share $ (0.41 ) $ (2.75 )
 
Weighted average shares outstanding:
Basic 15,550 11,696
Diluted 15,550 11,696
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  March 31,   December 31,
2019 2018
Assets
Cash $ 3,949 $ 7,302
Restricted cash 1,329 656
Accounts receivable, net 28,689 31,392
Inventories 3,352 3,358
Prepaid expenses and other receivables 3,539 2,435
Other current assets 283 1,582
Assets held for sale 4,604   2,782  
Total current assets 45,745   49,507  
Property, plant and equipment, net 208,520 215,640
Operating lease assets 4,103
Equity investments 38 41
Intangibles, net 997 1,112
Goodwill 29,518 29,518
Other assets 130   118  
Total assets $ 289,051   $ 295,936  
Liabilities and Shareholders’ Equity
Accounts payable $ 5,980 $ 9,061
Accrued and other current liabilities 14,733 16,670
Current portion of long-term debt 6,450 38,305
Current contingent consideration 500 500
Derivative warrant liability 75   34  
Total current liabilities 27,738   64,570  
Long-term debt 29,656 27,628
Noncurrent operating lease liabilities 2,180
Deferred income taxes 251 181
Other long-term liabilities 7,323   7,130  
Total liabilities 67,148   99,509  
Commitments and contingencies
Shareholders’ equity:
Common stock 157 122
Additional paid-in capital 336,455 303,463
Treasury stock (373 )
Accumulated deficit (114,336 ) (107,158 )
Total shareholders’ equity 221,903   196,427  
Total liabilities and shareholders’ equity $ 289,051   $ 295,936  
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
  Three Months Ended
March 31,
2019   2018
Cash flows from operating activities:
Net loss $ (6,355 ) $ (32,167 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 9,135 14,744
Amortization of debt issuance costs, net 206
Accrued interest added to debt principal 119
Stock-based compensation 852 10,978
Impairment of long-lived assets 117 4,131
Gain on sale of UGSI (75 )
Gain on disposal of property, plant and equipment (858 ) (8 )
Bad debt (recoveries) expense (141 ) 313
Change in fair value of derivative warrant liability 41 192
Deferred income taxes 70
Other, net 29 149
Changes in operating assets and liabilities:
Accounts receivable 2,944 (5,534 )
Prepaid expenses and other receivables (1,104 ) (2,573 )
Accounts payable and accrued liabilities (6,735 ) 2,110
Other assets and liabilities, net 1,294   368  
Net cash used in operating activities (505 ) (7,253 )
Cash flows from investing activities:
Proceeds from the sale of property, plant and equipment 3,665 11,881
Purchases of property, plant and equipment (3,626 ) (3,380 )
Proceeds from the sale of UGSI   75  
Net cash provided by investing activities 39   8,576  
Cash flows from financing activities:
Payments on First and Second Lien Term Loans (1,102 ) (799 )
Proceeds from Revolving Facility 51,037 55,321
Payments on Revolving Facility (51,037 ) (56,001 )
Payments on Bridge Term Loan (31,382 )
Proceeds from the issuance of stock 31,057
Payments on finance leases and other financing activities (787 ) (456 )
Net cash used in financing activities (2,214 ) (1,935 )
Change in cash and restricted cash (2,680 ) (612 )
Cash, beginning of period 7,302 5,488
Restricted cash, beginning of period 656   1,296  
Cash and restricted cash, beginning of period 7,958   6,784  
Cash, end of period 3,949 4,088
Restricted cash, end of period 1,329   2,084  
Cash and restricted cash, end of period $ 5,278   $ 6,172  
 

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. The Company
believes that providing non-GAAP financial measures such as EBITDA,
adjusted EBITDA, adjusted net income (loss), and adjusted net income
(loss) per share, in addition to related GAAP financial measures,
provides investors with greater transparency to the information used by
the Company’s management. These non-GAAP financial measures are not
substitutes for measures of performance or liquidity calculated in
accordance with GAAP and may not necessarily be indicative of the
Company’s liquidity or ability to fund cash needs. Not all companies
calculate non-GAAP financial measures in the same manner, and our
presentation may not be comparable to the presentations of other
companies.

 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of Net loss to EBITDA and
Total Adjusted EBITDA:

 
  Three Months Ended
March 31,
2019   2018
Net loss $ (6,355 ) $ (32,167 )
Depreciation and amortization 9,135 14,744
Interest expense, net 1,421 1,250
Income tax expense 79    
EBITDA 4,280 (16,173 )
Adjustments:
Transaction-related costs, net (208 )
Stock-based compensation 852 10,978
Change in fair value of derivative warrant liability 41 192
Reorganization items, net [1] 223 118
Legal and environmental costs, net 53 (347 )
Impairment of long-lived assets 117 4,131
Restructuring, exit and other costs 599
Gain on sale of UGSI (75 )
Executive and severance costs 2,937
Gain on disposal of assets (858 ) (8 )
Total Adjusted EBITDA $ 4,500   $ 2,352  
 
[1]   Reorganization items, net represents the costs related to the
chapter 11 filing incurred after the May 1, 2017 filing date.
 
 
NUVERRA ENVIRONMENTAL SOLUTIONS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS (continued)
(In thousands)
(Unaudited)
 

Reconciliation of QTD Segment Performance
to Adjusted EBITDA

 
  Rocky        
Three months ended March 31, 2019 Mountain Northeast Southern Corporate Total
Revenue $ 24,877 $ 11,840 $ 5,910 $ $ 42,627
Direct operating expenses 19,828 9,715 3,014 32,557
General and administrative expenses 1,046 846 399 3,184 5,475
Depreciation and amortization 4,299 2,664 2,160 12 9,135
Operating (loss) income (296 ) (1,502 ) 337 (3,196 ) (4,657 )
Operating margin % (1.2 )% (12.7 )% 5.7 % N/A (10.9 )%
(Loss) income before income taxes (358 ) (1,595 ) 291 (4,614 ) (6,276 )
 
Net (loss) income (358 ) (1,595 ) 291 (4,693 ) (6,355 )
Depreciation and amortization 4,299 2,664 2,160 12 9,135
Interest expense, net 128 93 46 1,154 1,421
Income tax expense               79     79  
EBITDA $ 4,069 $ 1,162 $ 2,497 $ (3,448 ) $ 4,280
 
Adjustments, net   (746 )   (95 )   153     908     220  
Adjusted EBITDA $ 3,323   $ 1,067   $ 2,650   $ (2,540 ) $ 4,500  
Adjusted EBITDA margin % 13.4 % 9.0 % 44.8 % N/A 10.6 %
 
Rocky
Three months ended March 31, 2018 Mountain Northeast Southern Corporate Total
Revenue $ 30,770 $ 9,113 $ 9,786 $ $ 49,669
Direct operating expenses 26,346 7,814 7,467 41,627
General and administrative expenses 1,276 762 578 16,704 19,320
Depreciation and amortization 6,289 4,306 4,124 25 14,744
Operating loss (3,141 ) (3,838 ) (7,044 ) (16,729 ) (30,752 )
Operating margin % (10.2 )% (42.1 )% (72.0 )% N/A (61.9 )%
Loss before income taxes (3,202 ) (3,899 ) (7,111 ) (17,955 ) (32,167 )
 
Net loss (3,202 ) (3,899 ) (7,111 ) (17,955 ) (32,167 )
Depreciation and amortization 6,289 4,306 4,124 25 14,744
Interest expense, net 105 62 67 1,016 1,250
Income tax expense                    
EBITDA $ 3,192 $ 469 $ (2,920 ) $ (16,914 ) $ (16,173 )
 
Adjustments, net   97     (918 )   5,172     14,174     18,525  
Adjusted EBITDA $ 3,289   $ (449 ) $ 2,252   $ (2,740 ) $ 2,352  
Adjusted EBITDA margin % 10.7 % (4.9 )% 23.0 % N/A 4.7 %
 

Contacts

Nuverra Environmental Solutions, Inc.
Investor Relations
602-903-7802
[email protected]

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