Mammoth Energy Services Inc (TUSK) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Mammoth Energy Services Second Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded and will be available for replay on Mammoth Energy Services' website. I would now like to introduce your host for today's conference, Mr. Don Crist, Mammoth Energy Services Director of Investor Relations. Sir, you may begin.

Thank you, Ashley. Good morning, and welcome to Mammoth Energy Services' Second Quarter 2018 Earnings Conference Call. Joining me on today's call are Arty Straehla, Chief Executive Officer; and Mark Layton, Chief Financial Officer.

Before I turn the call over to them, I would like to read our safe harbor statement. Some of our comments today may include forward-looking statements reflecting Mammoth Energy Services' views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements.

These risks are discussed in Mammoth Energy Services Form 10-K, Forms 10-Q, current reports on Form 8-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Our comments today may also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our second quarter press release, which can be found on our website along with our updated presentation. Now I'll turn the call over to Arty.

Thank you, Don, and good morning, everyone.

The second quarter of 2018 marked our seventh quarter as a public company and the fourth consecutive record quarter on an adjusted EBITDA basis. We were able to generate $149 million in adjusted EBITDA on $534 million of revenue, which is up from the first quarter of 2018 by 14% and 8%, respectively. It was a busy period as our team executed well within our core businesses and we've been able to further improve our balance sheet, while focusing on some growth initiatives.

We spent roughly $72 million in CapEx, the majority of which was for the expansion of our infrastructure and transportation and the expansion of our sand facilities. We completed 2 accretive acquisitions for $14 million and still paid off 100% of the borrowings of $39 million on our credit facility during the period, leaving us debt-free.

While Mark will elaborate further on our financial performance in his comments, I wanted to point out a few key highlights I am particularly proud of. Our infrastructure division performed exceptionally well in Puerto Rico. Similarly, our OFS teams excelled and, despite the apparent concerns of softness in the market, maintained full utilization during the period.

From a portfolio perspective, our Q2 results, again, underscore our differentiation from many of the OFS companies we are compared to. As we look ahead, we envision a continued diversification towards industrial sectors to complement our existing OFS asset base.

Consistent with our transition towards a less cyclical platform, our Board of Directors initiated a quarterly dividend, which was announced in July and will be paid starting in mid-August. This initial dividend reflects our balance sheet -- our balanced shareholder focus on both growth and income. While the implied yield is modest at this time, we feel that it is a starting point and a signal to shareholders that are -- that we are conscious about the need for a balanced return. It also affords us the opportunity to incrementally increase the dividend amount in the coming years as our earnings grow.

During the second quarter, we closed 2 acquisitions. One in the crude transportation business and the other expanding our cementing operations, while adding acidizing in West Texas. Combined, we paid $14 million for these acquisitions, which is modest in scale and offers us further options to allocate capital to these businesses, which has already begun.

We expect them to contribute immediately to our results, both in terms of customer contact as well as cash flow.

The crude transportation operation has historically focused on the Oklahoma market, and since closing the transaction, we have expanded into the Texas market. We've doubled the fleet and anticipate further expansion through the end of the year. Current differentials remain favorable for crude transportation in both markets, and this is a logical step-out from our existing transportation businesses, offering us another opportunity for expansion.

The integration of crude transportation into our other logistics offerings allows us to be a more complete transportation company. We are currently looking at other facets of the transportation industry for possible expansion to further broaden our breadth of logistics offerings.

We are currently evaluating approximately 25 transactions, some of which provide services that are in high demand, due to bottlenecks in the current oilfield and infrastructure service space, and are expected to have rapid paybacks.

In addition, we are evaluating several opportunities that would represent a step-out from our current asset base and tie to our interest to further expand our industrial presence and could provide stable cash flows in the years to come.

As our history has shown, we will remain disciplined in the deployment of capital, choosing only the transactions that are projected to meet or exceed our hurdle rates.

Now let me give you an update on our current operations, starting with the infrastructure division. Our team has been in Puerto Rico for over 275 days or nearly 10 months as of today. We continue to work closely with PREPA and other governmental agencies to improve the resiliency of the energy infrastructure network and have begun the task of reconstructing parts of the electrical grid to both harden it and provide better protection from future storms.

We remind you, this process is really just getting underway from a reconstruction standpoint. While the bulk of power has been restored to the island, the fragility of the system remains.

In the continental United States, we remain in discussions with several large investor-owned utilities to expand our operating footprint and build our backlog in all of our operating areas. The infrastructure division's total backlog was approximately $1.4 billion at the end of the second quarter as compared to $900 million at the end of the first quarter of 2018.

We continue to work across the Northeast, Southwest and Midwest portions of the U.S. and in Puerto Rico for private, public, investor-owned and cooperative utilities.

From an oilfield perspective, the second quarter was a strong one. We pumped 1,815 stages during the second quarter of 2018, with our EBITDA margins for our Pressure Pumping division coming in at approximately 21%. All 6 of our frac fleets remained active for the full quarter, with 3 of our 4 fleets in the Northeast, 2 in the Mid-Continent and 1 in the Permian.

While there has been significant speculation among investors as to the current demand for pressure pumping as of late, we can report that our fleets are committed to stable customers for the remainder of the year. Based on our current calendar, we anticipate stable utilization and positive cash flows throughout the balance of 2018.

In early July, we finalized an amendment to our pressure pumping contract with Gulfport, extending the expiration date to December 2021, providing for an additional 39 months. We value this working relationship with Gulfport and look forward to continuing to work on efficiencies with them over the coming years, which should benefit both companies.

Our view of the pressure pumping market has not changed with regard to adding frac capacity, and we anticipate remaining at 6 fleets for the foreseeable future. As of today, the cost of new equipment and current spot market pricing do not justify further investment.

Turning to sand, we are happy to announce that we have extended the contract in place with Gulfport Energy for 300,000 tons per annum until December 31, 2021. This extension coincides with the recent extension of the pressure pumping contract, with both having the same expiration date. We sold approximately 780,000 tons of sand during the second quarter of 2018, of which 19% was brokered. The average sales price for the sand sold during the second quarter of 2018 was $43.09 per ton.

Our blended second quarter production cost came in at approximately $18 per ton, in line with our projections, allowing us to support EBITDA per ton of just over $25.

As our internal capacity increases throughout 2018, we anticipate a gradual decrease in our production costs towards the mid-teens by the end of 2018. The expansion of our Taylor facility is -- to 1.75 million tons per annum is now complete with both the dry and wet plants operating.

The equipment needed to upgrade the dry plant at Piranha to 1.9 million tons per year has been delivered and is expected to be installed and commissioned in the third quarter. Approximately half of our processing capacity is expected to be consumed by customers utilizing our pressure pumping services, and we currently have another 1.3 million tons under long-term take-or-pay contracts at an average sales price of $43 per ton across multiple grades.

Two of the 3 contracts in place are 3-year take-or-pay, which run through the late 2020. The third contract with Gulfport Energy runs through 2021.

Before passing the call to Mark, let me sum up management's transition over the past 18 months in this way. Following our rapid expansion in 2017, we are in the midst of a steady transition of our asset base from a pure OFS company to more of a diversified industrial company.

We are attracted to the reduced cyclicality, stable cash flows and contracting nature in which we feel we can deploy our cash flow into effectively.

As we move away from the traditional OFS supply/demand limitations, we believe the investments made across a wider platform should drive multiple appreciation, frame longer term earning sustainability in growth and ultimately push our market value higher.

We anticipate a continued elevated level of free cash flow during the back half of 2018. We remain focused on reinvesting this cash on growth within our core operating areas and possibly entering into new areas. We will remain disciplined, patient and exclusively focused on opportunities that meet or exceed our targeted thresholds.

Let me turn the call over to Mark to take you through the financial performance during the second quarter of 2018, after which we will take questions.

Thank you, Arty, and good morning, everyone. I hope that all of you have had a chance to read our press release, so I will keep my financial comments brief and focus on certain highlights.

Mammoth's revenue during the second quarter of 2018 came in at $534 million, up more than 8% from the first quarter of 2018. The growth of our Infrastructure segment, the expansion of our Pressure Pumping division, the growth of our internal sand production, improved equipment utilization and improved pricing for our services, all contributed to the higher revenue compared to the prior period.

Net income for the second quarter of 2018 came in at $43 million or $0.95 per share. Adjusted earnings per share came in at $1.34 per share. It should be noted that Mammoth recorded a noncash charge of $18 million related to equity compensation to nonemployees at our sponsor level as a result of the recent secondary offering.

While we recognize this may draw questions, it is important for everyone to understand that this charge is noncash and was paid by our sponsor. Further, it did not result in the issuance of shares, so it is non-dilutive to Mammoth.

Adjusted EBITDA for the second quarter of 2018 came in at $149 million, up more than 14% from the first quarter of 2018. Our corporate adjusted EBITDA margin was 28% during the second quarter as compared to 26% in the first quarter of 2018.

Selling, general and administrative expenses came in at $65 million in the second quarter of 2018, up from $39 million in the first quarter of 2018. Excluding noncash equity compensation to nonemployees of $18 million and $28 million of bad debt expense, SG&A expenses during the second quarter were $18 million or approximately 3.4% of revenues.

Growth across all of our operating segments and an increase in total employee count contributed to the increase in total SG&A expenses compared to prior periods.

Income taxes during the second quarter of 2018 were approximately $53 million as compared to $46 million during the first quarter of 2018. The increase in taxes was a direct result of higher revenues in Puerto Rico as compared to the prior period.

The effective tax rate for the second quarter of 2018 came in at 58% as compared to 45% during the first quarter of 2018. Excluding the impact of bad debt expense and noncash, nonemployee equity-based compensation, our effective tax rate would have been 38% as compared to 35% during the first quarter of 2018.

CapEx during the second quarter of 2018 was approximately $72 million, the majority of which was related to the organic growth of our infrastructure segment in the continental U.S. and the expansion of our sand facilities. Our 2018 CapEx plan has been adjusted to $205 million. Today we are seeing significant opportunities to invest in electrical infrastructure, logistics, rentals and areas of the industrial sector.

At this time, we project our CapEx to be fully funded through internally generated cash flows.

The tightness in Permian oil pipeline takeaway capacity is having an effect on the oil differential and is expected to present some oil transportation opportunities until the pipeline capacity catches up to the growth in supply. Our recent expansion into crude transportation and the growth plans in place position Mammoth to take advantage of this tightness.

Our borrowing base on June 30, 2018 was $170 million, and it was completely undrawn. We also had cash on hand of approximately $11 million, resulting in liquidity of approximately $173 million net of letters of credit. Based on our current CapEx budget and cash flow outlook, we anticipate building cash throughout the balance of 2018. We thank our shareholders for their support. This concludes our prepared remarks, and we thank you for your time and attention. We will now open the call for questions.

(Operator Instructions) Our first question comes from Tommy Moll of Stephens.

So I wanted to start on Puerto Rico. As you roll onto the new contract there, how do you expect the number of personnel on the island to fluctuate over the next few quarters? How does the top line evolve along with that? And then, as well, on the margin side, how should we think about that?

Well, Tommy, let me, first of all, say that our team -- our infrastructure team in Puerto Rico has executed at a tremendously high level, and we are very proud of the work that they have done.

As you know, we are nearing the end of the restoration phase and going to reconstruction. We increased our personnel on the island during the past quarter and it'll start falling somewhat as it comes back to much more normalcy.

What occurred was that the Corps of Engineers, when they exited the island, there was still quite a bit of restoration work and we took our increases up. With that said, we're still about 700 on the island today. Now that's down from a high of about 1,000.

So this -- we still view this as long-term work. We have the $900 million contract that we won during the course of the second quarter, and we feel like that as we make the transition to reconstruction, we still have a long time to be on the island.

And any insight into when the next round of RFPs might kick off?

No. I think, as you've seen with -- PREPA has had quite a bit of operational changeover and that type of thing. So right now, we are waiting on the PWs for the reconstruction. We have the first ones that have been issued and we are currently working on those. But there are -- will certainly be more.

And when I use the term PW, those are project worksheets that -- PREPA is designing the work for the reconstruction and we have to be -- and we have been an aid to them in doing this, but it'll still be a longer-term process.

Okay. And then as a follow-up, I wanted to ask about the acquisitions that you completed in the second quarter both on the crude hauling and the cement and acid sides. It sounds like the angle here is similar to the one you played a year ago or so with the T&D acquisitions, where you bought and then quickly invested capital and scaled the acquired businesses.

Is that what we should continue to expect for the more recent deals? And how do they fit into your broader strategy in terms of where these businesses were operating or will operate? And then any synergies you expect to realize with your existing portfolio?

Yes, thanks, Tommy. I will tell you both of them were very strategic for us, and that was part of the decision making. And then, of course, there are values that we can add onto our platforms, and that's what we've done.

If you go all the way back to pressure pumping in -- a couple years ago, when we added additional horsepower and we've added additional sand mines and that type of thing. And then, we did the same thing with the infrastructure business, we bought 2 small platforms and then we added CapEx to it. It's exactly what we're doing here.

First of all, I'll talk about WTL and the crude transportation. Number one, it fits into our broader thought processes of transportation. We're already in the sand hauling, we're already in the rig hauling. So it's a logical step to go into the crude transportation.

We saw the tightness of the pipelines coming in Q1. We actually started the negotiations on this and we closed it in Q2. Since then, we've doubled the size of the fleet and we've continued to grow it and we will continue to invest in it.

Now it being an Oklahoma-centric company that we started with, they had a little bit of work and they would truck oil out of Wichita Falls back into Oklahoma and things of that nature.

We have seen a huge amount of demand for making the longer hauls from Owen Lake, which is just outside the Permian, to Gardendale, which is southwest of San Antonio.

So we feel very, very good about that and we continue to build that business. We were able to buy a lot of used equipment on the market, and we are certainly in the process of putting it to work.

The second acquisition was RTS, a small cementing and acidizing company in the Permian. The thing that attracted us to it was 2 things. One, it was a covered land play, in that it had real estate that was associated with this that gave us 3 new yards in the Permian and in the Delaware. We liked that aspect of it for further expansion of other services that we currently have.

Secondly, from our standpoint, it was a platform that we could build on and add some additional equipment and that's exactly what we've done so far is add additional equipment to it. Thirdly, the part that we really like about them is their customer base. They had about 250 customers. Some of them large, and some of them extremely small that we would be able to go out and go to work for and take cross-services for.

So we feel very, very good about both acquisitions. Both of them were cash flow positive the first month that they came into our team.

Our next question comes from Jason Wangler of Imperial Capital.

Wanted to ask maybe on the infrastructure side here in the U.S. Obviously, Puerto Rico has been taking most of the headlines for you guys, but how are you seeing that business build up? And you mentioned a couple regions that you're in, but could you maybe talk about the bidding or what you're seeing from a market perspective there as you kind of grow that business?

Yes, it's -- obviously, as -- when we went down to Puerto Rico last -- end of the third quarter, we had about $30 million in backlog in the continental United States, today that stands at $500 million. We've grown that business rapidly.

What Puerto Rico gave is an opportunity, when a number of the IOUs or investor-owned utilities came down to actually to do mutual aid and everything, they saw our capabilities and they saw our team working at an extremely high level. That has translated to us in about $500 million of backlog. But the bigger part of that is the pipeline that we see -- we're actively bidding on about $2 billion within our pipeline, and we think a lot of that work we will have a good -- better chance to get.

So we feel very good about where infrastructure is on the continental United States. That has been our whole emphasis from the very beginning is to be a continental United States player with that group. So we feel very good about where infrastructure is. We feel very good about the leadership and the execution by the teams.

I appreciate the color. And maybe just on that backlog or even the bids just at a higher level, I mean, is that type of work, over the next couple of years, how you guys kind of think about backlog in terms of the time frame of when you would hit?

We think about backlog in terms of a 3-year horizon, and our pipeline would -- in a lot of cases, we're bidding some fairly heavily that would be a little bit longer term than that. Right now, that's the way we think about it is 3 years but some of the backlog -- some of the pipeline things that we're bidding are transmission projects that would have a longer horizon.

And of course, I think you know that transmission is a little bit higher EBITDA producing than the standard distribution work.

Our next question comes from Jim Wicklund of Crédit Suisse.

Getting in the oil hauling business is clearly a positive right now. My question is twofold. Truck drivers, the famously quoted 20% shortage of truck drivers in every industry across America, what are you doing to hire and retain drivers?

And the follow-up to that question is, once the pipeline capacity in the Permian is added, does your truck hauling, oil hauling, trucking business become somewhat obsolete?

Let me answer the second question first. No, it doesn't become obsolete. You still have to pipe from the wellbore to the pipeline. So there is still the gathering system that -- and that's what we initially saw, Jim. That's exactly where we had started.

On the second part, on the recruitment of drivers, we have had phenomenal success in the crude hauling business. We have -- certainly one of the advantageous things for us is that, with the crude hauling or crude transportation in West Texas being something that goes down to South Texas, we've widened out where we seek our drivers. We are seeing a number of drivers come from San Antonio and surrounding areas.

So we are in -- we're not necessarily recruiting in the tightest of the labor markets in the Permian. We're recruiting in better markets, where there's more populous centers.

Got it. That's helpful. And I assume most of them get home at night, so that's always a positive. Let me switch to the Gulfport contract.

Yes.

As I understand the Gulfport contract, if they cut you loose, and I think they've cut 1 crew loose, then they make it up to you in terms of margin. But as you know, you're already working for somebody else, so that isn't an issue.

My question really centers around the annualized EBITDA per spread. I think you had been running close to $16 million. This quarter, I think it was closer to $14 million. And you had talked about not adding capacity, you've got your 6 crews and that's where you're going to keep for a while.

Can you talk to us about what your payback period that you quoted to us before, where that stands today? Obviously, it's not getting better near term, at least. Can you talk about where that payback period is today?

Yes, today, Jim, that payback period is just over 3 years. As we commented publicly before, we'd like to see that payback period reduce probably to the 2-year to 28-month time frame to justify investment, but we're not quite there yet on leading-edge pricing.

Okay. And do you see an annualized EBITDA per spread? Is that number going to stagnate for a little while we go through the transition period? Does it go down a little bit? Kind of what are the moving parts to that?

We've certainly seen some regionalized softness similar to many of our peers. We are seeing high inbound calls from our customers in relation to 2019 completion plans. So there may be some short-term softness in the pressure pumping market, but we're seeing a full calendar for our crews and a high number of increase related to 2019 completion plans.

Jim, one thing to remember. On our EBITDA per crew, ours is solely just the pressure pumping. We have our own individual sand segment that we also report separately and that may be a difference between what you see in our sales and some of our other competitors.

Good job. Good quarter.

Our next question comes from Praveen Narra of Raymond James.

I guess, if I could ask a follow-up on the crude hauling business. Maybe if you could give us a little bit of color on how you see the -- and I fully understand the longer-term gathering and transportation, but I guess, maybe the shorter-term opportunity in the Permian, but maybe you could talk about kind of how many turns you guys expect to get as you're driving those long-haul routes?

And maybe how much of a spread you could capture? Any color you can give on the economics of the shorter-term opportunity would be great.

Yes, we expect, because of the distances -- the distance is about 340 miles that we're traveling. So it is one of those type situations where we'll probably make 1 turn a day, but we'll have multiple trucks deployed there to make it.

We have seen pricing rise by 8% to 10% since we entered this a month ago. And quite honestly, we are pricing -- you never tell a customer no. Every once in a while, you raise their prices until they say no.

And it's -- quite candidly that's what we're seeing somewhat in this business. We continue to raise prices and continue to think -- put those assets to good use and get a very good return. So we feel very good about the crude transportation business.

Okay. Perfect. And then I guess, at least according to my model, you guys -- we expect you to end next year with a significant amount of cash on the balance sheet, but can you talk about those acquisition opportunities and the opportunity set that is available to you guys?

Is it as attractive as it was? Or are we kind of saying the opportunities become more marginal? And certainly hard to expect what happened in Puerto Rico or with the infrastructure services business. But can you talk about the return opportunities that are available in front of you guys?

Absolutely. We feel that's one of the brightest parts of our stories is -- and when you're not confined to investing in -- solely into 1 sector and you have a broadened outlook where you can look at some different things that you can get into, we feel like that we can get the best returns on invested capital with that.

Currently, we're looking at 25 active investments that we are considering. So far year to date, we looked -- we have looked at 122 different investments. And that compares -- that's at the end of Q2, and that compares with 135 discrete opportunities that we look.

Our deal flow that we are seeing now is very broad and very, very strong. We feel extremely good about it. And of course, one of the highlights of this quarter is, again, being out of debt, building cash and being able to deploy that cash into businesses we think that will get the best return.

If I could ask 1 follow-up, I guess, just in terms of the available opportunities. Is it more attractive in the industrial space or the oilfield services space or the other kind of step-out spaces you were referring to?

We see both. And we will make discrete investments where we get a 15- to 18-month payback on those assets. We're making those within the oilfield services, but we're looking much broader.

And we try to look at macro trends. We look at IMO 2020 and we look at 5G and the implementation of 5G and the growth of data and those type of things. So we are looking at a very, very broad spectrum of different opportunities.

Good quarter.

(Operator Instructions) Our next question comes from David Anderson of Barclays.

A question on the infrastructure services. There's a lot of moving parts here as you're kind of moving more into reconstruction in Puerto Rico and you had just highlighted how the lower 48 now looks like it makes up about 1/3 of your backlog.

Can you just kind of talk about, if I think out over the next couple of years, about how these mixes shift and how we should think about your margin profile? 31% margins, I don't think anybody was expecting these to be maintained here, but just help us understand how this shifts over the next, say, 12 to 18 months?

And I'm also particularly curious of how the lower 48, how those margins compare to the margins you're already -- or you're expecting to earn on the reconstruction side on Puerto Rico?

On the reconstruction side, we've previously bracketed those margins in the mid- to high 20%s. In regards to the U.S. work, we've bracketed those margins in the mid- to high teens.

And I think the key takeaway, as we look at the U.S. work, as Arty briefly mentioned earlier, is that we've had a large number of investor-owned utilities see the execution of the teams first hand in Puerto Rico. So that's helped us in our bidding process for lower 48 work, and also given us a better opportunity on the transmission side of the business, which is higher margin than the distribution work. So that takes that bracket of mid- to high teens upwards as we change that mix between transmission and distribution.

As Arty mentioned, we've got about $2 billion that the team is currently bidding. And given the execution, we feel fairly confident that we'll win a fair portion of what we've got out for bid.

So I think you had said before, I think, that there is about a 3-year time frame to turn the backlog into revenue. So if -- just kind of real loosely, does that imply that kind of lower 48 would be like maybe 1/4 of the infrastructure business in terms of top line by the end of '19? Is that kind of ballpark-ish?

More than likely higher, probably couch that in the 35% to 40% range overall depending on how we deploy CapEx.

Got it. And a question on your pressure pumping side. One of the things we've been hearing from a lot of the E&Ps is, they seem to all be beating production numbers. I'm hearing a lot of CapEx numbers higher. And it sounds like a lot of these programs are sort of ahead of schedule than they had planned to. Some companies even seem like they're pulling back on their schedules -- on their planning because they've gotten so far ahead.

Sounds like there's a lot of completion efficiencies that are starting to kick in, particularly in the Northeast. I was just curious, if you have seen those with your customers? Are you seeing those completion efficiencies really kick in? Is there any concern you have on any of your fleets up there in the northeast or in the SCOOP/STACK that your customers are getting ahead of schedule? Have you seen any of these kind of trends in your business?

We are seeing the efficiencies across the board. And I think you see that in relation to the percentage of zipper fracs. For Q2, 84% of our work was on zipper frac pads. So that has -- that drives efficiencies, and you see that translate to the EBITDA per stage level. So quarter-over-quarter, our EBITDA per stage increased about 15%.

And in terms of the budgets, are you concerned at all about the budgets being potentially used up earlier than expected for this year? Or does that not bother you because of the contracted nature of your fleets?

We certainly like the contracted nature of fleets, and we've historically contracted a percentage of our fleets. As we look into the back half of 2018, that's certainly a concern that we're aware of.

Our teams have executed at a high level. We have constant contact with a quality customer base and have line of sight of their completion schedules. So as we sit today, we've got line of sight for full calendar for the back half of '18, and taking a number of inbound calls for '19 in regards to dedicated fleets.

Our next question comes from Brad Handler of Jefferies.

If I could ask you to steer back to infrastructure as well, and I guess I don't mind asking a very specific question perhaps stretching you outside of what you would normally like to speak to.

But with infrastructure, it has beaten us from a top line and a bottom line perspective a couple quarters in a row, and I guess, I'd be welcome if you'd be willing to share some specific revenue guidance for Q3 or just even some directional boundaries, because I'm having trouble keeping up.

Directionally, Arty indicated a headcount earlier. The reconstruction phase will not be linear. We've historically not given guidance on either revenue or EBITDA, so not going to give guidance in the back half of 2018 right now.

But I think, directionally, given the headcount, we also have the $900 million reconstruction contract that's out there as well as the backlog numbers that we've talked about in terms of a 3-year backlog in North America. So we've got some data points publicly available to triangulate the directional revenue stream from the Infrastructure segment.

I get those. I don't have enough grip on those pieces to know what to do with that, but okay. We will -- then we'll wait and see. Could you update us on PREPA and the bad debt expense and the process of, I guess, trying to recapture that?

So we've got an excellent working relationship with PREPA, continue to have active dialogue with them. The bad debt expense specifically relates to a tax gross-up provision that is contained inside of the restoration contracts as amended. So we continue to have an active dialogue with PREPA, but we've not collected those tax gross-up amounts as of today.

But other than that, they are -- in the storm restoration investor-owned utility world, they are a pretty fast pair.

Okay. Is it reasonable to think of this continuing into the reconstruction phase as well? So is it the same -- I don't know if dispute is the word you'd use, but is it the same issue that -- so therefore, we might expect this negotiation to run for a nice long time?

No, the reconstruction contract does not contain the specific provision.

Okay. Okay. And then one more for me, please. This -- the equity compensation piece, I'm not sure that I fully understand that either, candidly, and I guess, that's okay.

Is there any reason to think that there is more of that, that we might expect at different times? Or is that purely related to the secondary? I guess, you made -- you sort of alluded to that in your prepared remarks.

Yes. This type of arrangement is common with private-equity-backed entities. So I think the key takeaway is, first, that this is a noncash charge. And secondarily, that we did not issue any shares relative to this equity-based compensation.

To your question in regards to whether or not there are any future amounts, there are, and we have historically disclosed the fair value of those amounts inside of the notes of the financial statements. And as of today, the fair value of those future amounts is approximately $43 million. You're exactly right that this was triggered by the secondary offering.

And our next question comes from [Stephen Cohen] of [Provo] Partners.

Steve, are you there?

We can just move on, Ashley.

All right. Well, I'm showing no further questions in the queue at this time. So I'd like to turn the call back to Arty Straehla for any closing remarks.

Thank you. We want to thank everyone for dialing in today during this very busy time. I want to personally thank our team. Without the hard work performed by each of you, Mammoth would not be what it is today. In particular, I want to thank our infrastructure teams who have shown the utmost professionalism while working in a very challenging environment.

I also want to welcome the newest members of the Mammoth family from WTL and RTS Energy Services. The future is bright for Mammoth and our roughly 2,500 team members as our unlevered balance sheet will allow us to become a consolidator in the years to come.

Thank you to our shareholders for your support and interest in our company. We look forward to seeing many of you at our upcoming conference appearances and speaking with you again in early November when we release our third quarter earnings. This concludes our second quarter conference call. Good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.