Secure Energy Services ((TSE:SES)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Secure Energy Services was marked by a robust financial performance and strategic growth initiatives. Despite the challenges posed by divestitures and a decline in net income, the company expressed a positive outlook, focusing on growth and maintaining a strong balance sheet. This optimistic sentiment was mirrored in their strategic investments and strong shareholder returns.
Strong Financial Performance
Secure Energy Services reported an adjusted EBITDA of $490 million, reaching the top end of their guidance. This was achieved despite a 17% year-over-year decline, underscoring the company’s strong demand and solid execution. The adjusted EBITDA margin, which averaged 35% of revenue, highlights the company’s efficiency and disciplined cost management.
Successful Share Buyback Program
The company executed a successful share buyback program, repurchasing 57.3 million common shares at an average price of $11.47 per share. This move reduced the total shares outstanding by 19%, significantly enhancing long-term shareholder value.
Revenue Growth
On an annual pro forma basis, revenue increased by approximately 11%, driven by the expansion of the Clearwater heavy oil terminal and increased volumes and pricing in the Waste Management segment. This growth reflects the company’s strategic focus on expanding its operations and enhancing revenue streams.
Strategic Investments
Strategic investments totaling $100 million were made, including the completion of the initial expansion of the Clearwater heavy oil terminal, growth of the Montney water pipeline system, and a strategic tuck-in acquisition in the metal recycling business. These investments are set to bolster the company’s growth trajectory.
Metals Recycling Business Expansion
The acquisition of an Edmonton-based metal recycling business has expanded Secure’s scale and processing capabilities. This acquisition is expected to contribute approximately 10% to the 2025 adjusted EBITDA before corporate costs, enhancing the company’s competitive edge in the recycling sector.
Strong Balance Sheet
Following the Metals acquisition, the total debt-to-EBITDA ratio, excluding leases, stands at approximately 1.1x. This is well below the targeted range, providing Secure with significant financial flexibility to pursue further growth opportunities.
Impact of Divestitures
The net revenue for Q4 was $332 million, a 26% decrease year-over-year, primarily due to divestitures. Consequently, the adjusted EBITDA also declined by 28% due to asset sales, reflecting the impact of the company’s strategic decisions.
Net Income Decline
Net income for Q4 stood at $34 million, a 42% decrease from the previous year. This decline was primarily due to lower operating profit as a result of divestitures, which impacted the company’s bottom line.
Sustaining Capital Expenditure Exceeding Guidance
Secure incurred $72 million in sustaining capital for the year, surpassing the guidance of $60 million. This increase was due to expanded asset integrity programs and facility improvements, highlighting the company’s commitment to maintaining operational excellence.
Forward-Looking Guidance
Looking ahead, Secure Energy Services has projected an adjusted EBITDA range of $510 million to $540 million for 2025, marking a 10% increase at the midpoint from 2024’s pro forma results. The company anticipates discretionary free cash flow between $270 million and $300 million, supported by a low debt-to-EBITDA ratio of approximately 1.1x. Secure plans to invest $85 million in sustaining and growth capital programs, focusing on expanding infrastructure capacity and efficiency, while continuing to provide strong shareholder returns through opportunistic share repurchases and dividends.
In conclusion, Secure Energy Services’ latest earnings call highlighted a strong financial performance amidst challenges, with strategic investments and efficient management practices bolstering their outlook. The company’s commitment to growth and maintaining a robust balance sheet underscores a positive trajectory, promising continued shareholder value.
