UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 


_____________________

FORM 8-K

 

_____________________

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported):   March 3, 2020


Commission file number 001-38025


U.S. WELL SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware 81-1847117
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
   
1360 Post Oak Boulevard, Suite 1800, Houston, Texas
(Address of principal executive offices)

 

_________________________

 

Registrant’s telephone number, including area code:

(832) 562-3730
_________________________


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company    ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

 

 


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

The following information is furnished pursuant to Regulation FD.

 

On March 3, 2020, U.S. Well Services, Inc., issued a press release announcing financial results for the fourth quarter ended December 31, 2019 and a conference call in connection therewith. A copy of the release is furnished herewith as Exhibit 99.1, and incorporated herein by reference. Such exhibit (i) is furnished pursuant to Item 2.02 of Form 8-K, (ii) is not to be considered "filed" under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (iii) shall not be incorporated by reference into any previous or future filings made by or to be made by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

(d) Exhibits.

 

99.1 Press Release dated March 3, 2020 announcing the earnings results for the fourth quarter ended December 31, 2019.

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

US WELL SERVICES, INC.  
(Registrant)  
     
By: /s/ Kyle O’Neil  
  Kyle O’Neil  
  Chief Financial Officer

 

Dated: March 3, 2020

 

 

 

 

INDEX TO EXHIBITS

Introductory Note: The following exhibit is furnished pursuant to Item 2.02 of Form 8-K and is not to be considered “filed” under the Exchange Act and shall not be incorporated by reference into any of the Company’s previous or future filings under the Securities Act or the Exchange Act.

 

 

Exhibit No. Description
99.1 Press Release dated March 3, 2020 announcing the earnings results for the fourth quarter ended December 31, 2019.

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.1

 

 

News Release

  Contacts: U. S. Well Services
    Josh Shapiro, VP, Finance and Investor Relations
    (346) 354-2058
    IR@uswellservices.com
     
    Dennard Lascar Investor Relations
    Ken Dennard / Lisa Elliott
    (713) 529-6600
    USWS@dennardlascar.com

 

U.S. Well Services Announces Full-Year and Fourth Quarter 2019 Financial and Operational Results

 

HOUSTON – March 3, 2020 – U.S. Well Services, Inc. (the “Company”, “U.S. Well Services” or “we”) (NASDAQ: USWS) today reported full-year and fourth quarter 2019 financial and operational results.

 

Full-Year and Fourth Quarter 2019 Highlights

 

·Deployed three newbuild electric fracturing fleets during 2019 and commissioned one additional electric fleet for deployment in the Permian Basin under a long-term contract with Shell beginning in 2020
·Averaged 9.9 active fleets and 8.8 fully-utilized fleet equivalents for 2019
·Total revenue of $514.8 million in 2019 compared to $648.8 million in 2018
·Net loss attributable to the Company of $93.9 million in 2019 compared to net loss of $65.9 million in 2018
·Adjusted EBITDA(1) of $118.0 million in 2019 compared to $117.4 million in 2018
·Full-year 2019 Adjusted EBITDA per fully-utilized fleet of $13.4 million, which equates to $11.7 million per fully-utilized fleet after deduction of fluid end maintenance capital expenditures(2)
·Fourth quarter 2019 revenue of $92.7 million compared to $130.9 million in the third quarter of 2019
·Fourth quarter net loss attributable to the Company of $33.2 million compared to $17.0 million in the third quarter of 2019
·Fourth quarter annualized Adjusted EBITDA per fully-utilized fleet of $7.1 million compared to $16.8 million for the third quarter of 2019(2)
·After deduction of fluid end maintenance capital expenditures, fourth quarter 2019 annualized Adjusted EBITDA per fully-utilized fleet was $6.3 million compared to $16.1 million for the third quarter of 2019
·Received three new patents, bringing total patents to 30, with 104 patents pending
·As of December 31, 2019, total liquidity, consisting of cash, restricted cash and availability under the Company’s asset-backed revolving credit facility, was $52.4 million

 

(1)Each of Adjusted EBITDA and Adjusted EBITDA margin is a Non-GAAP financial measure. Please read “Non-GAAP Financial Measures.”
(2)Adjusted EBITDA per fully-utilized fleet equivalent is defined as Adjusted EBITDA divided by the product of average active fleets during the quarter and the utilization rate for active fleets during the quarter.

 

“2019 was a momentous year for U.S. Well Services, as we deployed three new electric fleets and completed a strategic transition of our customer base, and despite the challenging market backdrop, U.S. Well Services produced solid financial results,” said Joel Broussard, President and CEO of U.S. Well Services. “USWS continued to demonstrate our operating efficiencies and value added relationships with customers, as well as our position as a market leader in next generation fracturing technologies with our new electric fleet deployments.

 

“Looking forward to the first half of 2020, we expect that E&P operators will remain disciplined in spending, which should lead to continued pressure on demand and pricing for fracturing services. We believe our unique mix of contracts and fleet dedications, along with our next-generation, electric hydraulic fracturing fleets and top-tier service quality should position USWS to garner high utilization with top-tier E&P customers,” added Mr. Broussard.

 

Outlook

 

During the first quarter of 2020, U.S. Well Services began hydraulic fracturing operations for Shell with its new electric fracturing fleet and it continues to see strong demand for electric fracturing services.

 

Despite recent reductions in crewed hydraulic fracturing fleets, the industry remains oversupplied, which is driving sustained pressure on frac service pricing. In order to differentiate the Company amid challenging market conditions, U.S. Well Services has focused on developing and deploying new technologies as well as pursuing opportunities to further enhance efficiencies.

 

Currently, U.S. Well Services has 11 of its 13 fleets deployed, 10 of which are working under contracts or dedications, and will evaluate opportunities to deploy additional fleets during the year as appropriate.

 

Full-Year 2019 Financial Summary

 

Revenue for the 2019 decreased 21% to $514.8 million versus $648.8 million in 2018, driven primarily by our customers’ continued shift towards self-sourcing materials such as proppant and chemicals. U.S. Well Services averaged 9.9 active fleets throughout the year, as compared to 9.7 for 2018.

 

Costs of services, excluding depreciation and amortization, for the 2019 decreased by approximately 28% to $384.0 million from $533.0 million in 2018, primarily as a result of the reduction in volumes of proppant, and chemicals provided to customers.

 

Selling, general and administrative expense (“SG&A”) decreased to $31.9 million in 2019 from $34.5 million in 2018. Excluding stock-based compensation and transaction related costs, SG&A in 2019 was $25.3 million compared to $15.9 million in 2018. The increase in SG&A costs was driven primarily by public company expenses, including reporting costs and corporate personnel.

 

2

Net loss attributable to the Company increased to $93.9 million in the 2019 from $65.9 million in 2018. Adjusted EBITDA was $118.0 million in 2019, which represents a slight increase over 2018 Adjusted EBITDA of $117.4 million. Adjusted EBITDA margin increased to 23% from 18% in 2018.

 

Fourth Quarter 2019 Financial Summary

 

Revenue for the fourth quarter of 2019 decreased 29% to $92.7 million versus $130.9 million in the third quarter of 2019, driven by a reduction in the number of active fleets working. U.S. Well Services averaged 8.0 active fleets during the quarter, as compared to 9.3 for the third quarter of 2019. Utilization of the Company’s active fleets averaged 84% during the fourth quarter, resulting in a fully-utilized equivalent of 6.8 fleets. This compares to 90% utilization and a fully-utilized equivalent of 8.4 fleets for the third quarter of 2019.

 

Costs of services, excluding depreciation and amortization, for the fourth quarter of 2019 decreased to $76.1 million from $90.8 million during the third quarter of 2019, primarily as a result of lower activity levels and ongoing cost-cutting initiatives. Although costs of service declined sequentially, USWS’ profitability was impacted by customer-driven decisions to delay jobs, resulting in white space.

 

SG&A decreased to $7.4 million in the fourth quarter of 2019 from $8.2 million in the third quarter of 2019. Excluding stock-based compensation and transaction related costs, SG&A in the fourth quarter of 2019 was $6.1 million compared to $6.8 million in the third quarter of 2019. The reduction in overall SG&A was primarily driven by lower compensation and benefits expense.

 

Net loss attributable to the Company increased to $33.2 million in the fourth quarter of 2019 from $17.0 million in the third quarter of 2019. Adjusted EBITDA decreased 66% to $12.1 million in the fourth quarter from $35.3 million in the third quarter as a result of reductions in USWS’ fleet utilization as well as increased repair and maintenance spending as fleets were prepared for deployment towards the beginning of 2020 during periods of downtime. Adjusted EBITDA margin decreased to 13% from 27% in the third quarter of 2019.

 

Operational Highlights

 

U.S. Well Services exited the year with nine active frac fleets, with three fleets in the Appalachian Basin, two fleets in the Eagle Ford and four fleets in the Permian Basin. During the first quarter of 2020, USWS deployed two additional fleets, one of which was deployed in the Appalachian Basin and one in the Permian Basin, bringing our current active fleet count to 11. Currently, four of our active fleets are electric fleets.

 

U.S. Well Services delivered strong operational results during in 2019. For full-year 2019, USWS completed 18,838 stages and pumped for 36,663 hours, which equates to approximately 2,140 stages and 4,166 pump hours per fully-utilized fleet. During the fourth quarter, the Company completed 3,726 stages, or 548 stages per fully-utilized fleet, as compared to 4,823 total stages or 574 stages per fully-utilized fleet during the third quarter of 2019. The Company pumped for 6,771 hours during 548 frac days, as compared to 9,174 hours during 696 frac days in the third quarter of 2019. Pumping hours per day decreased approximately 6% sequentially, driven by an increased share of stack-frac jobs during the fourth quarter.

 

3

U.S. Well Services continues to be the market leader in electric fracturing, with over 12,000 electric fracturing stages completed since the deployment of our first Clean Fleet® in 2014. The Company was awarded three new patents, bringing our total patent portfolio to 30 patents, with 104 patents pending.

 

Balance Sheet and Capital Spending

 

As of December 31, 2019, total liquidity was $52.4 million, consisting of $41.4 million of cash and restricted cash on the Company’s balance sheet and $11.0 million of availability under the Company’s asset-backed revolving credit facility, and net debt was $273.8 million.

 

Capital expenditures, on an accrual basis, were $279.6 million and $22.4 million for the full-year 2019 and the fourth quarter of 2019, respectively. Full-year capital expenditures consisted of $196.6 million of growth capital expenditures, $34.7 million of fleet enhancements and $48.3 million of maintenance capital expenditures. For the fourth quarter of 2019, the capital expenditures consisted of $9.2 million for growth initiatives, $4.7 million for fleet enhancements and $8.4 million for maintenance capital expenditures, which equates to an annualized rate of $5.0 million per fully-utilized fleet. Maintenance capital expenditures during the fourth quarter of 2019 included approximately $1.4 million for fluid ends, which equates to an annualized rate of $0.8 million per fully-utilized fleet and 17% of total maintenance capital expenditures.

 

Conference Call Information

 

The Company will host a conference call at 9:00 am Central / 10:00 am Eastern Time on Wednesday, March 4, 2020 to discuss financial and operating results for the fourth quarter of 2019 and recent developments. This call will also be webcast and an investor presentation will be available on U.S. Well Services’ website at http://ir.uswellservices.com/events-and-presentations/events. To access the conference call, please dial 201-389-0872 and ask for the U.S. Well Services call at least 10 minutes prior to the start time or listen to the call live over the Internet by logging on to the Company’s website from the link above. A telephonic replay of the conference call will be available through March 11, 2020 and may be accessed by calling 201-612-7415 using passcode 13699800#.  A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days. 

 

About U.S. Well Services, Inc.

 

U.S. Well Services, Inc. is a leading provider of hydraulic fracturing services and a market leader in electric fracture stimulation. The Company’s patented electric frac technology provides one of the first fully electric, mobile well stimulation systems powered by locally supplied natural gas including field gas sourced directly from the wellhead. The Company’s electric frac technology dramatically decreases emissions and sound pollution while generating exceptional operational efficiencies including significant customer fuel cost savings versus conventional diesel fleets. For more information visit: www.uswellservices.com. The information on our website is not part of this release.

 

4

Forward-Looking Statements

 

The information above includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included herein concerning, among other things, availability under the Company’s credit facilities, business strategy and objectives for future operations, results of discussions with potential customers, potential new contract opportunities and planned deployment, operation and utilization of fleets, are forward-looking statements. These forward-looking statements may be identified by their use of terms and phrases such as “may,” “expect,” “guidance,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” “target” and similar terms and phrases. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events, and it is possible that the results described in this release will not be achieved. These forward-looking statements are subject to certain risks, uncertainties and assumptions, including those identified in this release or disclosed from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”). Factors that could cause actual results to differ from the Company’s expectations include changes in market conditions, changes in commodity prices, changes in supply and demand for oil and gas, changes in demand for the Company’s services, availability of financing and capital, the Company’s liquidity, the Company’s compliance with covenants under its credit agreements, actions by customers and potential customers, geopolitical events, availability of equipment and personnel and other factors described in the Company’s public disclosures and filings with the SEC, including those described under “Risk Factors” in the Company’s annual report on Form 10-K expected to be filed on March 6, 2020 and in the Company’s quarterly reports on Form 10-Q. As a result of these factors, actual results may differ materially from those indicated or implied by forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

 

 

- Tables to Follow -

 

5

U.S. WELL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and amounts in thousands except for active fleets and per share amounts)
                
   Three Months  Year Ended December 31,
     December 31, 2019      September 30, 2019      December 31, 2018      2019      2018  
                
Statement of Operations Data:                         
Revenue  $92,682   $130,884   $118,436   $514,757   $648,847 
Costs and expenses:                         
Cost of services (excluding depreciation and amortization)   76,115    90,792    105,788    383,957    533,031 
Depreciation and amortization   36,260    39,723    30,893    154,149    108,440 
Selling, general and administrative expenses   7,382    8,216    19,634    31,856    34,497 
Loss on disposal of assets   4,182    4,976    2,858    20,065    10,848 
Loss from operations   (31,257)   (12,823)   (40,737)   (75,270)   (37,969)
Interest expense, net   (8,715)   (8,449)   (10,964)   (30,099)   (32,636)
Loss on extinguishment of debt   -    -    (190)   (12,558)   (190)
Other income (expense)   (7)   62    2    1,768    333 
Loss before income taxes   (39,979)   (21,210)   (51,889)   (116,159)   (70,462)
Income tax expense (benefit)   (546)   39    352    (77)   352 
Net loss   (39,433)   (21,249)   (52,241)   (116,082)   (70,814)
Net loss attributable to noncontrolling interest   (6,240)   (4,280)   (4,918)   (22,169)   (4,918)
Net loss attributable to U.S. Well Services, Inc.  $(33,193)  $(16,969)  $(47,323)  $(93,913)  $(65,896)
Dividends accrued on Series A preferred stock   (1,720)   (1,670)   -    (4,050)   - 
Deemed and imputed dividends on Series A preferred stock   (5,240)   (4,406)   -    (11,206)   - 
Net loss attributable to U.S. Well Services, Inc. common stockholders  $(40,153)  $(23,045)  $(47,323)  $(109,169)  $(65,896)
                          
Net lost attributable to U.S. Well Services, Inc. stockholders per common share (1):                         
Basic and diluted   (0.74)   (0.45)   (0.96)   (2.11)   (1.33)
Weighted average common shares outstanding:                         
Basic and diluted   53,279    50,250    47,779    50,244    47,899 
                          
Other Financial and Operational Data                         
Capital Expenditures (2)   22,350    14,523    87,989    279,630    195,921 
Adjusted EBITDA (3)   12,138    35,288    19,530    117,996    117,445 
Average Active Fleets   8.0    9.3    9.0    9.9    9.7 

 

(1) Due to the Company's combination with the SPAC which was accounted for as a reverse recapitalization, earnings per share has been recast to reflect the Company's capital structure post-combination for all comparative periods.

 

(2) Capital expenditures presented above are shown on an accrual basis, including capital expenditures in accounts payable, accrued liabilities and under equipment financing arrangements.

 

(3) Adjusted EBITDA is a Non-GAAP Financial Measure. See the tables entitled "Reconciliation and Calculation of Non-GAAP Financial and Operational Measures" below.            

 

6

 

U.S. WELL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited and amount in thousands, except share and per share amounts)
       
   Year Ended
   December 31, 2019  December 31, 2018
ASSETS      
CURRENT ASSETS:          
Cash and cash equivalents  $33,794   $29,529 
Restricted cash   7,610    507 
Accounts receivable (net of allowance for doubtful accounts of $22 in 2019 and $189 in 2018)   79,542    58,026 
Inventory, net   9,052    9,413 
Prepaids and other current assets   13,332    16,437 
Total current assets   143,330    113,912 
Property and equipment, net   441,610    331,387 
Intangible assets, net   21,826    27,890 
Goodwill   4,971    4,971 
Deferred financing costs, net   1,045    2,070 
TOTAL ASSETS  $612,782   $480,230 
LIABILITIES AND STOCKHOLDERS' EQUITY          
CURRENT LIABILITIES:          
Accounts payable  $70,170   $89,360 
Accrued expenses and other current liabilities   40,481    17,044 
Notes payable   8,068    4,560 
Current portion of long-term equipment financing   5,564    3,263 
Current portion of long-term capital lease obligation   10,474    25,338 
Current portion of long-term debt   6,250    900 
Total current liabilities   141,007    140,465 
Long-term equipment financing   10,501    8,304 
Long-term debt   274,391    91,112 
Deferred rent   215    - 
TOTAL LIABILITIES   426,114    239,881 
           
MEZZANINE EQUITY          
Series A Convertible Redeemable Preferred Stock, par value $0.0001 per share; 55,000 shares authorized, issued and outstanding as of December 31, 2019; aggregate liquidation preference of $59,050 as of December 31, 2019   38,928    - 
STOCKHOLDERS' EQUITY          
Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares authorized; 62,857,624 shares and 49,254,760 shares issued and outstanding as of December 31, 2019 and 2018, respectively   5    5 
Class B Common Stock, par value of $0.0001 per share; 20,000,000 shares authorized; 5,500,692 shares and 13,937,332 shares issued and outstanding as of December 31, 2019 and 2018, respectively   1    1 
Additional paid in capital   248,302    204,928 
Accumulated deficit   (111,201)   (17,383)
Total stockholders' equity/member's equity attributable to U.S. Well Services, Inc.   137,107    187,551 
Noncontrolling interest   10,633    52,798 
Total Stockholders' Equity   147,740    240,349 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY  $612,782   $480,230 

 

7

U.S. WELL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31
(unaudited and in thousands)
       
   2019  2018
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(116,082)  $(70,814)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:          
Depreciation and amortization   154,149    108,440 
Loss on disposal of assets   20,065    10,848 
Non-cash interest   -    9,553 
Share/Unit based compensation expense   7,755    20,633 
Loss on extinguishment of debt   12,558    190 
Other noncash items   3,784    9,381 
Changes in working capital   (7,385)   (4,762)
Net cash provided by operating activities   74,844    83,469 
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (209,101)   (147,606)
Insurance proceeds from damaged property and equipment   807    8,033 
Net cash used in investing activities   (208,294)   (139,573)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from issuance of revolving credit facility   49,960    55,975 
Repayments of revolving credit facility   (65,844)   (49,825)
Proceeds from issuance of long-term debt   285,000    40,000 
Repayments of long-term debt to related party   -    (163,860)
Repayments of long-term debt   (75,000)   - 
Payment of fees related to debt extinguishment   (6,560)   - 
Repayments of amounts under equipment financing agreements   (70,619)   (22,997)
Principal payments under finance lease obligation   (16,699)   (9,551)
Proceeds from issuance of preferred stock and warrants, net   54,524    - 
Proceeds from issuance of common stock, net   -    243,865 
Repurchase of common stock   -    (11,475)
Other   (9,944)   (2,418)
Net cash provided by financing activities   144,818    79,714 
Net increase in cash and cash equivalents and restricted cash   11,368    23,610 
Cash and cash equivalents and restricted cash, beginning of period   30,036    6,426 
Cash and cash equivalents and restricted cash, end of period  $41,404   $30,036 

 

8

 

Non-GAAP Financial Measures

 

The Company reports its financial results in accordance with GAAP. The Company believes, however, that certain non-GAAP performance measures, such as EBITDA and Adjusted EBITDA, allow external users of its consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate its operating performance and compare the results of its operations from period to period and against the Company’s peers without regard to the Company’s financing methods, hedging positions or capital structure. Additionally, the Company believes the use of certain non-GAAP measures, such as EBITDA and Adjusted EBITDA, highlights trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP measures.

 

Reconciliation of Net Income to Adjusted EBITDA

 

EBITDA and Adjusted EBITDA are non-GAAP financial measures and should not be considered as a substitute for net income (loss), operating income (loss) or any other performance measure derived in accordance with GAAP or as an alternative to net cash provided by operating activities as a measure of the Company’s profitability or liquidity. The Company believes EBITDA and Adjusted EBITDA are important supplemental measures of its performance that are frequently used by others in evaluating companies in its industry. Because EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income (loss) and may vary among companies, the EBITDA and Adjusted EBITDA that the Company presents may not be comparable to similarly titled measures of other companies.

 

The Company defines EBITDA as earnings before interest, income taxes, depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA excluding the following: loss on disposal of assets; share-based compensation; impairments; and other items that the Company believes to be non-recurring in nature. The Company defines Adjusted EBITDA margin as Adjusted EBITDA as a percentage of Revenue.

 

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U.S. WELL SERVICES, INC.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA (NON-GAAP) TO NET INCOME (GAAP)
(unaudited, amounts in thousands)
                
   Three Months  Year Ended December 31,
   December 31, 2019  September 30, 2019  December 31, 2018  2019  2018
Net loss  $(39,433)  $(21,249)  $(52,241)  $(116,082)  $(70,814)
Interest expense, net   8,715    8,449    10,964    30,099    32,636 
Income tax expense (benefit)   (546)   39    352    (77)   352 
Depreciation and amortization   36,260    39,723    30,893    154,149    108,440 
EBITDA   4,996    26,962    (10,032)   68,089    70,614 
Loss on disposal of assets (a)   4,182    4,976    2,858    20,065    10,848 
Share based compensation (b)   2,083    2,305    17,830    7,755    20,633 
Certain non-productive time (c)   -    -    -    -    1,200 
Fleet start-up and relocation costs (d)   877    1,045    3,339    9,085    5,056 
Restructuring and transaction related costs (e)   -    -    2,126    1,738    4,391 
Fleet 6 fire (f)   -    -    -    (1,294)   1,294 
Loss on extinguishment of debt (g)   -    -    190    12,558    190 
Terminated vendor contract (h)   -    -    3,219    -    3,219 
Adjusted EBITDA  $12,138   $35,288   $19,530   $117,996   $117,445 

 

(a) Represents net losses on the disposal of property and equipment.

 

(b) Represents non-cash share-based compensation.

 

(c) Represents revenue shortfall associated with non-productive time due to sand mine issues with a customer. The delays were caused by excessive wait times at the customer’s chosen sand mine as sand mine operations were starting up and have since been addressed. Additionally, the Company has come to an agreement with the customer to better define how non-productive time caused by sand mine delays are to be split between the two parties. As such, the Company does not anticipate,  nor has experienced, additional material revenue shortfalls related to delays at the customer’s sand mine moving forward.

 

(d) Represents non-recurring costs related to the start-up and relocation of hydraulic fracturing fleets.

 

(e) Represents non-recurring third-party professional fees and other costs including costs related to the capital restructuring and the potential sale of U.S. Well Services, LLC.

 

(f) Represents non-recurring costs related to a fleet fire and subsequent reimbursement via insurance proceeds.

 

(g) Represents non-recurring costs related to debt extinguishment.

 

(h) Represents non-recurring accrued costs related to disputed charges under a vendor contract that was subsequently terminated.                

 

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