Source Energy Services (SHLE) Q3 2024 earnings summary

Executive summary

• Achieved record sand sales volumes of 964,000 MT and sand revenue of CAD 142.2M in Q3 2024, the highest quarterly figures to date, with total revenue of CAD 183.1M, up CAD 58.4M year-over-year, and strong performance across all business areas.

• Net income rose to CAD 10.2M, a CAD 6.4M increase from Q3 2023, and Adjusted EBITDA reached CAD 35.3M, up 55% year-over-year.

• Closed acquisition of sand trucking assets, expanding the last-mile logistics fleet and enhancing logistics capabilities in Northeast BC.

• Completed construction and deployment of the tenth Sahara unit, now operating in Alaska, and achieved 83% utilization across the Sahara fleet.

• Announced partnership with Trican Well Service to build a new terminal in Taylor, BC, with construction on track for phased completion through 2025.

Financial highlights

• Sand volumes reached 964,000 MT and sand revenue was CAD 142.2M, a CAD 40M increase from Q3 2023.

• Total revenue was CAD 183.1M, up CAD 58.4M year-over-year; gross margin was CAD 33.7M, and adjusted gross margin was CAD 43.3M, up 34% and 41% respectively.

• Adjusted EBITDA was CAD 35.3M, up from CAD 22.7M in Q3 2023; free cash flow for Q3 was CAD 20.1M, up CAD 12.7M year-over-year; year-to-date free cash flow reached CAD 49.1M.

• Net earnings per share were CAD 0.75 (diluted CAD 0.74), compared to CAD 0.28 in Q3 2023.

• Cost of sales (excluding depreciation) rose to CAD 139.8M, mainly due to higher sand volumes and increased transportation costs.

Outlook and guidance

• Cautiously optimistic for a favorable Q4 due to some customers pulling capital from 2025 into Q4, despite typical seasonality.

• Expect continued strong industry activity in the WCSB, driven by LNG export growth, infrastructure projects, and natural gas demand.

• Anticipate 5%-10% volume growth in 2025 from customer additions, even if overall activity levels remain flat.

• Taylor Facility construction to be completed early 2025, enhancing capacity in northeastern BC.

• Contract structures and pricing expected to remain consistent year-over-year.