Step Energy Services (STEP) Q4 2024 earnings summary

Executive summary

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

• Net income for 2024 was CAD 2 million, down from CAD 50 million in 2023, impacted by non-cash impairments totaling CAD 36.7 million and transaction costs.

• Free cash flow for 2024 rose to CAD 86 million, up from CAD 83 million in 2023, and net debt reduced to CAD 53 million at year-end.

• Decision made to wind down U.S. fracturing operations in 2025 due to persistent loss of contracts to larger competitors and market conditions; Canadian operations remain strong.

• 1.9 million shares repurchased in 2024 under NCIB at CAD 4.17 average price; capital investment focused on dual fuel and electrification upgrades.

Financial highlights

• Q4 2024 revenue was CAD 147 million, down from CAD 256 million in Q3 and down year-over-year; adjusted EBITDA was CAD 4 million (3% margin), down from CAD 44 million (17% margin) in Q3.

• Q4 net loss was CAD 45 million, including CAD 2.5 million stock-based comp, CAD 2.2 million transaction costs, and CAD 23.9 million non-cash impairment.

• Excluding unusual items, 2024 net income would have been CAD 41 million (CAD 0.56 per share).

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

• Funded Debt to Adjusted Bank EBITDA was 0.43:1.00 at year-end, well below covenant limit.

Outlook and guidance

• Cautiously optimistic for 2025, with growth expected from higher commodity prices, increased natural gas demand, and major infrastructure completions like TMX and LNG Canada.

• Canadian activity expected to rise, especially in Montney and Duvernay plays, with robust Q1 utilization and strong client alignment.

• U.S. coil tubing activity steady in H1 2025, with potential uptick in H2 as LNG projects complete; U.S. fracturing service line to be wound down after Q1 2025.

• Focus on margin improvement, free cash flow generation, and continued capital discipline.

• Tariffs and FX rates pose risks to margins, with ongoing discussions to rebalance pricing.