Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the ProFrac Holding Corp.

Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Rick Black, with Investor Relations. Rick. you, Thank

begin. You may

Rick Black

me operator, Turner, joining and and We you, Executive results. morning, to Chairman; Wilks, Ladd Wilks, Financial good for ProFrac Officer. you Chief With XXXX us quarter call and our appreciate are Holding Matt review Executive Lance Thank Officer; second everyone. today Chief Corp.'s webcast conference

call well available Following well up of before second quarter the recording financial highlights my remarks, of There outlook available questions. management your until today's pfholdingscorp.com telephonic on business will XXXX to provide company's as as will high-level opening replay as the website at a the commentary by on the a the provide of XX, August as be webcast call XXXX.

these performance may company's contain no United statements. management's information in is you federal business information uncertainties contingencies not expressed in reading. are And the the performance. of achievements transcript time access replay risks are meaning forward-looking forward-looking as of future the differ Various or including results, current and note speaks that XXXX. management's that to More statements could laws, and features earnings performance. and ProFrac's within future financial forward-looking sensitive reflect accurate this management Also, on Please and today, any information of replay expectations The materially cause securities from the on the may or States' this call as of statements views guarantees those actual listening of of therefore, comments any of longer advised reported be call only how included release. XX, on August to time

other on adjusted XX-Q the encouraged uncertainties ProFrac's today financial figures company's Form filings or Investor and be also website sec.gov as Commission, found well or risks The include to other the and to Exchange those as the reader measures contributions Flotek. the and is and The can Filings of which with SEC Relations non-GAAP under certain listener tab contingencies. to at Securities read understand exclude comments the made

most website. GAAP included Additional the company's can press on to found the earnings in details be release, and comparable, measures reconciliations financial which consolidated the are direct quarterly and

And now to over Wilks. ProFrac's the like Chairman, to turn would I call Matt? Executive Matt

Matt Wilks

and subsidiaries, prepared us insight for everyone. remarks, Rick, the Thanks, good Thanks into the the a taking into and performance. to morning, provide take will deeper will After Lance today. additional of time our dive our my Ladd performance join call on financial

challenged impact our coordination as of cash schedules free external with recent and generated Despite consolidation, these debt adjusted million in of we generated on $XX banking by EBITDA, $XX CapEx reduced private Our million second and result a results operators. customer challenges, were million customer the quarter flow. of $XXX.X the crisis

rightsize structure We have through organization reduction. our headcount acquisition the to cost adjusted acceleration and of our synergies

these be reflected third of will reductions quarter Most results. in our

support behavior expect we and As grow from the pleased see disciplined our assets how and a ProFrac want fundamentals industry in year, we our relation of few our mining improving of our footprint. half which through to view We're to second we industry sales expand discuss in second to see to to half peers, and customer I move a about we constructive minutes the think Holdings how 'XX. the outlook subsidiaries. take

company, the technologies want vertically a complementary are to modern premier are a emphasize holding we integrated to company, that and I and The is services suite industry. energy offering holding services the first of thing we

and frac out Services, started as we While Stimulation we have major Production Manufacturing. and expanded company, transformed a segments: three into Proppant

of terms which has believe in-basin in contributes ACDC country. in of this the business to underappreciated, our as Proppant We as ProFrac segments well The stakeholders. terms is fastest is largest platform segment, growing both the it in the proppant value potential been these and of producer

Production the focused for on QX, the signing division. and pleased sales been have base contracts customer diversifying We we In XX% revenue. third-party were reached Proppant of that

additional pursue base customer and we grow and diversification and that stability, at levels. continue to expect contracts increase We improved total cost lower to the production

Lastly, we proposed we is West believe and Interior Proppant by currently DSL habitize the outside the the Department Texas the high-risk that of of our minimal well Production. would impact our are This related have a zones. assets regulation because to on believe

to our the X certainty we a potential division, EBITDA level the and generate incredibly a that boosting lean demonstrate more high while to proppant goal utilization will achieve. can segment this is Our less that the sales conversion optimize to company to has of cash our Proppant to Xx This We provide volatility second segment to highlight quarter. stability multi-mine the the had in that to illustrate profitability. and

We're terms encouraged. and overall In the environment, seeing of because are pricing market optimistic, optimistic remain are constructive. we we

are go fleets smaller aggressively fundamentals for multiple constructive that that see X months market higher remains to in the as idled considerably confident and We are While than of at encouraged, to see of in staffed We're stronger we second players half we this impacted bidding manner. we earnings, idle of a because a remain capacity be number and isolated pricing. continue and could lower The pricing to that work on but levels, unsustainable. number back second number asset year. utilization are responsive players, supportive a quarter the fleets work, spot view steady the of last

addition, which remainder will believe we In as gas built-in to a XXXX. the we constructive, is forward catalyst natural provide pricing of look

XXXX ramp 'XX, they operators the approach prepare see their of believe programs. we we for as activity back will we As half

accomplish I capitalize we what on and positioned believe industry well remain to this are continues of proud team to increasing activity.

primary for fundamental neither haven't Our and changed strategies have our ProFrac. goals

our goals. We continue execute to on

further customers, and us are efficiencies capable fleets for We to separate of fuel pumping our offer delivering and dual helping Tier of peers. portfolio savings X reductions Our cost best-in-class. emissions simultaneously from a electric our

our utilization our improve to further to maximizing cash and on structure cost focused flow. are We and adapt continue profitability

remains industry always, As discipline narrative. welcome a

ProFrac, our believe approach disciplined continue For we shareholder produce to meaningful value. that will

over With that, I'll turn the Ladd. to call

Ladd Wilks

Thanks, Matt.

dedication for culture our customers. team the hard direct our as believe thank work great is serving and to like within our that customer result market their in the of company our teams continue I'd strong and always, our customers. We firmly continually a they distinguishes service As to serve

Turning to the quarter.

crop outlook. job were service of great resulted industry and of differentiated our That fleet and who a industry discipline a to said, constructive how offering second that subsequent closely in integrated you white detailing industry. many being As did the support remains and the follow there have seen, reductions. our Matt activity cream positive the ProFrac's quarter shifts vertically pricing space during in continues is in meaningful

swing efficiency and strong standpoint, From to deliver bill base hands and we they a As levels us to with the get drive caught can We with Customers in our service up cost a utilization, can diesel deploy in attractive we dislocations services generate the technologies will cash We're fleets for want only earn our the purposefully youngest activities return short-term see have seeing of continue down equipment fuel-efficient where the interest capacity. returns don't fleet. to some reliably in industry. in stimulation most to to our healthy and savings. fit rebound, be that and providers stakeholders. appears type want we and We industry. advanced asset assets

our contracting and engine levels. year strategy slowed CapEx but to response to gross commercial our White CapEx in e-fleet also have spend, adjusting QX fleet. appears space We've lowered upgrade approaches After acquisition, in we're to committed diverse spend in customer of past with out the reduced a more May. accelerated activity base target across bottomed the

goal during market to volatility dedicated Our the dislocation. in longer-term short-term work, is capture reducing business

Turning Production to our Proppant segment.

full quarter from Sand quarter, the volumes a all of industry-wide first utilization. last from quarter due potential lower what to up result, full we to yet guided were contribution mines. our second we is As believe constrained as represented the eight their

segment of Proppant show improvement. continues The to signs

Our customer third-party stability. pursue we efforts to all-time diversify that sales, for increase reached continue contracts to and base diversification additional and improved the an high

are growth increases, We in lowered. expect segment expands, production base customer further the and as costs this

strategy our and throughout both, vertical discussed our benefits As we've cycles. the significantly before, integration ProFrac customers

logistics cost. Our ability internally and to saves fleets customers produced sand, significant chemicals bundle with our

year, suggests share. fleets QX budgets. pursuing their QX back positioning in commercial general and will as solidify winning opportunities, half Looking the ProFrac improved XXXX activity reactivate market year. we're generating trend prioritize When we into as over the to ourselves The to customers next always of progress returns

integrating We are build minimizing calendars working our as fleet. into out they materials with diligently more goal with their the and gas our of customers

I'll now results. financial more provide hand to Lance detail on over our to it

Lance Turner

Ladd. you, Thank

$XXX the during flow, Ladd. As primarily free activity $XXX Matt and second administrative mentioned, we by in the million slightly as million basis, and the revenue consolidated general Selling, quarter, second quarter adjusted for first the by levels from lower On in outlined we EBITDA, in approximately a totaled $XX million cash reduced a quarter. decrease were our debt generated quarter. driven costs million, and down Matt $XX million by $XX

was relating quarter $X onetime $X activities million reduction business by in SG&A $X.X of million. included as million to items acquisition of a also such costs. our Flotek. offset litigation-related approximately in Second stock-based included other partially SG&A number in and segment This a noncash compensation SG&A

excluding We prior believe from items. $X these when and our the baseline approximately various Flotek down quarter SG&A was million

efforts. our as Additional the third a cost reductions quarter are expected in of reduction result

white half million $XXX quarter the we Stimulation reduced end active and outlined, second million business segments. white quarter, in the in first quarter first our the our on $XXX the the space to count of due in again down generated fleet Adjusted previous of at response more million second revenues $XXX lower was count that quarter. and EBITDA we primarily for segment space Services August. of the to Turning to to In from fleet count The compared reduced the segment the fleet fleets.

second up the from primarily segment the mines We revenues the quarter to will compared significant for and the million, million $XXX sequentially. during the approximately revenue this uplift Profit quarter. capture XX% of approximately savings active cost quarter. first optimization eight quarter beyond. $XX Adjusted us Production was the full of third allow impact X.X mines quarter, by the XX% believe up Profit first approximately EBITDA to all The in totaled segment in Production generated calendar in driven

at see output we ton. we our efficiencies While we an are And focused lower higher. plants, total expect in as improve per we a cost uptick on to saw production, getting total

second down EBITDA generated the previous segment this and of services in the the from for Manufacturing the our and expenditures capital Stimulation of segment. focused lower related reduced Manufacturing revenue down on Services quarter. was Stimulation products totaled for million, revenues equipment intercompany XX% Adjusted inventory $XX XX% million Services was the expenditures first Approximately segment million in second hand. was orders by by $XX segment This utilizing from quarter. The segment quarter, Cash to quarter. $X.X impacted as they approximately on the provided

reflects for our As we we our of remainder Tier total $XXX CapEx which of deferral including and to reducing focus deployment. electric our approximately upgrade CapEx expect fleet upgrades fleet X million, year, the program, be the on the

will continue and for growth disciplined our to CapEx Operating plans further quarter. remain cash to flow during allocation reduce second $XXX capital look the spend. We million with areas was

We continue to liquidity. our manage manage receivables to and payables

of are the Total we of end that cash credit ProFrac cash million $XXX $XX was the had back addition, and benefit inventory the have providing of cash year. total a the million, in combination liquidity expect we equivalents to we on our million. quarter which asset-based over In facility. last built We of working the the under of focused consisting capital and [start] half availability $XXX year, of a consuming to at

of outstanding. we billion of $X.X end approximately the second the debt At quarter, had

sheet XXXX we in generating As Matt approximately roughly our used the for remainder quarter With this please illustrated priority produced debt free for down flow in with cash million debt. flow outstanding second $XX of repayment. open of balance combination on $XX of million, the questions. mentioned, line the as which is that, cash cash free We focus for operator, we pay to the

Operator

the from Lemoine Sandler. Luke Our with Instructions] comes line Piper first question [Operator of

Luke Lemoine

on Can guys you put about I sidelines should that then some had August? you in fleets on commentary have XQ. the provide in fleets magnitude believe active the of June the and XX in you

Matt Wilks

focused on the -- structure we asset Yes. a in not the What utilization What is with And of with really focusing we is every going reducing active any we've it. and associated maximizing seeing industry that. We're to provide associated pullback fleet. cost on rightsizing the commentary that have by across seen we're approach overall inactive to what the fleets. encouraged similar available costs on is a

shoots pricing levels the that the to that there green second than We're robust seeing picking sensitivity already means we believe and term. going longer activity believe half for for provides people up the really And so more is be some and really, that And what sensitivity here is year some on much upside. the of expect.

Luke Lemoine

try differently -- the ProFrac quantification where XQ in or [indiscernible] upside. many into fleet Great. you Maybe how Any provide or to you Matt, 'XX. for reactivations think

Matt Wilks

efficient we're we going be with lot the think the rigs, the to point will operators instead count a at that the It's frac really keep a We're count. rigs of levels subdued. low closely very how these quickly not completely the out rates the to they asset capital, guide that's of have, looking spend related just seeing When partial of interest the of is -- associated where at not with the that attention see to really it's count. DUC changed. -- of and to has work fleet. coming of high has industry at And DUC would to and count a structure, paying fleet rates. inventory an the we're on with is those feature cost A not more following and and count, way that changed. high the building deploy capital going we back unproductive inventories best rig a guys most is that with cost I is up look way rig activity see rig One And DUC thing with get at use it close capital to inventory too, excited you'll DUC level, private likely but looked

Luke Lemoine

And more Okay. then here. try -- I'll one

right schedule XX, probably to With next just the it the Can pushed update months? the like like you sounded deployment bit. looks CapEx e-fleet e-fleet reduction, were the on what a us deployments XX over the

Matt Wilks

XXXX our overall generating construction delivery. some focusing leverage. had we're CapEx we've we And under into that reducing So pushed cash, on paring down and

Operator

the line Scheibelhoffer with next Stifel. comes Our from question of Alec

Alec Scheibelhoffer

just here, to curious, been in you for the kick spot weaker seeing so that points pricing we've us as that So been off have just I'm some seen has Permian data guys Proppant. maybe Haynesville, Eagle guess, that you by I prices the I in are effect And what well? can how talk plays And in market. doing and that guess Ford? the ProFrac about also also

Matt Wilks

Certainly.

and from a some are spot West that type pricing come the what been market, range. has narrow above these Texas, in situations. otherwise is has rates down well are So there pretty isolated Contracting spot

you other a it mine there's of logistics to customer differentials customer, to that out. you the When look And miss mines. include from The these you look model at easy to thing more else. is all is not it it's to at it's This business and than gate mine pricing mine gaps to logistics anything and huge how if basins,

a the closely to we right if just that price don't save So earn what with, has go in, and the but we compete there them, there's on on disadvantage solution do a don't a for is and really competitor the we with work are, we solution customers we advantages we're worry our we that there's pricing focus or and if and logistics have about ton spot the out where them. right for can be per them still and We higher money. everyone, logistics,

Alec Scheibelhoffer

And sand? changes the to bundling across a follow-up, sand? Understood. as also for you talk pricing frac dynamic have preferences for customer the with any seen can also And you basins

Matt Wilks

I for think horses it's courses.

a bundle and that about there It's that's a for difficult about procurement customers, and individual we think to solution basin our our less And more do their get each we the format. different the an think operator full-blown I love are for works work all and that I it's full with team. and -- -- so customer got to best have solution one, out but we a them. so

Operator

question Rice. next from Crist Johnson comes with Don the of Our line

Donald Crist

has your performance, looks really about of I Because of wanted and ticked come the they've mean you the the kind eight it quarter. I points work couple to on of all basis mines. in like the profitability team hundred Can continue you sounds up closed since down? like and costs discussion. how of a sand kind gotten optimize talk to it

Matt Wilks

Yes, certainly.

your is costs think going costs these is electricity, consistent So And variable are is continue [plants] on these about that almost be gas, the COGS mean our volumes are at all utilization to labor relatively way of pretty we The to covered. are consistent, fixed. we're your and costs we moves your essentially utilization out, I volume. point, everything and climb. businesses. see And putting our the that this

profitability. continue see so at pull relatively And of a continue one, as is, to nameplate our costs what And these our about in to good stronger each capacity business And a spot that you'll so growth in we're much we really are assets, through. our we love reach much fixed.

do And very a services. we business out frac conversion everything from So capital-intensive to -- on they that like stand compared has the -- are of really the here on earnings quality a high is cash business rate.

Donald Crist

I appreciate one for you. Lance, that color. And maybe

the As quarter the has a capital? bit into how little the into generate think we second about third and should Should and there? some in possibly quarter, slowed it maybe flow release cash free the fourth quarter business working

Lance Turner

Yes.

year. inventory, one the I things So I over been of was which building mentioned the think has past

get as And the that's that the as focused that remove, AEP biggest AR so And fleets -- then on to also to provide thing we're the impact. extent that we release. you'll

a that's assumption. fair I So think

Donald Crist

or $XX-plus to kind of any be magnitude like give, you'd And so? would that million

Lance Turner

of feasible. on the inventory in, it's all think But majority that's targeting I think the We're side. I that feasible.

Matt Wilks

conservative, conservative a for type. that's pretty Lance. think is He I bullish

Operator

the Stanley. Dan Our with next Morgan question of comes Kutz line from

Daniel Kutz

should actions profitability metrics. maintain fleet you could remarks prepared your that taken had in like at looking in touched the cost on guys press profitability out downside quarter structure this that some confident costs be per the take the guys there or and I and fleet you level versus you about think should how that August. have from Or a pretty that profitability comment of we -- that be what quarter, half? that? It's were per at just interpret the feel as a -- in the comment about given think guys appreciate the the that the second kind comment But should you that, off as you per there second of result rightsize kind to in fleet of fleets a coming at where guys you second would third that quarter So some release, guys help activity I looking in perspective,

Matt Wilks

Yes.

So and count that attrition be acquisitions synergies natural in a quicker those, care normally reduction, made we that -- the would that of the over gone been we've we've fleet what more took one, turnover you direct approach a a we and year. the when much from has harvested through and a And accelerated taken have brought last in of when especially lot we've something fashion. forward

said, took and is entire we need as The we part this possible." "Look, our other much calendar to as compress

to, There's are maintain per work to we're possible. no the calendar and How known level the pump then of assets for. the so highest we to as provide. a we'll we on that all doing And on those cover hours to optimize everything want business that we resources fleet you basis the we that, working, that profitability a hours sure many the and maximize services costs. much many by them fewer of do as make level per then fleet how in with reduction or to and need returned assets and cut we focus unassociated with we'll how utilization that our increase same But pump that

Daniel Kutz

Got Understood. it. That's helpful.

go back Production the comment. Let's to Proppant

think I And you volume of look Xx mean if that the business wondering or correctly it it for is contemplated what level. utilization or higher quantify answered is terms if this wondering was the of higher that I said EBITDA, might previously be that name to you be EBITDA help I could of if that of, potential us I if the could in heard for question second contemplate just at unpack that just margins Xx or in the you game. saying kind could Xx that utilization? we kind Xx quarter what you segment? pricing higher that might But

Matt Wilks

at with QX, that utilization a the rate at in utilization cost higher carried the burden full Certainly, Yes. produced -- we and that we that we EBITDA fixed have the rate. much had would

you nice, you converts fixed delivering and start utilization a exceed exceed cost, with the fixed so a higher cost, and well of increase look activity result and pull-through. -- at at that on And you results when same looking when gives it lower utilization rate the your that levered

very And attainable on So frac goal. it's your think mobilizing able quicker -- be that a I expectation our deliver fashion a way much to that's is services a in in to than relative side.

Operator

Thank floor you. This back question-and-answer turn would session. management concludes to over comments. like I to the for our closing

Matt Wilks

results Thank you, delivering of platform has a strong capable purposely operator. built dynamic cycles. market through ProFrac

you Although forward quarter shareholder incredibly We the near subside, speaking these we've again look us some we we deliver joining see well to meaningful positioned that to are with you today. and quarter. the next begun for term. believe already posed challenges, second Thank in value headwinds to

Operator

your you for This participation. thank gentlemen, today's and Ladies does teleconference. conclude

and your lines disconnect a day. may have You wonderful

ProFrac Holding (ACDC) 10 Aug 232023 Q2 Earnings call transcript