ProFrac Holding Corp.

Greetings and welcome to the ProFrac Holding Corp Conference Call. Excuse me one second. Welcome to the ProFrac Holding Corp Second Quarter Earnings Conference Call. My apologies. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Rick Black. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for ProFrac Holding Corps Conference Call and Webcast to review second quarter 2022 results. With me today are Matt Wilkes, Executive Chairman, Ladd Wilkes, Chief Executive Officer, Lance Turner, Chief Financial Officer, and Corey Randall, Chief Operating Officer. Following my remarks, management will provide a high-level commentary on the company, the financial details of the second quarter, and outlook before opening the call up for your questions. There will be a replay of today's call that will be available by webcast on the company's website at www.pfholdingscorp.com, as well as a telephonic recording available until August 19, 2022. For more information on how to access these replay features, is included in the company's earnings press release. Please note that the information reported on this call speaks only as of today, August 12, 2022, and therefore you are advised that any time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Also, comments on this call may contain forward-looking statements within the meaning of the United States federal securities laws, including management's expectations of future financial and business performance. These forward-looking statements reflect the current views of Profract's management and are not guarantees of performance. Various risks and uncertainties and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in management's forward-looking statements. The listener or reader is encouraged to read Profract's prospectus Form 10-Q and other filings with the Securities and Exchange Commission, which can be found at sec.gov or on the company's investor relations website under the SEC Filings tab to understand those risks, uncertainties, and contingencies. The comments today also include certain non-GAAP measures as well as other adjusted figures to exclude the contributions of Flowtech. Additional details and reconciliations to the most direct, comparable, consolidated, and GAAP financial measures are included in the quarterly earnings press release issued yesterday, which can also be found on the company's website. And now, I'd like to turn the call over to Mr. Matt Wilkes. Matt?

Thank you, Rick. I'd like to begin by stating how pleased we are to report exceptional results for the second quarter, to which Ladd and Lance will speak more about in their remarks. I will highlight that we outperformed what we said we were going to do once again. I'm extremely proud of our $28 million of annualized EBITDA, adjusted EBITDA per fleet, and more excited about the future opportunity than ever. Our view of the macro environment and oil field services has not changed, and we are extremely well positioned for the current U.S. frack market, where supply of pressure-pumping horsepower is limited and incremental horsepower is bottlenecked. With many of our competitors completely sold out and having legacy footprints that need to be upgraded, the supply chain is extremely strained for maintaining and upgrading the existing fleets with a limited ability to build new capacity. And as we all know, capital is more expensive. Taken together, these dynamics strengthen our belief that there is a great deal of length left in this cycle and margin expansion will continue through this cycle. We believe this is the best backdrop that we've seen since we started in the Shell industry over 20 years ago, and we see this lasting for quite some time. In terms of the path forward, I see opportunity for growth in multiple areas in pressure pumping that Ladd will discuss, but I also see opportunities for continued execution on our growth strategy. As I've mentioned before, we have a two-pronged growth strategy, acquire, retire, replace on the equipment side, and a desire to scale our vertical integration on the supply chain. It is important to state that our M&A strategy is and will continue to be based on a very strict criteria for what is considered an accretive transaction and to maximize cash generation. We will continue to put all potential acquisitions under the same technical and financial microscope, and although we believe the market is ripe for consolidating the space and expanding our vertical integration, We will not sacrifice the strength of our balance sheet for any deal. We remain extremely thoughtful about our overall leverage and believe that we are on track to maintain our target of below one turn of debt to EBITDA so that we can continue to enhance our ability to return cash to shareholders. We expect that the excess cash flow we generate after interest and maintenance capex will be sufficient to fund growth capex, delever the balance sheet, and return cash to shareholders. All three of those are priorities to us. To continue illustrating our strategy, I am very excited that we closed our acquisition of the Monaghan's West Texas Sand Operations in late July and that our pending acquisition of U.S. Wealth Services is on track to close in the fourth quarter. As you have heard and seen from us already, we are constantly thinking about strategic efficiencies, enhancing value of the supply chain and vertical integration for our company to maximize profitability and returns for our stakeholders. Our vertical integration reduces overall cost of services and cost of maintenance to a level that is unmatched in the industry. From designing and manufacturing fluid ends, power ends, high-pressure iron to our sand, chemicals, logistics, refurbishment, and new fleet construction, we see the impacts on margins, cost structure, and capex savings. Our vertical integration provides Profract with more control over the timing and amount of critical inputs into our business, and it uniquely distinguishes us with a cost advantage compared to our peers. Specifically, in this environment, where supply chain interruption is a challenge for pretty much everyone, we're in a better position than our peers to capitalize because we have our own sand mines, we have our own iron, our own machine shops, and we design, engineer, and assemble our own equipment, from frack pumps to blenders to E-fleets. With the Monaghan's mine, which combined with our La Mesa plant and Kermit mines, ProFrac has close proximity sand supply to almost every well in West Texas, which is far superior to any asset base in the region. The pull-through profit from logistics and our frac fleets are considerable in this environment and helps to ensure that our pumping is not interrupted. This increases pro-fracts efficiency in the region by ensuring a reliable, uninterrupted supply of high-quality sand, as well as our ability to reduce truck traffic, fuel consumption, and emissions, which helps mitigate our costs in this inflationary environment. To provide some perspective, prior to the Monaghan's purchase, we were only producing sand for three of our fleets while purchasing the rest from third parties at current market rates. After all three mines are producing sand, We will have the capacity to supply up to 15 fleets worth of sand in West Texas when operating at an optimal capacity. While we expect to continue to supply a mix of third-party sand to our customers, we believe there is a tremendous value in procuring more materials on behalf of our customers. These are exactly the kinds of opportunities we continue to look at to consolidate within our sand and chemical markets. The margin contribution that comes from these types of opportunities will provide continued growth on top of any quarter-over-quarter price increases on our fleet pricing, which we continue to see today. I cannot stress this enough. Having custody and control of our supply chain is one of the biggest drivers of utilization on our fleets. We are bullish on the future of our industry and our company, and as we continue to execute on our acquire, retire, replace strategy, and vertical integration strategy, we plan to continue to redefine what is possible for an oil field services company. I will now hand the call over to Ladd to provide additional comments about our operations.