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U.S. SILICA HOLDINGS, INC. (SLCA)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue was $336.0M with diluted EPS $0.37 ($0.28 adjusted); sequentially softer on seasonality and lower Oil & Gas activity, yet net income rose 8% vs Q3 to $29.1M, and the company completed another $25M voluntary term loan repayment, keeping net leverage at 1.4x .
  • Industrial & Specialty Products (ISP) delivered improved profitability on structural cost reductions, price increases, and mix; contribution margin per ton rose 27% YoY despite seasonal volume declines .
  • Oil & Gas segment contribution margin was strong (management cited 35%) despite lower proppant volumes and SandBox loads; four customer contract amendments/extensions signed, and Guardian filtration continues to gain traction with more systems expected in 2024 .
  • 2024 outlook: robust operating cash flow; planned capex of approximately $60M; Northern White Sand offerings to be reclassified from Oil & Gas to ISP starting Q1 2024, streamlining operations and reporting .

What Went Well and What Went Wrong

What Went Well

  • ISP profitability improved on price increases and mix; contribution margin per ton up 27% YoY in Q4, with management highlighting ongoing structural cost reductions and advanced materials sales .
  • Strong balance sheet progress: $25M debt extinguished in Q4, cash/equivalents at $245.7M, net leverage held at 1.4x; full-year cash from operations reached $263.9M .
  • Oil & Gas pricing discipline and variable cost reductions sustained high margins; Guardian frac fluid filtration system “continues to perform well” with several incremental systems planned for 2024 .

What Went Wrong

  • Sequential and YoY volume softness from seasonality and lower completions activity: total tons sold down 6% QoQ and 16% YoY; Oil & Gas revenue -13% QoQ and -27% YoY; company contribution margin and Adjusted EBITDA declined sequentially .
  • Average selling price per ton decreased in Oil & Gas, and SandBox loads fell, pressuring segment revenues and contribution margins vs prior periods .
  • ISP volumes declined YoY due to reduced seasonal demand, customer maintenance, and year-end inventory management, partially offset by cost/mix/pricing improvements .

Financial Results

Consolidated Metrics vs Prior Periods and Year-Over-Year

MetricQ4 2022Q3 2023Q4 2023
Revenue ($USD Millions)$412.934 $366.961 $336.037
Net Income ($USD Millions)$31.516 $26.808 $28.965
Diluted EPS ($USD)$0.40 $0.34 $0.37
Adjusted Diluted EPS ($USD)$0.43 $0.38 $0.28
Tons Sold (Millions)4.606 4.121 3.865
Contribution Margin ($USD Millions)$134.441 $129.237 $116.936
Adjusted EBITDA ($USD Millions)$104.2 $102.1 $88.6

Segment Breakdown

Segment MetricQ4 2022Q3 2023Q4 2023
Oil & Gas Revenue ($USD Millions)$273.717 $231.426 $200.552
Oil & Gas Tons Sold (Millions)3.568 3.122 2.907
Oil & Gas Contribution Margin ($USD Millions)$94.437 $82.890 $70.142
ISP Revenue ($USD Millions)$139.217 $135.535 $135.485
ISP Tons Sold (Millions)1.038 0.999 0.958
ISP Contribution Margin ($USD Millions)$40.004 $46.347 $46.794

Balance Sheet and Leverage KPIs

KPIQ4 2022Q3 2023Q4 2023
Cash and Cash Equivalents ($USD Millions)$280.845 $222.435 $245.716
Net Debt ($USD Millions)$776.148 $645.177 $594.321
Net Leverage Ratio (x)2.2x 1.4x 1.4x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital Expenditure ($USD Millions)FY 2024N/A≈ $60 New
Operating Cash FlowFY 2024N/A“Produce robust operating cash flow” (qualitative) New
Adjusted EBITDA Growth (%)FY 2023“≈ +25% YoY” reaffirmed Delivered: +24% YoY ($439.0M vs $353.6M) Achieved near target
Capital Expenditure ($USD Millions)FY 2023$60–$65 (high-end) Actual $65.2 Achieved high end
Northern White Sand OfferingFrom Q1 2024N/AReclassified from Oil & Gas to ISP Structural change
DividendsFY/Q4 2023$— prior $— declared Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023, Q3 2023)Current Period (Q4 2023)Trend
Oil & Gas pricing discipline and marginsPricing held up; margins increased despite lower activity Strong segment contribution margin cited (35%) despite lower volumes/loads; disciplined pricing continues Margins resilient; volumes cyclical headwind
ISP price/mix and structural cost actionsPrice/mix and cost reductions driving margin expansion 27% YoY increase in CM per ton; ongoing structural cost reductions Improving profitability
Guardian filtration systemLaunch and early traction Performing well; incremental systems planned in 2024 Adoption ramping
Seasonality and activity levelsLower activity in certain categories Normal seasonal volume declines and customer maintenance/inventory management Seasonal headwinds in Q4
Deleveraging$25M debt extinguished; net leverage ~1.5x Another $25M extinguished; net leverage 1.4x Ongoing deleveraging
Portfolio/reporting changeN/ANorthern White Sand reclassified to ISP starting Q1 2024 Streamlining operations/reporting

Management Commentary

  • “During the fourth quarter, we continued to strengthen our financial foundation and advance our growth strategy while closing out an exceptionally strong and historic year... delivered on our guidance of approximately 25% YoY improvement in Adjusted EBITDA... improved our total company contribution margin by 16% YoY... repurchased and extinguished an additional $25 million of debt, improving our balance sheet and maintaining a low net leverage ratio of 1.4x.” — Bryan Shinn, CEO .
  • “In our Oil and Gas segment... we delivered a strong segment contribution margin of 35% for the quarter... signed four customer contract amendments and extensions... our new, patent-pending Guardian frac fluid filtration system continues to perform well... expect to add several incremental systems to the fleet in 2024.” .
  • “In our Industrial and Specialty Products segment... price increases and improved product mix... 27% increase in contribution margin on a per ton basis vs prior year quarter.” .
  • 2024 focus: “produce robust operating cash flow... investing approximately $60 million for capital expenditures for the year.” .
  • Structural change: Northern White Sand offerings reallocated from Oil & Gas to ISP starting Q1 2024 to streamline operations and maximize value .

Q&A Highlights

  • Management emphasized durability of Oil & Gas margins amid cyclicality and reiterated pricing discipline and strong contractual commitments; Guardian system seen as a productivity/maintenance cost saver with broader 2024 deployment .
  • Clarifications on 2024 investment and cash generation: capex ~ $60M and robust operating cash flow expected; balance sheet deleveraging remains a priority .
  • Segment mix and reporting: reclassification of Northern White Sand to ISP from Q1 2024 to align offerings and simplify reporting; management to provide bridges on Q1 2024 call .

Estimates Context

  • S&P Global consensus for SLCA Q4 2023 was unavailable in our system; therefore, official beat/miss vs SPGI consensus cannot be provided at this time.
  • Third-party sources indicated an EPS beat vs expectations (reported adjusted EPS $0.28 vs $0.24), but we anchor on S&P Global; treat non-SPGI references as supplemental only .
  • Revenue comparison to estimates is similarly unavailable due to SPGI mapping limitations (SPGI consensus unavailable).

Key Takeaways for Investors

  • Q4 softness was primarily seasonal and activity-driven; margins remained resilient due to pricing discipline and variable cost reductions, indicating healthy through-cycle profitability in Oil & Gas .
  • ISP’s structural cost actions and price/mix improvements are translating to sustained margin gains despite seasonal volume declines, supporting medium-term mix shift and earnings quality .
  • Operational execution and balance sheet strengthening continue (another $25M debt repayment; net leverage 1.4x), enhancing flexibility for 2024 investments and potential shareholder value creation .
  • 2024 roadmap calls for robust operating cash flow and ~$60M capex; watch for Guardian system deployment pace and customer contract expansions as catalysts .
  • The reclassification of Northern White Sand to ISP beginning Q1 2024 is a structural reporting change; monitor management’s bridge and any segment margin implications .
  • Near-term trading: narrative skews to margin durability and cash generation vs seasonal volume pressure; medium-term thesis hinges on pricing discipline, cost optimization, Guardian adoption, and ISP mix/innovation .

Sources

  • Q4 2023 8-K press release and exhibits: .
  • Prior quarters’ 8-K releases: Q3 2023 ; Q2 2023 .
  • Press release distribution page: .
  • Earnings call transcript (external copy): .