Step Energy Services (STEP) Q2 2025 earnings summary

Executive summary

• Q2 2025 revenue was $228.0 million, nearly flat year-over-year, but down from $308 million in Q1 due to seasonal slowdown and industry conditions.

• Adjusted EBITDA was $34.8 million (15% margin), compared to $59 million (19%) in Q1 and $41.7 million (18%) in Q2 2024.

• Net income was $5.9 million, or $0.08 per diluted share, including a $5 million net loss from terminated U.S. fracturing operations.

• Free cash flow for the quarter was $17.3 million, down from $32.2 million in Q1 and $20.5 million in Q2 2024.

• U.S. fracturing operations were terminated in Q1 2025, with related costs impacting Q2 results.

Financial highlights

• Revenue decline quarter-over-quarter is typical due to spring breakup, but impact was lessened by large pad operations.

• No revenue from U.S. fracturing operations as these were terminated; prior periods included $14 million (Q1) and $23 million (Q2 2024) from this segment.

• Adjusted EBITDA now excludes terminated U.S. operations for clarity.

• Capital expenditures totaled $14 million: $6 million sustaining, $7 million optimization, $1 million right-of-use assets.

• Net debt decreased to $43.9 million at June 30, 2025, from $52.7 million at year-end 2024.

Outlook and guidance

• Q3 fracturing activity expected to see a modest uptick, but revenue likely to be flat or down sequentially due to client-supplied sand and competitive pressures.

• Margins expected to improve in Q3 as sand is a low-margin pass-through; EBITDA should increase sequentially.

• Cautious optimism for the remainder of 2025 amid fluctuating commodity prices and client capital deferments.

• Several Canadian clients are moving projects from Q1 2026 into Q4 2025, potentially boosting late-year activity.

• 2026 activity expected to be in line with Q1 2025, with LNG Canada ramp-up influencing demand.