Attached files
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| 8-K - 8-K - Southcross Energy Partners, L.P. | a8-kx2016earningsrelease.htm |
Exhibit 99.1
NEWS RELEASE
Southcross Energy 1717 Main Street, Suite 5200, Dallas, Texas 75201, 214-979-3720
Southcross Energy Partners, L.P. Reports Fourth Quarter Results
DALLAS, Texas, March 9, 2016 - Southcross Energy Partners, L.P. (NYSE: SXE) (“Southcross” or the “Partnership”) today announced fourth quarter and full-year 2016 financial and operating results.
Southcross’ net loss was $39.5 million for the quarter ended December 31, 2016, compared to $16.5 million for the same period in the prior year and $32.6 million for the quarter ended September 30, 2016. Adjusted EBITDA (as defined below) was $18.4 million for the quarter ended December 31, 2016, compared to $24.9 million for the same period in the prior year and $14.8 million for the quarter ended September 30, 2016. Adjusted EBITDA for the fourth quarter was higher than the prior quarter due to improved frac spreads, annual deficiency payments from producers and lower overall general and administrative expenses.
Processed gas volumes during the quarter averaged 287 MMcf/d, a decrease of 34% compared to 437 MMcf/d for the same period in the prior year and a decrease of 4% compared to 299 MMcf/d for the quarter ended September 30, 2016.
“In 2016, Southcross focused on improving safe, reliable operation of its assets and beginning to reduce costs to better align with the current energy market environment and realities,” said Bruce A. Williamson, President and Chief Executive Officer of Southcross’ general partner. “We began several initiatives that should result in reduced 2017 general and administrative and operating expenses and lower future capital expenditure requirements. We also began rationalizing some of our assets including the planned shut-down and sale of two of our older and less efficient processing facilities.”
“Looking ahead to 2017, we will continue an internal focus on safe, reliable operations while seeking to accelerate and expand cost reductions, rationalize assets and capacity, and reduce our overall debt level toward a sustainable capital structure,” said Williamson. “Externally, with the recently announced bank amendment, we are now focused on seeking to take advantage of any potential upturn in the natural gas and NGL markets.”
Capital Expenditures
For the quarter ended December 31, 2016, growth and maintenance capital expenditures were $8.7 million and were related primarily to work to enhance system efficiency and capability. For the year ended December 31, 2016, growth and maintenance capital expenditures were $26.1 million and were related primarily to various expansion and reliability improvement projects in the Partnership’s South Texas assets, compared to $108.7 million for the year ended December 31, 2015.
Southcross expects that capital expenditures for full-year 2017, including growth and maintenance expenditures, will be in the range of $14 million to $20 million and will be limited to projects with contractually committed volumes, along with recurring maintenance spending.
Capital and Liquidity
As of December 31, 2016, Southcross had total outstanding debt of $560 million including $123 million under its revolving credit facility as compared to total outstanding debt of $561 million as of September 30, 2016.
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In conjunction with the amendment to Southcross’ revolving credit agreement executed December 29, 2016, Southcross Holdings LP, the parent of Southcross’ general partner, invested $17 million into Southcross to further improve Southcross’ liquidity position.
Cash Distributions and Distributable Cash Flow
Distributable cash flow (as defined below) for the quarter ended December 31, 2016 was $9.5 million, compared to $11.4 million for the same period in the prior year and $5.8 million for the quarter ended September 30, 2016. The Partnership did not make a cash distribution for the quarter ended December 31, 2016 and is not allowed to make any cash distributions until the Partnership’s consolidated total leverage ratio, as defined under its credit agreement, is at or below 5.0x to 1.
About Southcross Energy Partners, L.P.
Southcross Energy Partners, L.P. is a master limited partnership that provides natural gas gathering, processing, treating, compression and transportation services and NGL fractionation and transportation services. It also sources, purchases, transports and sells natural gas and NGLs. Its assets are located in South Texas, Mississippi and Alabama and include two gas processing plants, one fractionation plant and approximately 3,100 miles of pipeline. The South Texas assets are located in or near the Eagle Ford shale region. Southcross is headquartered in Dallas, Texas. Visit www.southcrossenergy.com for more information.
About Southcross Holdings LP
Southcross Holdings LP, through its subsidiary Southcross Holdings Borrower LP, owns 100% of Southcross Energy Partners GP, LLC, the general partner of Southcross, as well as a portion of Southcross' common units, and all of Southcross' subordinated units and Class B convertible units. Holdings also owns natural gas gathering and treating assets as well as NGL pipelines and fractionation facilities in South Texas.
Forward-Looking Statements
This press release includes certain statements concerning expectations for the future that are forward-looking within the meaning of the federal securities laws. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” and similar expressions, or future conditional verbs such as “may,” “will,” “should,” “would” and “could.” Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include: the expectations, plans, strategies, objectives and growth of Southcross; and anticipated capital expenditures and Adjusted EBITDA. Although Southcross believes the expectations and forecasts reflected in these and other forward-looking statements are reasonable, Southcross can give no assurance they will prove to be correct. Forward-looking statements contain known and unknown risks and uncertainties (many of which are difficult to predict and beyond management’s control) that may cause Southcross’ actual results in future periods to differ materially from anticipated or projected results. An extensive list of specific material risks and uncertainties affecting Southcross is described in reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K and in subsequent reports, which are available through the SEC’s EDGAR system at www.sec.gov and on our website. Any forward-looking statements in this press release are made as of the date hereof and Southcross undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.
Use of Non-GAAP Financial Measures
We report our financial results in accordance with accounting principles generally accepted in the United States, or GAAP. We also present the non-GAAP financial measures of Adjusted EBITDA and distributable cash flow.
We define Adjusted EBITDA as net income/loss, plus interest expense, income tax expense, depreciation and amortization expense, equity in losses of joint venture investments, certain non-cash charges (such as non-cash unit-based compensation, impairments, loss on extinguishment of debt and unrealized losses on derivative
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contracts), major litigation costs net of recoveries, transaction-related costs, revenue deferral adjustment, loss on sale of assets, severance expense and selected charges that are unusual or non-recurring; less interest income, income tax benefit, unrealized gains on derivative contracts, equity in earnings of joint venture investments and selected gains that are unusual or non-recurring. Adjusted EBITDA should not be considered an alternative to net income, operating cash flow or any other measure of financial performance presented in accordance with GAAP.
Adjusted EBITDA is a key metric used in measuring our compliance with our financial covenants under our debt agreements and is used as a supplemental measure by our management and by external users of our financial statements, such as investors, commercial banks, research analysts and others, to assess the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions; operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or capital structure; and the attractiveness of capital projects and acquisitions and the overall rates of return on investment opportunities.
We define distributable cash flow as Adjusted EBITDA, plus interest income and income tax benefit, less cash paid for interest (net of capitalized costs), income tax expense and maintenance capital expenditures. We use distributable cash flow to analyze our liquidity. Distributable cash flow does not reflect changes in working capital balances. Distributable cash flow is used to assess the ability of our assets to generate cash sufficient to support our indebtedness and make future cash distributions to our unitholders; and the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.
Adjusted EBITDA and distributable cash flow are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures provides useful information to investors in assessing our financial condition, results of operations and cash flows from operations. Reconciliations of Adjusted EBITDA and distributable cash flow to their most directly comparable GAAP measure are included in this press release. Net income and net cash provided by operating activities are the GAAP measures most directly comparable to Adjusted EBITDA. The GAAP measure most directly comparable to distributable cash flow is net cash provided by operating activities. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool because each excludes some but not all items that affect the most directly comparable GAAP financial measure. You should not consider Adjusted EBITDA or distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
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Contact:
Southcross Energy Partners, L.P.
Mallory Biegler, 214-979-3720
Investor Relations
investorrelations@southcrossenergy.com
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SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues: | |||||||||||||||
Revenues | $ | 134,598 | $ | 132,080 | $ | 451,271 | $ | 603,815 | |||||||
Revenues - affiliates | 25,126 | 33,665 | 97,452 | 94,658 | |||||||||||
Total revenues | 159,724 | 165,745 | 548,723 | 698,473 | |||||||||||
Expenses: | |||||||||||||||
Cost of natural gas and liquids sold | 122,236 | 118,046 | 395,874 | 517,157 | |||||||||||
Operations and maintenance | 16,069 | 21,001 | 70,242 | 82,529 | |||||||||||
Depreciation and amortization | 38,049 | 18,358 | 106,947 | 70,814 | |||||||||||
General and administrative | 5,757 | 6,414 | 28,546 | 30,026 | |||||||||||
Impairment of assets | — | 6,874 | 476 | 7,067 | |||||||||||
Loss (gain) on sale of assets, net | 987 | 270 | (11,768 | ) | 416 | ||||||||||
Total expenses | 183,098 | 170,963 | 590,317 | 708,009 | |||||||||||
Loss from operations | (23,374 | ) | (5,218 | ) | (41,594 | ) | (9,536 | ) | |||||||
Other income (expense): | |||||||||||||||
Equity in losses of joint venture investments | (10,466 | ) | (2,730 | ) | (21,123 | ) | (13,452 | ) | |||||||
Interest expense | (8,565 | ) | (8,651 | ) | (35,166 | ) | (32,738 | ) | |||||||
Write-off of deferred financing costs | (1,006 | ) | — | (1,006 | ) | — | |||||||||
Gain on legal settlements | 3,939 | — | 3,939 | — | |||||||||||
Total other expense | (16,098 | ) | (11,381 | ) | (53,356 | ) | (46,190 | ) | |||||||
Loss before income tax benefit | (39,472 | ) | (16,599 | ) | (94,950 | ) | (55,726 | ) | |||||||
Income tax benefit | — | 120 | 2 | 233 | |||||||||||
Net loss | $ | (39,472 | ) | $ | (16,479 | ) | $ | (94,948 | ) | $ | (55,493 | ) | |||
General partner unit in-kind distribution | (9 | ) | — | (47 | ) | (164 | ) | ||||||||
Net loss attributable to Holdings | — | — | — | (4,258 | ) | ||||||||||
Net loss attributable to partners | $ | (39,481 | ) | $ | (16,479 | ) | $ | (94,995 | ) | $ | (51,399 | ) | |||
Earnings per unit and distributions declared | |||||||||||||||
Net loss allocated to limited partner common units | $ | (21,705 | ) | $ | (4,799 | ) | $ | (50,612 | ) | $ | (24,790 | ) | |||
Weighted average number of limited partner common units outstanding | 37,265 | 28,372 | 34,161 | 26,781 | |||||||||||
Basic and diluted loss per common unit | $ | (0.58 | ) | $ | (0.17 | ) | $ | (1.48 | ) | $ | (0.93 | ) | |||
Net loss allocated to limited partner subordinated units | $ | (7,111 | ) | $ | (2,065 | ) | $ | (18,089 | ) | $ | (11,300 | ) | |||
Weighted average number of limited partner subordinated units outstanding | 12,214 | 12,214 | 12,214 | 12,214 | |||||||||||
Basic and diluted loss per subordinated unit | $ | (0.58 | ) | $ | (0.17 | ) | $ | (1.48 | ) | $ | (0.93 | ) | |||
Distributions declared and paid per common unit | $ | — | $ | 0.40 | $ | — | $ | 1.60 | |||||||
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SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
(Unaudited)
December 31, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 21,226 | $ | 11,348 | |||
Trade accounts receivable | 51,894 | 39,585 | |||||
Accounts receivable - affiliates | 7,976 | 49,734 | |||||
Prepaid expenses | 2,751 | 3,915 | |||||
Other current assets | 4,343 | 1,256 | |||||
Total current assets | 88,190 | 105,838 | |||||
Property, plant and equipment, net | 971,286 | 1,066,001 | |||||
Investments in joint ventures | 124,096 | 140,526 | |||||
Other assets | 2,504 | 6,595 | |||||
Total assets | $ | 1,186,076 | $ | 1,318,960 | |||
LIABILITIES AND PARTNERS’ CAPITAL | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 50,639 | $ | 66,458 | |||
Accounts payable - affiliates | 524 | 7,871 | |||||
Current portion of long-term debt | 4,500 | 4,500 | |||||
Other current liabilities | 10,976 | 10,406 | |||||
Total current liabilities | 66,639 | 89,235 | |||||
Long-term debt | 543,872 | 604,518 | |||||
Other non-current liabilities | 11,936 | 3,871 | |||||
Total liabilities | 622,447 | 697,624 | |||||
Commitments and contingencies | |||||||
Partners' capital: | |||||||
Common units (48,502,090 and 28,420,619 units outstanding as of December 31, 2016 and December 31, 2015, respectively) | 255,124 | 271,236 | |||||
Class B Convertible units (17,105,875 and 15,958,990 units issued and outstanding as of December 31, 2016 and December 31, 2015) | 278,508 | 300,596 | |||||
Subordinated units (12,213,713 units issued and outstanding as of December 31, 2016 and 2015) | 19,240 | 37,920 | |||||
General partner interest | 10,757 | 11,584 | |||||
Total partners' capital | 563,629 | 621,336 | |||||
Total liabilities and partners' capital | $ | 1,186,076 | $ | 1,318,960 | |||
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SOUTHCROSS ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
Twelve Months Ended December 31, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (94,948 | ) | $ | (55,493 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 106,947 | 70,814 | |||||
Unit-based compensation | 3,523 | 4,573 | |||||
Amortization of deferred financing costs and PIK interest | 3,614 | 3,494 | |||||
Loss (gain) on sale of assets, net | (11,768 | ) | 416 | ||||
Unrealized loss (gain) on financial instruments | (147 | ) | 110 | ||||
Equity in losses of joint venture investments | 21,123 | 13,452 | |||||
Distribution from joint venture investment | 740 | 500 | |||||
Impairment of assets | 476 | 7,067 | |||||
Gain on legal settlements | (2,375 | ) | — | ||||
Write-off of deferred financing costs | 1,006 | — | |||||
Other, net | (310 | ) | (82 | ) | |||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivable, including affiliates | 31,554 | (3,069 | ) | ||||
Prepaid expenses and other current assets | 947 | (495 | ) | ||||
Other non-current assets | (358 | ) | 296 | ||||
Accounts payable and accrued liabilities | (18,234 | ) | (24,559 | ) | |||
Other liabilities, including affiliates | 9,112 | 1,701 | |||||
Net cash provided by operating activities | 50,902 | 18,725 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (26,066 | ) | (108,698 | ) | |||
Insurance proceeds from property damage claims, net of expenditures | 125 | 78 | |||||
Net proceeds from sales of assets | 22,470 | 4,693 | |||||
Investment contribution to joint venture investments | (5,433 | ) | (8,910 | ) | |||
Consideration paid for Holdings' drop-down acquisition | — | (15,000 | ) | ||||
Net cash used in investing activities | (8,904 | ) | (127,837 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings under our credit facility | 11,210 | 187,695 | |||||
Repayments under our credit facility | (70,350 | ) | (36,000 | ) | |||
Repayments under our term loan agreement | (4,500 | ) | (4,500 | ) | |||
Payments on capital lease obligations | (419 | ) | (528 | ) | |||
Financing costs | (1,366 | ) | (698 | ) | |||
Tax withholdings on unit-based compensation vested units | (138 | ) | — | ||||
Contributions from general partner | — | 1,301 | |||||
Common unit issuances to Holdings for equity contributions | 29,416 | — | |||||
Payments of distributions and distribution equivalent rights | — | (46,915 | ) | ||||
Expenses paid by Holdings on behalf of Valley Wells' assets | — | 17,858 | |||||
Borrowing of senior unsecured PIK notes | 14,000 | — | |||||
Repayment of senior unsecured PIK notes and PIK interest | (14,260 | ) | — | ||||
Valley Wells operating expense cap adjustments | 4,053 | 1,023 | |||||
Other, net | 234 | (425 | ) | ||||
Net cash provided by (used in) financing activities | (32,120 | ) | 118,811 | ||||
Net increase in cash and cash equivalents | 9,878 | 9,699 | |||||
Cash and cash equivalents — Beginning of period | 11,348 | 1,649 | |||||
Cash and cash equivalents — End of period | $ | 21,226 | $ | 11,348 | |||
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SOUTHCROSS ENERGY PARTNERS, L.P.
SELECTED FINANCIAL AND OPERATIONAL DATA
(In thousands, except for operating data)
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Financial data: | |||||||||||||||
Adjusted EBITDA | $ | 18,398 | $ | 24,892 | $ | 69,527 | $ | 83,883 | |||||||
Maintenance capital expenditures | $ | 630 | $ | 2,650 | $ | 4,711 | $ | 11,618 | |||||||
Growth capital expenditures | 8,107 | 8,740 | 21,355 | 93,718 | |||||||||||
Operating data: | |||||||||||||||
Average volume of processed gas (MMcf/d) | 287 | 437 | 312 | 434 | |||||||||||
Average volume of NGLs produced (Bbls/d) | 30,987 | 43,234 | 32,271 | 43,234 | |||||||||||
Average daily throughput Mississippi/Alabama (MMcf/d) | 158 | 156 | 160 | 145 | |||||||||||
Realized prices on natural gas volumes ($/Mcf) | $ | 2.95 | $ | 2.51 | $ | 2.34 | $ | 3.16 | |||||||
Realized prices on NGL volumes ($/gal) | 0.37 | 0.36 | 0.34 | 0.36 | |||||||||||
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SOUTHCROSS ENERGY PARTNERS, L.P.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net cash provided by operating activities | $ | 9,301 | $ | (5,783 | ) | $ | 50,902 | $ | 18,725 | ||||||
Add (deduct): | |||||||||||||||
Depreciation and amortization | (38,049 | ) | (18,358 | ) | (106,947 | ) | (70,814 | ) | |||||||
Unit-based compensation | (888 | ) | (1,060 | ) | (3,523 | ) | (4,573 | ) | |||||||
Amortization of deferred financing costs and PIK interest | (818 | ) | (879 | ) | (3,614 | ) | (3,494 | ) | |||||||
Gain (loss) on sale of assets, net | (987 | ) | (270 | ) | 11,768 | (416 | ) | ||||||||
Unrealized gain (loss) on financial instruments | 31 | 179 | 147 | (110 | ) | ||||||||||
Equity in losses of joint venture investments | (10,466 | ) | (2,730 | ) | (21,123 | ) | (13,452 | ) | |||||||
Impairment of assets | — | (6,874 | ) | (476 | ) | (7,067 | ) | ||||||||
Distribution from joint venture investment | — | — | (740 | ) | (500 | ) | |||||||||
Gain on legal settlements | 2,375 | — | 2,375 | — | |||||||||||
Write-off of deferred financing costs | (1,006 | ) | — | (1,006 | ) | — | |||||||||
Other, net | 64 | 13 | 310 | 82 | |||||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Trade accounts receivable, including affiliates | 14,890 | 8,682 | (31,554 | ) | 3,069 | ||||||||||
Prepaid expenses and other current assets | (1,603 | ) | (1,021 | ) | (947 | ) | 495 | ||||||||
Other non-current assets | 295 | (219 | ) | 358 | (296 | ) | |||||||||
Accounts payable and accrued expenses | (6,417 | ) | 10,379 | 18,234 | 24,559 | ||||||||||
Other liabilities, including affiliates | (6,194 | ) | 1,462 | (9,112 | ) | (1,701 | ) | ||||||||
Net loss | $ | (39,472 | ) | $ | (16,479 | ) | $ | (94,948 | ) | $ | (55,493 | ) | |||
Add (deduct): | |||||||||||||||
Depreciation and amortization | $ | 38,049 | $ | 18,358 | $ | 106,947 | $ | 70,814 | |||||||
Interest expense | 8,565 | 8,651 | 35,166 | 32,738 | |||||||||||
Unrealized loss on commodity swap derivatives | — | 237 | — | 111 | |||||||||||
Revenue deferral adjustment | 754 | 754 | 3,016 | 3,016 | |||||||||||
Unit-based compensation | 888 | 1,060 | 3,523 | 4,573 | |||||||||||
Income tax benefit | — | (120 | ) | (2 | ) | (233 | ) | ||||||||
Loss (gain) on sale of assets, net | 987 | 270 | (11,768 | ) | 416 | ||||||||||
Major litigation costs, net of recoveries | 79 | 4 | 495 | 513 | |||||||||||
Equity in losses of joint venture investments | 10,466 | 2,730 | 21,123 | 13,452 | |||||||||||
Severance expense | 456 | 222 | 472 | 956 | |||||||||||
Retention bonus funded by Holdings | 474 | — | 3,168 | — | |||||||||||
Valley Wells' operating expense cap adjustments | — | 1,647 | 2,406 | 2,670 | |||||||||||
Fees related to Equity Cure Agreement | 61 | — | 650 | — | |||||||||||
Distribution from joint venture investment | — | — | 740 | 500 | |||||||||||
Transaction-related costs | — | 698 | 6 | 2,483 | |||||||||||
Impairment of assets | — | 6,874 | 476 | 7,067 | |||||||||||
Gain on legal settlements | (3,939 | ) | — | (3,939 | ) | — | |||||||||
Write-off of deferred financing costs | 1,006 | — | 1,006 | — | |||||||||||
Other, net | 24 | (14 | ) | 990 | 300 | ||||||||||
Adjusted EBITDA | $ | 18,398 | $ | 24,892 | $ | 69,527 | $ | 83,883 | |||||||
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