Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CES Energy Solutions Corp (CESDF, Financial) achieved all-time record quarterly revenue of $607 million, marking a 13% increase from the previous year.
- The company reported an all-time high quarterly EBITDA of $103 million, a 28% increase compared to Q3 2023.
- CESDF's EBITDA margin improved to 16.9%, up from 15% in the same quarter last year.
- The company successfully repurchased 9 million shares under its NCIB plan, representing 47% of the current program.
- CESDF's cash conversion cycle improved to a record 101 days, significantly below the targeted range of 110 to 115 days.
Negative Points
- Total debt to trailing 12 months EBITDA increased slightly to 1.14 times from 1.12 times in the previous quarter.
- Free cash flow decreased to $40 million for the quarter, down from $55 million in Q2 and $76 million in Q3 2023.
- The company reported a decrease in cash flow from operations to $73 million, compared to $83 million in Q2 and $100 million in Q3 2023.
- CESDF's total debt increased by $34 million from the prior quarter, reaching $439 million.
- The company anticipates a slight increase in CapEx to $85 million in 2024, which may impact free cash flow.
Q & A Highlights
Q: Can you provide more details on the record revenue and EBITDA achieved in Q3 2024?
A: Kenneth Zinger, President and CEO, highlighted that CES Energy Solutions achieved all-time record quarterly revenue of $607 million, which was 13% higher than Q3 of last year. The EBITDA for the quarter was $103 million, marking a 28% increase from the previous year. The EBITDA margin improved to 16.9% from 15% in Q3 2023. This growth was driven by strong performance across all business lines and strategic investments in capital expenditures to support future growth.
Q: How is CES Energy Solutions managing its capital allocation and share repurchase program?
A: Kenneth Zinger stated that CES has repurchased 9 million shares under the current NCIB plan, representing 47% of the program in just 3.5 months. The company plans to continue purchasing the maximum number of shares possible under the NCIB. Additionally, CES will maintain its quarterly dividend of $0.03 per share and intends to adjust the dividend annually. Capital expenditures are expected to increase slightly to $85 million in 2024 to support anticipated revenue growth.
Q: What is the outlook for CES Energy Solutions' market share and activity levels in North America?
A: Kenneth Zinger reported that CES holds a leading market share in North America, with a 25% share of the land market. In Canada, CES services 36.3% of active drilling jobs, while in the US, it maintains a 21% market share of land rigs. The company anticipates increased activity in 2024 and 2025, driven by infrastructure projects and improved takeaway capacity. CES expects a small uptick in US rig activity beginning in Q1 2025.
Q: How is CES Energy Solutions leveraging its vertically integrated business model?
A: Anthony Aulicino, CFO, explained that CES's vertically integrated model allows it to effectively manage its supply chain and optimize production through innovative, technologically advanced products. This approach has resulted in high service intensity levels and attractive economics, contributing to record revenue and EBITDAC margins. The model supports CES's ability to meet customer needs and capitalize on growth opportunities.
Q: What are the strategic priorities for CES Energy Solutions moving forward?
A: Kenneth Zinger emphasized that CES will continue to focus on strategic tuck-in acquisitions, particularly in related business lines or geographies where value can be added. The company aims to maintain a debt level within the 1 to 1.5 times EBITDA range and will prioritize investments that support growth and returns. CES is also committed to optimizing its working capital and maintaining a strong return on average capital employed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
