Step Energy Services (STEP) Q1 2025 earnings summary

Executive summary

• Q1 2025 delivered strong operational and financial performance, with revenue up significantly from the prior quarter but down 4% year-over-year, driven by high utilization in core service lines and successful technology deployment.

• The U.S. fracturing division was terminated due to adverse business conditions, leading to a reorganization and aggregation into a single reporting segment, with some assets transferred to Canada.

• The company introduced Canada's first 100% natural gas reciprocating engine for fracturing and continues to invest in next-generation, lower-emission technologies.

Financial highlights

• Q1 consolidated revenue was CAD 308 million (USD 307.7 million), up from CAD 148 million in the prior quarter but down 4% year-over-year; fracturing revenue was $224.1M, coiled tubing $83.6M.

• Adjusted EBITDA was CAD 59 million (19% margin), up from CAD 8 million (5%) in the prior quarter, but down from CAD 71 million (22%) year-over-year.

• Net income reached CAD 24 million (CAD 0.33 per diluted share), compared to a loss of CAD 45 million in the prior quarter and CAD 41 million in Q1 last year.

• Free cash flow was CAD 32 million, reversing a negative CAD 17 million in the prior quarter; capital expenditures totaled CAD 17 million.

• Net debt increased to CAD 85 million from CAD 53 million, mainly due to working capital build.

Outlook and guidance

• Q2 is expected to be impacted by typical seasonal breakup, with activity building into Q3; activity levels for both business lines are projected to be similar to 2024.

• Natural gas prices are expected to remain steady through 2025, supported by power demand and new LNG facilities.

• The company remains cautiously optimistic for Q4, with updates to be provided in the next quarterly release.

• LNG Canada’s first shipment in June is expected to support regional capital activity.

• Cost control and margin management are priorities amid inflation, tariffs, and competitive pricing.