Step Energy Services (STEP) Q4 2024 earnings summary

Executive summary

• Q4 2024 revenue was CAD 147 million, down from CAD 256 million in Q3, with adjusted EBITDA of CAD 4 million (3% margin) versus CAD 44 million (17%) in Q3.

• Full-year 2024 revenue reached CAD 955 million, up from CAD 946 million in 2023, with adjusted EBITDA of CAD 169 million (18% margin), up from CAD 164 million (17%).

• Net income for 2024 dropped to CAD 2 million from CAD 50 million in 2023, impacted by CAD 36.7 million impairment and CAD 2.2 million transaction costs.

• Decision made to wind down U.S. fracturing operations post-Q1 2025 due to persistent loss of contracts and market conditions.

• The take-private transaction with ARC Financial was mutually terminated after failing to secure minority shareholder approval.

Financial highlights

• Q4 2024 revenue was CAD 147.5 million, down CAD 47.6 million year-over-year; adjusted EBITDA was CAD 4.1 million (3% margin) vs CAD 18.4 million (9%) in Q4 2023.

• Q4 included CAD 2.5 million in stock-based compensation, CAD 2.2 million in transaction costs, and a CAD 23.9 million non-cash impairment related to U.S. fracturing.

• Free cash flow for 2024 was CAD 86 million, up from CAD 83 million in 2023.

• Net debt at year-end was CAD 53 million, down from CAD 88 million in 2023 and CAD 142 million in 2022.

• Cash and equivalents at year-end were CAD 4.4 million; working capital was CAD 35.4 million.

Outlook and guidance

• Cautiously optimistic for 2025, with Canadian activity expected to increase, especially in Montney and Duvernay plays, supported by TMX and LNG Canada.

• Q1 2025 activity in Canada projected to be robust, with high utilization and sand volumes ahead of Q1 2024.

• U.S. coil tubing activity expected to remain steady in H1 2025, with potential for growth in H2 as LNG projects complete.

• Pricing for services has improved sequentially from Q4 2024 but remains below Q1 2024 levels.

• Margin compression expected due to FX and input costs; back half of 2025 depends on gas price stability.