U.S. Silica (SLCA) Reports In-Line Q4 EPS, Revenues Beat

U.S. Silica (NYSE: SLCA) reported Q4 EPS of ($0.53), in-line with the analyst estimate of ($0.53). Revenue for the quarter came in at $339.1 million versus the consensus estimate of $294.67 million.

Total Company

• Revenue of $339.1 million for the fourth quarter of 2019 decreased 6% compared with $361.8 million in the third quarter of 2019 and 5% when compared with the fourth quarter of 2018.
• Overall tons sold of 4.204 million for the fourth quarter of 2019 decreased 13% compared with 4.850 million tons sold in the third quarter of 2019 and 9% when compared with the fourth quarter of 2018.
• Contribution margin of $107.1 million for the fourth quarter of 2019 increased 13% compared with $95.0 million in the third quarter of 2019 and 8% when compared with the fourth quarter of 2018.
• Adjusted EBITDA of $73.6 million for the fourth quarter of 2019 increased 26% compared with $58.4 million in the third quarter of 2019 and 8% when compared with the fourth quarter of 2018.

"I am proud of what we achieved in 2019 in the face of market headwinds in energy and uncertainty late in the year in broader industrials markets,'' said Bryan Shinn, U.S. Silica chief executive officer. "We continued to build, invest in and transform U.S. Silica for the long-term and had many successes.

We expanded our industrial capacity, delivering record segment profitability, and invested in next generation Sandbox equipment while achieving record load volumes. We also right sized our proppant business and completed startup of our two new West Texas mines. Across the enterprise we signed numerous new customer contracts during the year. At the same time, we significantly advanced our new offering pipeline while recording the safest year in my tenure at the company."

Outlook and Guidance

In 2019, the Company made significant process in laying the groundwork to achieve its three strategic priorities in 2020, namely, 1) prioritizing free cash flow, 2) repositioning its Oil & Gas business, and 3) growing its Industrial & Specialty Products business.

In November of 2019, the Company announced a 10% reduction of its workforce that is expected to deliver annual SG&A savings of approximately $20 million. U.S. Silica took steps to optimize its asset portfolio by idling its highest-cost plants and improving efficiencies at existing plants.

The Company made significant progress in repositioning its Oil & Gas business and right sizing its proppant volumes to match current and expected demand from well completions. The Company continues to optimize its logistics network by eliminating sub-optimal shipments and exiting high cost transload sites while renegotiating transload fees and rail rates. The Company expects proppant demand in 2020 to increase by approximately 5% compared with 2019.

In 2019, the Company's last-mile business made significant investments in next generation equipment for Sandbox, expanded box payloads and offered customers a new gravity fed stand that is quieter, requires less maintenance and is less expensive to build. In 2020 we anticipate that SandBox pricing pressure will persist but not worsen.

U.S. Silica has continued to shift its Industrial and Specialty Products business toward higher margin products and is currently pursuing several growth platforms. For example, the Company is using innovative technology in milling that expands the Company\'s capabilities and further differentiates its products. The Company is targeting new, not-in-kind markets where customers are looking for an effective alternative to existing offerings. The Company has several new products in various stages of customer trials. In many cases, the sales cycles for these new products are long but the Company believes it is making good progress. The Company intends to increase the base Industrial and Specialty Products business through price increases, market share gains, a focus on new, higher-margin products and small, bolt-on acquisitions.

In 2020, the Company expects continued strength in many of its industrial end markets, especially residential housing and remodeling, driven by growing housing demand and historically low mortgage rates. The Federal National Mortgage Association (Fannie Mae) forecasts single-family housing starts in 2020 to increase 10% year-over-year. Despite an expected year-over-year slight contraction in light vehicle sales in 2020, the Company is optimistic with respect to its automotive end markets, which should benefit from low unemployment, strong consumer confidence and low finance rates. In its filtration end markets, however, the Company expects slight headwinds for some of its silica sand and diatomaceous earth product offerings due to the expected contraction in U.S. alcohol sales.

The Company expects to keep its capital expenditures in the range of $30 million to $40 million in 2020 and to be funded from its cash flow from operations.

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

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