ProFrac Holding Corp.

Greetings and welcome to the ProFrac Holding Corp's 2022 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. 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, Rick Black with Investor Relations. Thank you, Rick. You may begin.

Thank you, Operator, and good morning, everyone. We appreciate you joining us for ProPRAC Holding Corp's conference call and webcast to review third quarter 2022 results. With me today are Matt Wilkes, Executive Chairman, Vlad Wilkes, Chief Executive Officer, Lance Turner, Chief Financial Officer, and Corey Randall, Chief Operating Officer. Following my remarks, management will provide high-level commentary on the financial highlights of the third quarter and outlook before opening the call up to your questions. There will be a replay of today's call available by webcast on the company's website at pfholdingscorp.com, as well as a telephonic recording available until November 17, 2022. More information on how to access these replay features is included in the company's earnings release. Please note that information report on this call speaks only as of today, November 11, 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 expectations of future financial and business performance. These forward-looking statements reflect the current views of pro-fract management and are not guarantees of performance. Various risks and uncertainties and contingencies could also 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 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 section under the SEC Filings tab, to understand those risks and uncertainties and contingencies. The comments today also include certain non-GAAP financial measures, as well as other adjusted figures to exclude the contribution of Flowtech. Additional details and reconciliations to the most directly comparable consolidated and GAAP financial measures are included in the quarterly earnings press release that was issued yesterday, which can also be found on the company's website. And now, I would like to turn the call over to PROPRAC's Chief Executive Officer, Mr. Ladd Wilkes. Ladd?

Thank you, Rick. To begin, I'd like to state how excited I am having completed our acquisition of U.S. Wells Services. I wanted to welcome their team to the ProFrac family. We believe electric fracking represents the future of the industry, and we're excited to leverage our scale and capabilities along with the clean fleet technology as the largest provider of electric fracturing services in the world. And by changing our ticker symbol to ACDC, After closing the U.S. Well Services acquisition, we wanted to communicate to investors that not only are we the market leader in E-Fleets, but we also have a strong commitment to an ESG strategy of reducing fuel costs and minimizing emissions. In addition, we just think the ticker is really cool. So as of today, after factoring in the acquired fleets, we have 39 fleets active, and eight of which are electric. Included in this fleet count is the deployment of Profract's first internally manufactured electric fleet. We're pleased to report that this fleet performed extremely well in its initial customer field test and was fully deployed this month. We continue to be impressed by the technical performance of these electric fleets. They have demonstrated the ability to pump at a high rate, high pressure, consistently and reliably with very little fluctuation. Just as important, the economics are unmatched given the E-Fleets' 100% use of cheaper and cleaner-burning natural gas. We look forward to this first E-Fleet generating significant revenue and profitability in the back half of the fourth quarter. Going forward, and after U.S. Well Services' fleets are brought closer to market rates, we expect to generate higher profitability on E-Fleets due to their lower maintenance needs. smaller footprint, and the tremendous value proposition to our customer. In the meantime, we are focused on bundling opportunities, efficiency improvements, cost synergies, and other select strategies that we believe will improve the profitability of these fleets in the near term. With the closing of the U.S. well acquisition, we now have four E-Fleets under construction. We're working to complete these additional E-Fleets and expect full deployment of those fleets by early 2023, by which time we expect to have 44 active fleets. Fleet optimization remains a primary goal, which means we're not just looking to add fleets, but to maximize the throughput and profitability of the fleets in operation for our clients and for ProFrac. In addition to the electric fleets under construction, we've accelerated our Tier 4 dual-fuel upgrade program as the year has progressed. Our goal is to stay ahead of customer demand as it relates to equipment type, and we believe that electric and Tier 4 dual fuel fleets offer incredible benefits to our customers and represent the future of our industry. Now I want to highlight several key metrics from the third quarter. I'm extremely proud to report that we achieved 18% sequential growth in revenue, leading to a 22% sequential increase in adjusted EBITDA for the third quarter. Excluding other business activities, adjusted EBITDA increased 49 million from 218 million in Q2 to 267 million in Q3. Annualized adjusted EBITDA per fleet, excluding other business activities, rose 23% to 34 million from 28.1 million in the second quarter. We believe these incredible results are the product of the best team in the industry and running the best equipment in the industry, focused on every aspect that makes our company, our customers, and our suppliers truly great. I believe it is important to highlight three critical areas that are driving our industry, leading profitability per fleet. Pricing, our ability to control the supply chain, and utilization. Pricing continued to move higher during the quarter, and we see continued momentum with a data-driven approach. Our commercial team works constantly with each of our customers to drive home the value that ProFrac creates for their production returns and ESG initiatives. In addition to pricing, we saw further incremental expansion from increased bundling of materials used in the services provided by ProFrac. Vertical integration allows us to capture more share of our customers' completions budget, and this is a priority for ProFrac. as we believe it represents our largest top-line growth opportunity in 2023. We have always aimed to provide sand, chemicals, storage, and logistics as we believe we can manage the complicated supply chain as a single provider more efficiently and reduce the risk of NPT on pad. During the third quarter, we made great progress expanding the number of fleets that are bundling materials. By the end of the third quarter, we were providing approximately 40% of the sand we pumped and 50% of the chemistry. Looking forward, we believe we have the supply, the proximity, and cost advantages to become the primary choice for our customers. Another equally important factor in our results is utilization. We posted the highest level of utilization for the company in terms of pumping hours. of everyone at ProFrac is maximizing pumping hours from our commercial teams focused on filling the calendar to our operations teams and maintenance teams focused on executing every single minute on pad and keeping equipment in optimal shape to reduce downtime. It's because of these strengths that in Q3 we were able to reduce move times, pump more hours per day, pump more days per fleet, etc. These trends continued in October and I'm excited to see what the team can do moving forward. Lastly, I want to provide a summary of what we're seeing from our customers. Demand remains very strong for all fleet types, including increased demand for newer technology fleets as customers appreciate the economic benefits of next-generation pumping technology. This equipment remains sold out across the industry. As a result, pricing levels remain constructive for all equipment types as we look into Q4 and 2023. We completed the third quarter with a record level of efficiency and are carrying the efficiency into the fourth quarter. While we don't expect year-end budget exhaustion to materialize this year, fourth quarter typically comes with some uncertainty around utilization due to holidays and the possibility of inclement weather. Overall, our 2023 pipeline and book of contracted work is very strong. Our current calendar is the strongest we've seen in 14 years in this industry. I'll now hand the call over to Lance, and he'll provide some comments on our financials.