ACDC - Earnings call transcript Q2 2024

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Operator

Good day, ladies and gentlemen, and welcome to the ProFrac Holding Corp.

Second Quarter Earnings Conference Call.[Operator Instructions]. At this time, it is my pleasure to turn the floor over to your host, Michael Messina, Director of Finance. Sir, the floor is yours.

Michael Messina

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

at encouraged call high-level today, advised the be accurate There in Following replay on reading. as included information and available the meaning contingencies. replay on Flotek. will found contribution speaks is cause of Investor of listening pfholdingscorp.com guarantees longer August information that States second before sec.gov Commission, be well features comments filings tab the listener the future laws, today United within include company's and as forward-looking the up call today's section views is may And with the performance. Relations non-GAAP results, commentary statements. transcript current or or opening on exclude my in federal a how understand SEC from management's forward-looking no reported risks, of or of will statements actual XXXX. uncertainties, the which of the the XX-K those certain also to call on highlights and available to can to contain Securities figures the as ProFrac's X, this you statements operational therefore, the performance, on telephonic and differ of to of any company's management note measures XXXX. not replay August company's materially quarter The earnings time remarks, any risks, forward-looking other these until and or and time-sensitive including Various website those other call comments future by Form More and to management's financial the securities business may are under release. Please expectations provide webcast as financial reflect financial on The These achievements this Filings as that website your as information well adjusted the Exchange the of management at the be could access of questions. expressed read contingencies recording performance. of reader Also, are to uncertainties, ProFrac's XX, only

And like and can release, in reconciliations included details press to comparable to and the earnings the on financial Chairman, Additional to be the directly measures which most turn call Executive would consolidated now quarterly I Matt company's website. over found GAAP the are Wilks. Mr. ProFrac's

Matthew Wilks

reduced quarter, and set drilling were second prepared for achieve our this you, customers. Michael, Overall, activity, to by We good has continued gas regions. everyone. the operators comment performance our remarks, rollover further our financial subsidiaries, new delivering through natural and our performance operating Lab during performance. on morning, of In and After to in space. records efficiency completion quarter, Austin my services been multiple the walk having will able the in Thank the white will the resulting customers to strong additional of we calendar market performance challenged despite particularly for fleets

strategy to customers executed integrated successfully we solutions. value commercial However, our partner with that

will at prefer we efficiency deliver believe service companies to driving benefit firmly by we with ProFrac, quarters, that have collaborate prior consolidation consolidation larger in conveyed operators As operators scale. upstream that

opportunities take leading advantage we are throughout rapidly of able the value to Given ProFrac's completions evolving a in marketplace. chain, position

example, X majority in For customers last of have the our the a transaction completed years.

These we and has operating leading region, activity unconventional note, million revenue. second U.S. free spending. is at witnessed in prefer of to second for with of free generated our the land flow opportunities the West Texas, $XXX flow. EBITDA consolidation million results illustrate market integrated Of quarter, increased operator in recent take headwinds enable that advantage share the on we post-COVID while to generating cash cash market successfully $XXX that scale, adjusted align Additionally, material in largest to Furthermore, of which offerings generated In completions customers ProFrac million efforts ProFrac continue cycle. we $XX the quarter. our and should navigate is market through to built

direct team's the is execution second underpinned in quarter successful the active result performance record-setting a in our per by efficiency Our fleet, field. of

manufacturing of entry active of particularly operators AST. capabilities and We from with scale, believe we us enable is basins This rapidly fleets. We invest activity oil-weighted natural maintained gas the recovery of in upgrade, redeploy relationships critical in a on Further, to internal factor customer technologies strategy regions mid-June, attractive service for executed but ProFrac's and opportunity add us to a point operational our not also Additionally, markets. believe quality we service stimulation delivering at ProFrac. most enables materializes. based through to the levels our acquisition gas-weighted basins in and in-basin scale on only will benefit track a that as purposely to positions In record we an repair, an or in increased performance. differentiating maintain, strategically strengthen continue Advanced

values align region improves most in culture. active AST ProFrac's AST's Lower our ProFrac's service profile well best-in-class position extremely enhances core market XX. and with and in of Importantly, the the earnings efficiency

assets to gas the and diesel continue as will substitution, dual equipment XX% Today, or include e-fleet natural fleet equipment. progress Demand next-generation our to remain e-fleets we utilizing in gas-capable make on we deployments. natural or for that gas invest of strong, our fuel fleets enables source. active our and continue primary dynamic forward, blending Looking fuel

alternatives trends. has of reliability, are significant evaluating related for highly power actively made sought integrated at In generation. number that a the ability we AI-driven our failures, vertically Our industrial-scale customers In requirements, particular, service at to requiring a demand with enable of fuel our end solutions grid increasingly power in assets has operations coupled critical and to surge offerings. There least line on-demand savings, and with high strategy, provide significant our wellhead. next-generation generation after a and part customer-centric our markets, are efficient and driven across with substitution power customers electrification generation by diesel power part constraints broader computing in been

organically a diesel next-generation well solutions, to substitution As in e-fleets leader power positioned generation. to and we provide are diversify

gas regions general Weakness softness Turning impacted results. to our and Alpine. in natural activity

pricing and were through potential impacted move QX. commercial encouraged quarter, volumes and second the opportunities additional into the uptick we as quarter are during volumes in Although the materialize that recent we and third negatively by could

progress for And next-generation we execution make XX% testament fleets and fleet, I'm in record field active utilize highest field continue of based proud the our by hours the We excellence. integrated efficiencies company, deployments and on with of per for as technologies. and repair our electric we and dual approximately Tier inbound to to requests active fuel a our achieved capabilities. manufacturing or today, and to technology. execution new summary, best-in-class employees priorities, our demand of a for DGB new on pump fleet maintenance, additional to our a In X continue team's As commitment and

market overall expect flow We most West despite have generated as integrated region inorganic free in in decrease third continued slight Strengthened Lower million organic customers cash through the improved the completions during of consolidation. headwinds. Texas, our in-basin by operators our progress driving alignment efficiencies both in active $XX investments. M&A. the of through quarter, executed scale for we We and in increased We majority model. utilization with XX, improvement a quarter. witnessed we the Although The second we vertically

We relentless cash by through integrated cycle. generation over focus most long-term on free service, ProFrac deliver flow that, turn delivering through have in-basin value the the for our offerings, vertically to to scaled best-in-class Lad. With I'll and positioned the efficient stakeholders call the solutions

Unknown Executive

hours our Pressure I'm efficient this most performance an Thanks, record proud each we quarter making to despite Matt. market, efficiency in begin I'll again a starting segment, with challenging another once with achieved hours Pumping. the overview achieved per fleet, report is for of active day pumping consecutive best-performing in quarter per in This pumping ProFrac and ProFrac's history. fleets. which for hours per XXX exceeded second hours, the records fleet pumping month. quarter ProFrac's for

weakness a particular, the improvements made our expand in placed and provide result we've in and strategy. internally and several These natural quarter. scale the rig X% across that we horizontal count fleet region relatively an best-in-class land. to experienced is planned first gas region in-basin in delays we on have operational of decline and Due count as inorganically direct the for Texas, in In West to with the invested organically strategically the largest our ability spending Our of commercial an activity to the in emphasis felt and as average in completions and U.S. most service lower we industry both line our by quarter, the reevaluated operators the than programs early completion during evidenced prices active was expectations. the were quarter in active the

was Our also gas-related segment activity. impacted weaker-than-anticipated by profit natural

replace QX, to believe to across and ton targeted regions in However, spot mines early in that headwinds as reductions to we recent to we and These months, mine reiterate as utilization the we scale, number our improve. and anticipate improving increasing throughput, to leverage. goal In lowest implemented at making the of our the I'd we include automation cost that with of work opportunities. gas took natural costs into progress have initiatives volumes in a have operating Alpine idling with our aimed produce and mines. quarter. industry. power we utilization, cost troughed In and our Prolonged headcount, at Maryville, action of have now manage the profitability higher have like per believe deploy volumes through fundamentals in but lower Louisiana, positioned is recovery market the continued we summary, continuing a

service, we and is us partner a to with integrated coupled thank from offerings, our I outstanding to and safety. what in-basin bespoke while generating Leveraging increase free have for integrated benefits that for. and drive absorption higher with hard to leverage commitment dedication, activity. operators operating to best-in-class as precisely deliver is We ProFrac vertically built to work, enabled flow. cash This higher their scale team platform want efficiencies

We're Harbour strategy industry now Austin more executing ProFrac results to and expertise ProFrac, our We of have to have new forward makes it the their detail. look away. take CFO, excited team. best to for cover over the have in possible it execute at every team ProFrac's Austin, focus in our we on financial call as the contributions our and his team differentiated hand and the succeed on opportunities. day. I'll We His capitalize extensive to strengthened the knowledge future to Austin join financial industry strategy

Austin Harbour

to respect sequentially maximizing the the value were Thank join at With significant million. the It's margin forward results, an at adjusted to you while of EBITDA We $XXX an for potential EBITDA generated look flat contributing team. I team revenues for honor Lad. is second for I the creation of believe value to ProFrac, stakeholders. quarter to XX%. adjusted with million our $XXX Conwert,

adjusted active fleets, relative average decline were quarter to by a represents weaker absorption. pricing, relative negatively quarter. impacted Second cost in a Margins EBITDA lower the decrease XX% first and

cash We invest utilize the Although navigate ability adjusted generated debt strategic ProFrac particularly for sand mine successfully declined, demonstrating fleet, flows and of service free ebbs cash acquisitions, million, to obligations. our our to activity. flow and in next-generation EBITDA technologies, improvements, $XX and

decreases contract $XX cost our amortization Flotek with of cost QX. quarter Services fleet $X per in allocated management and EBITDA of revenue free services structure million Of upgrade achieved commercial the the fleet. of decline acquired Adjusted for us mid-teens marginal cash Average to second revenues our production proppant and generate note, the our The approximately declined inclusive quarter, the and we operational of decline was fixed pricing expense in quarter. representing white of the of shortfall Stimulation to million XX% Activity the competitive. maintain in by our Despite million and were the quarter. results, This on Revenue was and enabled second with strategies, generated versus EBITDA the decrease prior as $XX million, segments. our in the basins initiatives count impact was quarter, pricing coupled partially flow. segment Margins quarter, with liabilities a activity. decline. prudent and impacted sequential line materials related market agreement space. West capital first in minimal to highly on XX% by XXX to coupled by intra-quarter idling supply with first remain and in an X basis in approximately versus rollover in volumes. approximately the $XXX segment including to We of second $XXX pricing, increased a customers of offset equipment both expenditures gas impacted operating costs, a executed stimulation negatively reduce to mine. Texas reduced sequential million fleet with points natural reduction witnessed in due capital in remains and subdued, active the and line Turning

Adjusted rapid exposure. during segment the third the quarter. diversify the cost declines XX% cost at a we mitigate on for our second the reduction impact in partially EBITDA as Our customers initiatives of us executed million for order were XX% into Production strategy late the absorption. subsisted witnessed quarter representing $XX of enabled to second Proppant early Activity totaled third-party Approximately sold quarter to approximately to sequential XX%. volumes second quarter, lower

quarter. volumes the drove this will we The the a second the segment EBITDA. $X.X in for quarter. the decline and were the legacy production Approximately quarter, increase Manufacturing result pricing primarily the quarter, up flat $XX for million competitive. The was $XX the by expenditures with remains anticipate Adjusted engine early opportunities driven approximately million was sales in prior Selling, approximately the majority inventory approximately administrative generated in in million We revenues of witness revenues pumped the compensation. was second approximately second stock-based Lower in through via million. in first sequential EBITDA Cash although were sales. pricing quarter progress and beginning first $XXX,XXX of enacted and generated segment quarter, upgrades capital of coupled the are decline XX% second-quarter to million, recovery commercial at see second of the Manufacturing services. as general costs flat increase quarter, XX% adjusted from expenses a compared $XX stimulation $XX quarter. The totaled from in the to that second from a improved hours in intercompany segment segment quarter of

maintenance, activity-driven at dual-fuel to to next-generation addition equipment, upgrades mine engines, limited In we but not in e-fleets, and including invested Alpine.

our in and evaluating to rightsize plans. Just recent swiftly we acted accurately spending as capital more actively demand, expenditure to we capital levels reflect allocation are quarters

result, lower we million year, XXXX now capital expenditures anticipate expect in the with capital that for closer to guidance. during expenditures our million on maintenance total between of a and $XXX We spending the approximately along incur are million end As CapEx. previous to $XXX $XXX growth-related

our to outstanding, of in with does until floating utilize questions. look formal to The provide senior integrated notes execute please debt majority our AST cycle. flow remarks. rate approximately million, free connection end Borrowings to the facility the through including quarter up the quarter. line the had in credit of $XX the operating initiatives under were intend generating the executing mature increasing cash the level. are We expenses the liquidity an our million, free of to XXXX. priorities, we cash equivalents the as as customers That cost Total periods We Additionally, with open At million, the of from approximately continuing to we forward attributable as at well debt prior secured strategic partnering XX June and approximately our ABL. future acquisition decreasing $XXX on the second to subsidiaries $XXX increase efficiencies the organization, issued reduction end sequentially ended on million deleverage. goal in ABL $XXX was including cash $X million concludes solutions, January of flow at to across quarter, billion under the corporate at $X.X with Operator, for June. quarter not at million $XX and Total of related Flotek. best-in-class cash available

Operator

[Operator Stifel. from first Gengaro comes question Stephen Instructions]. our And from

Stephen Gengaro

sort competitive equipment But more One I X that's as bigger Two integration. asperities is questions picture I assets specific. had how similar well having of when type your you more advantage? industry evolves think you -- the if the of for do the me. one out at And hold normalizes, X, competitors' drives was, is we of them, competitive as a reasonable what one one I assumption? kind advantage think, site. kind of a the probably But the years that mean, people advantage first the about into

Matthew Wilks

lot a There's that question. to

people essentially, all bit group, types But a next-gen high or while definitely participate So to environment. landscape smaller in mean, Tier lot and advantage. from it's It's are difficult and equipment huge and when provides we there, little a of fleets this fuel-efficient out and your at that assets with of can I more more those competitive within the smaller smaller competitive go it's demand, who a with X those look those a we smaller and a of in diesel consolidated seeing assets group. upgrade are types,

having fully competition. overall for think competitive with the not to overall it advantage So assets. don't is we and strategy. to as good We have too possible the comes offerings, for come with advantage, happy bit easy and that integrated but doing from really or approach newer as solutions focusing providing just try job the really wells. X technologies. making a the I customers controls think with our technology from technology customer get not the -- it the We're largest on fact really as a in relatively complete competitors again. like competitor little X the are smaller our far the our It competitive I as that But similar our I we're a I and love entire on concerned. think the take focus same fail technology. group the But can industry it And what to and diminishes to reinforces really category, new it's good

Stephen Gengaro

color can we fleet second should this just profitability the when pricing about we the then think and on any be give as we year, us half half how about of year? thinking of you this back about And Okay. think per

Matthew Wilks

flat. We expect be relatively it to

Of overall course, we market. watch the

we focusing a control, that's element, those focus and the the structure, we from things like control items. now. year that throughout the flat faced with you a what really macro this profile Those are cost nature the any inventory managing can and the that. in business main plan on can't on can We're have is cyclical of overall but And an things along Our management always business with. market geopolitical a we risks, environment, we're around that and managing

Operator

question from And from Kutz Morgan comes Dan Stanley. our next

Daniel Kutz

that Do growing. some magnitude potential the comments quarter. and a but be in you could if put fleet down in growth And third comment that a disclosed of think different the my that quarter -- just those third press in some of inbound quarter second in think I so, If half services and improvement, be if anything puts or kind Maybe per can additional the kind about and of takes fair? that's second question a share guys the deployments you of release, would and from the little of the fleet could puts we production, and for result, for But stimulation then some might you be cost-based flat quarter? that we the of EBITDA about sounds angle. if quarter room integrated third takeaway the the bit think there profitability prepared on in kind profit is remarks like from kind pricing, third some takes

Matthew Wilks

the we service. what we're we're managing generate right side flat that flat focused all inventory. at in control. what working we're and think but that opportunity provide Yes. going respectable growth there's with at overall working and managing portfolio a that now can looking relatively the incredible a think model it. And customers definitely mix making with sure can But grow of and results. capital some things growing There's the and market, also I we a integrated managing is we tremendous to opportunity costs, and on customer and I our the looking coming certainly around from is the of executing market on But potential, But

Daniel Kutz

if could ask then I the just AST on And acquisition.

fits already guess, prepared communicated allocation guys in rationale strategy. But guess the But tire has guys kind capital I the elaborated idle more of -- that some So the and recently, a on the strategy. presumably, priority I delivering This you strategic remarks. fleets moved you into acquirer list. have consistently and have up you of on

those light the wondering just on just X could acquisition. if of So factors, the strategic AST you expand rationale in for

Matthew Wilks

value, a an Certainly, a that Texas. this and came incredible great West and base great asset great was asset reputation an at price in workforce and a

not really it The complements It's really, complement out customers high does was acquiring portfolio quality. replace. attached of to It of with it. think high-quality to quality our well there weeks our the really fleet I certainly we be numbers we that complemented as particularly reflected that of the a just couple had in to numbers only want to our June our over were in by. QX level would it

So having to to years many package look added profile. a it. that forward having our And I beyond full quarter with

Operator

Instructions]. [Operator

question Bank America. next Saurabh Our comes Pant from of

Saurabh Pant

things. they I Maybe outlook with the side the relative of on a things. start sounds you very the guys curtailment can E&P to the risk get have bit an on near Maybe year better side. side season, your it to things more balance term? the exposure because your outsized the get a gas gas of the peers I'll little of of talk for like listening activity you gas costs, know the in to is worse question some on Do before activity there

Matthew Wilks

readying them But the towards cautiously planning overly than too expected all look, recovery environment from that we're our in for managing slowing manage bounce environment, to flat a some with managing into for business and we're our about we're half the faster And our we're letting getting going optimistic bulled than here, an and to. the conversations rather seeing costs, will it. But it. coming We're them year. seem up about a opportunities excited way. certainly markets we markets impact we're constant it, say But additional see business do But to in our a substantial working performance. gas QX, be very macro had in with We're Yes. activity impact in down gas that from and when pick customers, we with mean back. what of activity. we back and going disciplined markets the guiding the customers with I not on you're see is up gas very a I a

And and really gas so come with position And we're come looking we'll of markets full model. to to in back activity to effect the our integrated to those show be it. a

Saurabh Pant

Right. No, your absolutely, talk Matt. peers, then one had And in the fleet I the quarter around know mid-teens. you've count, got Austin, annualized per than prepared I more you you in was I I leverage makes absolute of remarks many to sense. said that clarification. EBITDA think that know the about you gas your markets so don't think but fleet

try like you So quarter. XX XX second or do sounds have if fleets it had to would slightly I maybe math, that the in than less

on just First And fleet count things how then think that right? things, of year? of back go where side the should thing, I the doing math roughly that about in am we half

Matthew Wilks

Yes, you're kind right about thinking I on think in that. -- fairway the of the between in it

right, I think we to can things as we're we look managing control. going forward, that the

you about the improve are about absolutely and count there you fleet on out. set the us that numbers opportunity for I have, to we think you think think As laid opportunities

the to today. I importantly, efficiencies that with to from specific focus we think for in on us more addition the have there opportunities in perspective, portfolio as customers equally are cost efficiencies

of EBITDA that number I should be And kind mid-teens forward, going true. think so

Saurabh Pant

is Okay. Fantastic. have the you about No, so it's more opportunities season again, I coming know up, more But RFP to profitability. volume. get would

Operator

our question Daniel And John next Energy from comes Partners. Daniel from

John Daniel

on like tough market fleets? now, always Or looked including right are like, think gains. keep lower and time, if best go per makes raise of efficiency you those the the would customers the each you you citing at your during do could often at Do they fleets as almost virtues me. RFP companies that you hours risk wonder, higher D&C I you know think it just same grinding to efficiency? Thank seems rates And and price? for approach And take 'XX season, today that it you you their efficiency day maybe very Matt, is maintain but would we the quarter. E&P pumping

Matthew Wilks

Yes.

the question think paid is We the get thing. overall for partnership focusing most important at ability good higher reasons. more. with much But I markets. I think as would the of and to a are focused always a lot When that's relationship difficult you to comes we a look from and get customer on efficiencies higher that in our a as efficiencies look who's on customers

get in I from lifts and like But our the boats. customers a partnership markets think all you're relationship tide and margin this, we with efficiencies and stability great with. working

leverage. can for really from where expansion we is So operating from that's things inventory grinding cost margin through we're looking control rationalization, rationalization and out value the

and will it. along focused boats, so If ours lifts be lifted all better a with comes then that's And on. we're market what

John Daniel

the you you X the mine then idled to you idled forward X activity, like that in Fair was quarters try and as higher were would fast mines to hopes of enough. at the that And look until or out, wait that frame how on your has process? pricing sold reactivate higher to would any Or up to anticipation gone other has stuff would actual inclined of just activity? you be thoughts go in about --

Matthew Wilks

Yes. The was bounds it. -- outer of bit that the idled logistically Haynesville. the really proximity of in a outside the demand good ways of out little was customer that one to was we closing of pretty There

opportunities. some asset is the of it particular like things that industrial has about that One we

for gas been probably lines we've asset, basin a recovery. those particular And this that most find why see we did X that's gas tremendous on in So advantages. opportunities That's the likely have that to regardless in that to we that do that some able other outcome even keep markets back may of industrial what on. mine, just would even if that's we kick a warrant but better environment, logistics use have case And that the us

Operator

conclude for now back to like closing today. I remarks. turn any to Matt does it This question-and-answer session our Wilks would

Matthew Wilks

to QX forward ProFrac, everybody proud the and at year. Definitely, going got We We've our of a for look we joining of team. really things great on the thank remainder of this lot morning.

look integrated the of controls that. our model, with rationalization to on through call thank get able right cost joining some we But do be our what As and the cost we'll excited And appreciate now, growth. recovery, about expansion be everybody forward, we're to managing and top-line and operating really we'll leverage, management. focusing this with We're our you. margin We excited about all market is today execution. of and maybe inventory

Operator

does thank This We for your participation. today's you conclude conference. you. Thank

time, You lines have at this may and wonderful day. disconnect your a

ProFrac Holding (ACDC) 8 Aug 242024 Q2 Earnings call transcript