CES ENERGY SOLUTIONS CORP. ANNOUNCES STRONG Q3 2024 RESULTS WITH RECORD REVENUE AND ADJUSTED EBITDAC AND DECLARES CASH DIVIDEND
Canada NewsWire
CALGARY, AB, Nov. 6, 2024
CALGARY, AB, Nov. 6, 2024 /CNW/ - CES Energy Solutions Corp. ("CES" or the "Company") (TSX: CEU) (OTC: CESDF) is pleased to announce strong financial results for the three and nine months ended September 30, 2024, with record quarterly revenue and Adjusted EBITDAC. The Company's Board of Directors also approved a quarterly dividend of $0.030 per share, which will be paid on January 15, 2025, to the shareholders of record at the close of business on December 31, 2024. Third quarter highlights include:
-- Record quarterly revenue of $606.5 million, increased 13% year over year
-- Record quarterly Adjusted EBITDAC of $102.5 million at a 16.9% margin,
increased 28% year over year
-- Cash Flow from Operations of $72.9 million and Free Cash Flow of $40.1
million
-- Conservative leverage of 1.14x Total Debt/Adjusted EBITDAC
-- Returned $53.1 million to shareholders through $7.1 million in dividends
and $46.0 million in the repurchase of 6.0 million shares representing
approximately 2.5% of outstanding shares
CES' third quarter, record setting results demonstrate the significant merits of its unique business model. During the quarter, CES continued to provide mission critical chemical solutions enabling our customers to succeed in an era of high service intensity levels, and increasingly complex drilling fluids and production chemical technology requirements.
CES' performance is characterized by strong levels of financial resilience, cash flow generation, and profitability inherent in its capex light, asset light, consumable chemicals business model supported by industry leading people, infrastructure, and technology. CES continues to provide valuable solutions to increasingly complicated drilling programs which require higher levels of service intensity, effectively overcoming a lower US industry rig count. Attractive growth was also achieved by delivering superior production chemical services and technology to active, results oriented, high quality customers as they continue to maximize returns on their producing wells through effective chemical treatments.
Adjusted EBITDAC margin of 16.9% resulted from continued levels of high service intensity, an attractive product mix, and adoption of innovative, technologically advanced products supported by a prudent cost structure, effective supply chain management, and vertically integrated business model.
CES remains confident in its ability to continue generating strong surplus free cash flow, supported by its financial performance, outlook, and capital structure, and furthermore, on November 6, 2024, the Company's Board of Directors approved a quarterly dividend of $0.030 per share, which will be paid on January 15, 2025, to the shareholders of record at the close of business on December 31, 2024.
Third Quarter Results
In the third quarter, CES generated record revenue of $606.5 million, representing a sequential increase of $53.3 million or 10% compared to Q2 2024, off of seasonally lower activity levels in Canada as anticipated, and an increase of $70.0 million or 13% compared to $536.5 million in Q3 2023. For the nine months ended September 30, 2024, CES generated revenue of $1.7 billion, an increase of $138.2 million or 9% relative to the nine months ended September 30, 2023. The increase from the prior year comparative periods was driven by increasing service intensity levels, higher production chemical volumes, and strong market share positions, resulting in an overall uptick in revenue despite softening industry rig counts in the US.
Revenue generated in the US during Q3 2024 set a new quarterly record at $402.6 million, representing a sequential increase of $11.7 million or 3% compared to Q2 2024, and an increase of $41.2 million or 11% compared to Q3 2023. For the nine months ended September 30, 2024, revenue generated in the US was up 7% to $1.2 billion relative to the nine months ended September 30, 2023. US revenues for both the three and nine month periods benefited from higher production levels and increased service intensity, which more than offset the impact of decreased industry drilling activity. CES continued to maintain its strong industry positioning, achieving US Drilling Fluids Market Share of 22% for both the three and nine months ended September 30, 2024, compared to 21% and 20% for the three and nine months ended September 30, 2023, respectively.
Revenue generated in Canada during Q3 2024 set a new quarterly record at $203.9 million, representing a sequential increase of $41.6 million or 26% compared to Q2 2024, as is expected on a seasonal basis, and an increase of $28.8 million or 16% compared to Q3 2023. For the nine months ended September 30, 2024, revenue generated in Canada was up 12% to $567.1 million relative to the nine months ended September 30, 2023. Canadian revenues for both the three and nine month periods benefited from higher industry activity and production chemical volumes year over year. Canadian Drilling Fluids Market Share of 35% and 33% for the three and nine months ended September 30, 2024, respectively, compared to 34% and 35% for the three and nine months ended September 30, 2023, respectively.
Adjusted EBITDAC set a quarterly record at $102.5 million, representing a sequential increase of 7% compared to Q2 2024, and an increase of 28% compared to Q3 2023. Adjusted EBITDAC as a percentage of revenue of 16.9% in Q3 2024 compares to 17.3% recorded in Q2 2024 and ahead of the 15.0% recorded in Q3 2023. For the nine months ended September 30, 2024, Adjusted EBITDAC was up 29.8% to $300.0 million from $231.2 million in the nine months ended September 30, 2023, and Adjusted EBITDAC as a percentage of revenue increased to 17.2% from 14.4% a year ago. Adjusted EBITDAC improvements for both the three and nine month periods were driven by record revenue levels combined with strong margins, resulting from increased service intensity, an attractive product mix, effective supply chain management, and continued adoption of innovative, technologically advanced products, supported by a prudent cost structure and vertically integrated business model.
Net income for the three and nine months ended September 30, 2024, increased 21% to $46.6 million, and 42% to $149.3 million, respectively, relative to prior year comparative periods, driven by strong activity levels combined with improved margins and prudent management of expenses.
During the quarter, CES returned $53.1 million to shareholders (Q3 2023 - $46.3 million), through $46.0 million in shares repurchased under its NCIB and its quarterly dividend of $7.1 million (2023 - $40.0 million and $6.3 million, respectively). For the nine months ended September 30, 2024, CES returned $83.8 million to shareholders (2023 - $68.3 million), through $63.8 million in share repurchases under its NCIB and $20.0 million in dividends paid (2023 - $51.8 million and $16.5 million, respectively).
For Q3 2024, net cash provided by operating activities totaled $72.9 million compared to $99.9 million during the three months ended September 30, 2023. For the nine months ended September 30, 2024, net cash provided by operating activities of $242.4 million compared to $262.5 million for the nine months ended September 30, 2023. The decreases in net cash provided by operating activities for both the three and nine month periods were driven by larger required investments into working capital to support record revenue levels, partially offset by improvements to the cash conversion cycle for both reference periods.
CES generated $88.5 million in Funds Flow from Operations in Q3 2024, compared to $61.6 million generated in Q2 2024 and an increase of 53% from $57.9 million generated in Q3 2023. For the nine months ended September 30, 2024, CES generated $224.2 million of Funds Flow from Operations compared to $183.5 million in 2023. Funds Flow from Operations excludes the impact of working capital, and is reflective of the continued strong surplus free cash flow generated in 2024.
CES generated $40.1 million in Free Cash Flow in Q3 2024, compared to $54.8 million generated in Q2 2024, and $75.6 million generated in Q3 2023. For the nine months ended September 30, 2024, CES generated $152.3 million of Free Cash Flow compared to $196.4 million in 2023. The decrease for both the three and nine month periods were driven by larger required investments into working capital to support record revenue levels. Free Cash Flow includes the impact of quarterly working capital variations, net of capital expenditures and lease repayments.
As at September 30, 2024, CES had a Working Capital Surplus of $633.3 million, which decreased from $639.6 million at June 30, 2024, and increased from $632.8 million as at December 31, 2023. The movement during the quarter was driven by increases in accounts receivable and inventory, partially offset by increase in accounts payable and accrued liabilities, in line with the sequential and year over year increases in activity levels. The Company continues to focus on working capital optimization benefiting from the high quality of its customers and diligent internal credit monitoring processes.
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