Secure Energy Services Inc.
(SES-T) C$6.39
Q4/21 Results: First Look
Event
Secure reported Q4/21 results.
Impact: POSITIVE
Q4/21 Results: Secure reported Q4/21 net revenue, EBITDAS net of transaction costs, and EPSD of $327.0 million, $99.0 million, and a loss of $0.54/share, respectively, compared to our estimates of $330.5 million, $97.7 million, and a loss of $0.04/share. Importantly, our estimate featured $7.0 million of one-time transaction costs compared with actual transaction costs of $10.0 million. After normalizing for this difference, we view the quarter as a 4% beat on an EBITDAS basis. Secure incurred a $247.0 million (or ~$0.80/share) non-cash impairment charge related to the suspension or closure of underutilized facilities that we discuss below. Details in Exhibit 1.
Synergies Realized Through Asset Optimization, Rationalization: Secure has suspended or closed 17 underutilized facilities. These types of opportunities were critical to our confidence in its $75 million synergies guidance as volumes from closed facilities are driven to nearby remaining facilities that improves remaining facility margin performance and removes the fixed costs associated with facilities that were closed. Management indicated that this was a large portion of the $11 million of annual synergies realization in the quarter.
2022 Growth Capital Budget Disclosed: Secure is guiding to $45 million of growth capital, below our estimate of $60 million (we are the street high), but well above the implied consensus estimate of $25 million after backing out $40 million in sustaining capital and $15 million in landfill expansions that were previously disclosed. In our view, this is a very reasonable level of growth spending in the context of our $457.7 million 2022 EBITDAS estimate, but note that some investors may view increased consensus spending estimates as negative in the context of its leverage following the Tervita acquisition and investors continued focus on capital discipline and return of capital.
Conference Call: We will update our estimates following managements conference call at 11:00 a.m. ET, dial: 1-888-664-6383