U.S. Silica (SLCA) Misses Q2 EPS by 5c, Miss on Revenues

U.S. Silica (NYSE: SLCA) reported Q2 EPS of $0.64, $0.05 worse than the analyst estimate of $0.69. Revenue for the quarter came in at $427.4 million versus the consensus estimate of $447.79 million.

Second Quarter 2018 Highlights

Total Company

• Revenue of $427.4 million for the second quarter of 2018 compared with $369.3 million in the first quarter of 2018, up 16% sequentially and 47% over the second quarter of 2017.
• Overall tons sold of 4.489 million for the second quarter of 2018 compared with 4.129 million tons sold in the first quarter of 2018, up 9% sequentially and 23% over the second quarter of 2017.
• Contribution margin of $155.9 million for the second quarter of 2018 compared with $120.0 million in the first quarter of 2018, up 30% sequentially and 65% over the second quarter of 2017.
• Adjusted EBITDA of $123.6 million for the second quarter of 2018 compared with Adjusted EBITDA of $95.4 million in the first quarter of 2018 and $75.1 million in the second quarter of 2017.

"I'm extremely pleased with the outstanding performance by our two operating segments during the second quarter," said Bryan Shinn, president and chief executive officer. ''Higher sand volumes and pricing plus strong performance from Sandbox® drove record contribution margin for Oil and Gas in the quarter. For our ISP segment, record revenue, contribution margin and contribution margin per ton was driven by a mix of higher volumes, higher pricing and a strong contribution from the EP Minerals acquisition, which closed during the second quarter,'' he added.

"During the quarter we also decided to exit the resin coated sand business, which primarily served the oil and gas market, based on customer feedback that demand for this type of product is rapidly declining. This has been a very small business for us and we don\'t anticipate any impact to earnings beyond the impairment charges in the second quarter," he continued.

"Looking forward, we expect strong demand in Oil and Gas for both sand and Sandbox®. We are heavily contracted in this market at attractive margins and are well positioned to serve our blue-chip customer base in the years ahead. In ISP, we expect significant margin growth from pricing, new products and accretive acquisitions. Given these many positive catalysts, we should generate substantial free cash flow in the coming quarters, with free cash flow yield approaching 15% at our current market capitalization next year," he concluded.

Outlook and Guidance

The Company anticipates that its capital expenditures for 2018 will be approximately $350 million. For the third quarter, we expect volumes in Oil & Gas to be up in the range of 20 to 25 percent as we ramp our new capacity in West Texas and bring our Brownfield expansion projects fully online. We expect to sell up to 80% of our total Oil and Gas volumes under long term supply agreements.

For Sandbox®, we expect increased volumes and strong performance in the third quarter as we continue to add crews and grow adjusted EBITDA per crew.

Looking at the outlook for ISP, we expect sequential increases in pricing and margins, driven by a full quarter of the strategic price increases implemented during the second quarter and a full quarter of results from EP Minerals. ISP should also benefit from favorable product mix as higher margin products continue to make up a larger percentage of their overall sales.

For earnings history and earnings-related data on U.S. Silica (SLCA) click here.

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