Step Energy Services (STEP) Q2 2024 earnings summary

Executive summary

• Q2 2024 consolidated revenue was CAD 231.4 million, flat year-over-year but down 28% sequentially from Q1 2024.

• Adjusted EBITDA was CAD 41.7 million (18% margin), down from CAD 80 million in Q1 and CAD 47.4 million (20%) in Q2 2023.

• Net income was CAD 10.5 million or CAD 0.14 per diluted share, compared to CAD 41 million in Q1 and CAD 15.3 million in Q2 2023.

• Free cash flow for Q2 was CAD 20.5 million, or CAD 0.28 per diluted share, down from CAD 34.8 million in Q2 2023.

• Continued focus on debt reduction and shareholder returns, including share repurchases under the NCIB.

Financial highlights

• Six-month revenue rose to CAD 551.5 million from CAD 495.4 million year-over-year.

• Six-month net income was CAD 51.8 million, up from CAD 34.9 million in the prior year.

• Adjusted EBITDA for the first half was CAD 121.2 million (22% margin), up from CAD 92.8 million (19%) year-over-year.

• Net debt reduced to CAD 75.8 million at June 30, 2024, from CAD 108 million at the end of Q1 and CAD 87.8 million at year-end 2023.

• Working capital at June 30, 2024 was CAD 64.6 million, up from CAD 42.1 million at December 31, 2023.

Outlook and guidance

• Canadian fracturing and coiled tubing divisions expected to see steady work through Q3 and into Q4, with Q3 activity levels anticipated to surpass last year.

• U.S. fracturing line expected to contribute minimally for the rest of 2024, but more opportunities are anticipated in 2025.

• Strategic focus remains on free cash flow generation, debt reduction, share buybacks, and asset upgrades, targeting 90% dual fuel fracturing horsepower by end of 2025.

• Commodity price volatility expected to persist through 2024, but a constructive setup is seen for 2025.

• Canadian operations anticipate robust Q3 activity, with record proppant volumes expected for 2024.