Aly Energy Services, Inc. Announces Second Quarter Earnings
HOUSTON, Aug. 14, 2018 /PRNewswire/ -- Aly Energy Services, Inc. ("Aly" or the "Company") (OTCQB: ALYED) today filed its Form 10-Q for the period ended June 30, 2018 with the Securities and Exchange Commission. Revenues for the second quarter of 2018 increased 5.1% to $4.4 million as compared to $4.2 million for the second quarter of 2017, and Adjusted EBITDA increased 9.3% in the second quarter of 2018 to $1.1 million as compared to $1.0 million for the same quarter last year. Aly reported net loss available to common stockholders of $0.3 million for the second quarter of 2018 as compared to a net loss available to common stockholders of approximately $1.0 million for the same period in 2017. The improvement in financial results was driven by a combination of (i) a slight increase in revenue due to price increases on our surface rental products and utilization increases for our solids control equipment and (ii) a slight reduction in operating expenses due to operating efficiencies. The resulting increase in gross margin was only partially offset by increased selling, general and administrative payroll expense as we increased headcount to facilitate a stronger internal control environment. In addition to the factors mentioned above, the change in the net loss available to common stockholders is partially due to a decrease in aggregate non-cash and non-recurring expenses to $0.4 million for the second quarter of 2018 from $0.7 million for the second quarter of 2017. These expenses included, among other things, items such as severance in 2018 and stock option expense in 2017.
Revenues for the first six months of 2018 increased 24.4% to $8.7 million as compared to $7.0 million for the first six months of 2017, and Adjusted EBITDA increased 50.6% in the first six months of 2018 to $2.1 million compared to $1.4 million for the first six months of 2017. Aly reported net loss available to common stockholders for the first six months of 2018 of approximately $0.3 million as compared to net income available to common stockholders of approximately $0.5 million, after preferred stock dividends and accretion aggregating to approximately $0.1 million, for the same period in 2017. The increases in revenue were derived primarily from improved pricing on surface rental products and improved utilization of solids control products. Although operating expenses increased period-over-period, they increased more slowly than revenue as we continued to minimize non-productive labor and effectively manage our sub-rental fleet. The efficiencies in operating expenses were partially offset by increases in selling, general and administrative payroll expense as we returned certain employees to their contractual salaries and increased headcount to enable better segregation of duties. The change in the net income/loss available to common stockholders was largely driven by the change in aggregate non-cash and non-recurring items to charges of $0.4 million for the first half of 2018 from income of $1.6 million in the first half of 2017. These items included, among other things, severance in 2018 and a gain on extinguishment of debt and other liabilities, stock compensation expense, and a debt modification fee in 2017.
Adjusted EBITDA is a non-GAAP financial measure that is not necessarily comparable from one company to another. Adjusted EBITDA is defined as earnings before net interest expense, income taxes, depreciation and amortization, certain non-cash items, such as stock compensation expense, bad debt expense, and gains on extinguishment of debt, and certain non-routine items, including transaction costs. Management believes that Adjusted EBITDA is useful to investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of the Company's normal operating results. For a reconciliation of Adjusted EBITDA to net income, please see the tables at the end of this release.
Management Comment
Micki Hidayatallah, Aly's Chairman and Interim Chief Executive Officer said: "Over the last six quarters, as a result of a recapitalization transaction, improved financial results, and increased liquidity, we have been very successful in making Aly a viable entity with real growth opportunities."
"On October 26, 2016, our lender, Wells Fargo Bank, National Association ("Wells Fargo") sold our senior secured debt and certain other related obligations to Tiger Finance, LLC ("Tiger"). In connection with Tiger's purchase of the obligations from Wells Fargo, Aly transferred excess and idle equipment with an estimated fair value of $2.6 million to Tiger in exchange for a $2.0 reduction in the outstanding obligations. During October and November 2016, Permian Pelican, LLC ("Pelican"), a related party whose members are the major stockholders of Aly, raised money to acquire the obligations from Tiger with the objective of removing onerous institutional debt from Aly's balance sheet. On December 12, 2016, Pelican successfully acquired the remaining Aly obligations from Tiger."
"Subsequent to this transaction, Aly's quarterly revenues and Adjusted EBITDA have increased approximately 100.0% and 266.7%, respectively, to approximately $4.4 million and $1.1 million, respectively, for the second quarter of 2018 from $2.2 million and $0.3 million, respectively, for the fourth quarter of 2016. Our management team has achieved this improvement in operating results primarily by diversifying our customer base and increasing pricing to existing customers. The improved performance has enabled Aly to fund both maintenance and growth capital expenditures in 2018 with internally generated cash flow from operations."
"As of August 13, 2018, Aly has approximately $6.6 million of senior secured debt outstanding with a related party, Permian Pelican Finance, LLC ("PPF", which has the same member composition as Pelican). Aly has no third-party debt, has availability to borrow an incremental $0.7 million under its revolving credit facility with PPF, and has approximately $2.0 million in cash. We believe our current liquidity position combined with our strong operating results will facilitate a capital expenditure program to invest in assets which will generate an immediate return by enabling increased activity or, if the demand is not there, by reducing sub-rental expense."
"After giving effect to the reverse stock split which was effective on August 7, 2018, Aly has 690,918 common shares outstanding. The Series A convertible preferred stock owned by Pelican is convertible into an additional 2,881,400 common shares resulting in diluted shares outstanding of 3,572,318 (excluding options). As of June 30, 2018, the book value of stockholders' equity was $25.6 million, or approximately $7.17 per diluted share (excluding options)."
"Our primary strategic objective is to continue to grow Aly, both organically and through bolt-on acquisitions. We consistently seek opportunities to diversify our customer base, expand our geographic presence in the major domestic shale basins, and broaden the scope of products and services that we provide to our customers. As we evaluate potential opportunities, our top priorities will be providing high quality equipment and personnel to our valuable customers in a safe and healthy environment and adding the latest technology to our product offerings."
"During the past three months, we have observed some easing in the capital markets for oilfield services companies, particularly those with strong balance sheets. We believe that our existing capital structure, strong liquidity position and improved financial results will enable us to benefit from this trend and we believe there will be opportunities to obtain financing for bolt-on acquisitions and growth capital expenditures in the coming months."
About Aly
Aly Energy Services, Inc., together with its subsidiaries, is a provider of oilfield services to leading oil and gas exploration and production companies operating in unconventional plays in the United States. Generally, the services we offer fall within two broad categories: surface rental and solids control. Our surface rental equipment includes a wide variety of large capacity tanks with circulating systems, associated pumps, separators, gas busters, mud mix plants and ancillary equipment. We also provide environmental containment berms to safeguard against spills from mud systems on the drilling rig site. Our solids control equipment includes large centrifuges, shakers, cuttings dryers and ancillary components that can be integrated into a closed loop mud system. We operate in the United States, primarily in Texas, Oklahoma, and New Mexico.
Forward-Looking Statements
This press release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Aly's business, financial condition, results of operations and prospects. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this press release.
Although forward-looking statements in this press release reflect the good faith judgment of our management, such statements can only be based on facts and factors that our management currently knows. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, demand for oil and natural gas drilling services in the areas and markets in which Aly operates, competition, obsolescence of products and services, the ability to obtain financing to support operations, environmental and other casualty risks, and the effect of government regulation.
Further information about the risks and uncertainties that may affect our business are set forth in our most recent filings on Form 10-K (including without limitation in the "Risk Factors" section) and in our other SEC filings and publicly available documents. We urge readers not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Aly undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this press release.
For the Three Months Ended June For the Six Months Ended June
30, 30,
-------------------------------- ------------------------------
2018 2017 2018 2017
---- ---- ---- ----
(unaudited) (unaudited)
Components of EBITDA:
Net income (loss) $(300) $(1,024) $(313) $534
Non-GAAP adjustments:
Depreciation and
amortization 888 922 1,779 1,849
Interest expense, net 3 3 9 16
Interest expense -
related party 92 384 178 595
Income tax expense 21 3 42 12
--- --- --- ---
EBITDA 704 288 1,695 3,006
Adjustments to EBITDA:
Stock-based compensation - 625 - 625
Gain on extinguishment
of debt and other
liabilities - - - (2,387)
Loss on disposal of
assets - - - 40
Bad debt expense 22 20 44 35
Severance, settlements,
and other losses 317 8 341 30
Expenses in connection
with lender
negotiations and
Recapitalization 50 59 50 65
Adjusted EBITDA $1,093 $1,000 $2,130 $1,414
====== ====== ====== ======
ALY ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
June 30, 2018 December 31, 2017
------------- -----------------
(unaudited)
ASSETS
Current assets
Cash $1,896 $203
Restricted cash 30 30
Receivables, net 2,940 3,883
Prepaid expenses
and other
current assets 302 390
--- ---
Total current
assets 5,168 4,506
Property and
equipment, net 26,069 26,888
Intangible assets,
net 3,724 4,099
Other assets 9 9
---
Total assets $34,970 $35,502
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts
payable,
accrued
expenses and
other current
liabilities $2,303 $2,774
Accrued interest
-related party 30 26
Current portion
of long-term
debt - related
party 1,000 -
----- ---
Total current
liabilities 3,333 2,800
Long-term debt -
related party, net 5,602 6,352
Other long-term
liabilities 410 412
---
Total liabilities 9,345 9,564
Commitments and
contingencies
Stockholders'
equity
Series A
convertible
preferred stock
of $0.001 par
value
(liquidation
preference of
$17,292) 6,755 6,755
Authorized-20,000; issued and
outstanding-17,292 as of June
30, 2018
Authorized-20,000; issued and
outstanding-17,292 as of
December 31, 2017
Preferred stock
of $0.001 par
value - -
Authorized-9,980,000; issued
and outstanding-none as of
June 30, 2018
Authorized-9,980,000; issued
and outstanding-none as of
December 31, 2017
Common stock of
$0.001 par
value 14 14
Authorized-25,000,000; issued
and outstanding-690,918 as of
June 30, 2018
Authorized-25,000,000; issued
and outstanding-690,918 as of
December 31, 2017
Additional paid-
in-capital 53,752 53,754
Accumulated
deficit (34,896) (34,583)
Treasury stock,
11 shares at
cost as of
December 31,
2017 - (2)
--- ---
Total stockholders'
equity 25,625 25,938
Total liabilities and stockholders'
equity $34,970 $35,502
======= =======
ALY ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
For the Three Months Ended June For the Six Months Ended June
30, 30,
-------------------------------- ------------------------------
2018 2017 2018 2017
---- ---- ---- ----
(unaudited) (unaudited)
Revenue $4,388 $4,175 $8,724 $7,012
Expenses:
Operating expenses 2,529 2,619 5,139 4,559
Depreciation and amortization 888 922 1,779 1,849
Selling, general and
administrative expenses 1,155 1,268 1,890 1,834
Total expenses 4,572 4,809 8,808 8,242
Loss from operations (184) (634) (84) (1,230)
Other expense (income):
Interest expense, net 3 3 9 16
Interest expense - related party 92 384 178 595
Gain on extinguishment of debt and
other liabilities - - - (2,387)
-----------------------------------
Total other expense (income) 95 387 187 (1,776)
Income (loss) from operations
before income taxes (279) (1,021) (271) 546
Income tax expense 21 3 42 12
--- --- --- ---
Net income (loss) (300) (1,024) (313) 534
Preferred stock dividends - - - 63
Net income (loss) available to
common stockholders $(300) $(1,024) $(313) $471
===== ======= ===== ====
Basic earnings per share information:
Net income (loss) available to common
stockholders ($0.43) ($1.48) ($0.45) $0.75
Weighted average shares - basic 690,918 690,918 690,918 630,015
Diluted earnings per share information:
Net income (loss) available to common
stockholders ($0.43) ($1.48) ($0.45) $0.15
Weighted average shares - diluted 690,918 690,918 690,918 3,044,011
ALY ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(in thousands)
For the Six Months Ended June
30,
------------------------------
2018 2017
---- ----
(unaudited)
Cash flows from operating activities:
Net income (loss) $(313) $534
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 1,779 1,849
Loss on disposal of assets - 40
Stock-based compensation - 625
Bad debt expense 44 35
Gain on extinguishment of debt and other liabilities - (2,387)
Debt modification fee - related party - 320
Changes in operating assets
and liabilities:
Receivables, net 899 (1,867)
Prepaid expenses and other current assets 88 299
Accounts payable, accrued expenses and other liabilities (473) 602
Accrued interest and other - related party 4 170
--- ---
Net cash provided by operating activities 2,028 220
Cash flows from investing activities:
Purchases of property and
equipment (585) (915)
Proceeds from disposal of
property and equipment - 15
--------------------------
Net cash used in investing activities (585) (900)
Cash flows from financing activities:
Borrowings on long-term
debt - related party 250 525
Repayment of long-term debt - (5)
---------------------------
Net cash provided by financing activities 250 520
Net increase (decrease) in cash and restricted cash 1,693 (160)
Cash and restricted cash, beginning of period 233 711
Cash and restricted cash, end of period $1,926 $551
====== ====
Supplemental disclosure of cash flow information:
Cash paid for interest -
related party $93 $105
Cash paid for interest 2 3
Cash paid (received) for
income taxes, net (13) 35
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SOURCE Aly Energy Services, Inc.
