ProFrac Holding Corp.

Greetings, and welcome to the ProFrac Holding Corp. Fourth Quarter Earnings Conference Call. This time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during a 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, Brian Wheatley, Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, everyone. We appreciate you joining us for ProFrac Holding Corp's conference call and webcast to review fourth quarter and full year 2022 results. With me today are Matt Wilkes, Executive Chairman, Ladd Wilkes, Chief Executive Officer, and Lance Turner, Chief Financial Officer. Following my remarks, management will provide high-level commentary on the financial highlights of the full year and fourth quarter of 2022, as well as the business 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 March 28, 2023. More information on how to access these replay features is included in the company's earnings release. Please note that information reported on this call speaks only as of today, March 21, 2023. 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 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 the management's forward-looking statements. The listener or reader is encouraged to read ProFRAC's Form 10-K 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, which can be found on the company's website. And now, I would like to turn the call over to Profract's Executive Chairman, Mr. Matt Wilkes.

Thank you, Brian. 2022 is a milestone year for our organization. We listed on the NASDAQ, announced eight M&A transactions totaling roughly $1.8 billion, and assembled the most technologically advanced fleet in the industry, along with an in-basin sand mining footprint and manufacturing capabilities to support it. As we have demonstrated, M&A is core to our strategy, and integrating acquired assets and businesses is a key competency. In 2022, we successfully leveraged this skill set. scaling our vertically integrated platform while building upon and executing on our acquire-retire-replace strategy. Vertical integration positions Profract to reduce market volatility and deliver more consistent profitability throughout the cycle. Our internal manufacturing capabilities result in shortened lead times for inventory, rationalized purchase orders, and improved capital efficiencies. Owning the production of critical inputs to the frac value chain, such as sand and chemicals, ensures supply, enhances fleet utilization, and limits non-productive time. Furthermore, it allows us to control a larger share of the frac value chain and aggregate a larger share of the total profits earned along the way to the wellhead. This is critical to our strategy. Our leading in-basin prop and production footprint, when combined with the baseload demand from our fleets, insulates us from price volatility and operational disruptions caused by the sand market and serves as a competitive advantage, facilitating our goal of improving integrated sand and logistics sales. Historically, ProFrac has always aimed to offer fully integrated fleets with prop and chemicals and logistics sold along with the service and equipment. This strategy uniquely differentiates our business model from the companies we acquired in 2022, all of which marketed their fleets on an equipment-only basis. This provides a distinct opportunity for new growth, and as we apply our commercial strategy to these fleets and those legacy fleets currently not providing materials, we expect continued improvement in the profit-earning potential of our business. To put it in context, at today's pricing, we believe a fully integrated fleet that aggregates profits across the entire FRAC value chain, including horsepower, sand, and chemicals and logistics, could generate as much as $50 million in gross profit annually. To be clear, we believe this is the amount already being earned by various service providers throughout the value chains. We also believe that ProFrac can do it more efficiently and more effectively for our customers, providing them with a cost savings and thus a profit enhancement by capturing as much of that value chain as possible. Finally, our recent acquisitions of Producer Service Corp and Rev Energy Services demonstrate further commitment to our acquire, retire, replace strategy and also illustrates our ability to identify financially attractive opportunities with additional strategic upside. We are confident that we can improve the economics of the fleets we acquired in both these transactions. We have successfully run this playbook following our acquisitions of FTSI and U.S. Well Services. In addition, we also gained a low-cost avenue for expanding our manufacturing presence in the Northeast through the producer's acquisition. With REV, we acquired modern, high-quality fleets and gained a foothold further diversifying our basin and customer mix without diluting pricing in that market. In connection with these transactions, we made the decision to retire equipment equivalent to three frac fleets. Evaluating a target's assets to determine what equipment can be immediately worked at pro-frac standards, what can be rebuilt or refurbished, and what should be retired is a critical element of our process. We believe our decision to retire certain fleets not only allows us to maintain the highest quality of assets and levels of operating efficiency, but also helps to add balance to the overall market. Profrag's objective is simple. We're working to build the most nimble and financially stable company in the oil field. Vertical integration is critical to achieving this goal. By controlling the critical links in our supply chain and maintaining an unwavering focus on safety, efficiency, and profitability, We believe we can deliver for our customers, shareholders, and employees like no other company in our industry. Now I would like to turn the call over to Ladd.

Thanks, Matt. We're incredibly proud of our team's performance in the fourth quarter to generate nearly 14% sequential revenue growth and to achieve annualized adjusted EBITDA per fleet of approximately 30 million, excluding flow tech, despite an early round of cold weather that negatively impacted fleet efficiency. The inclusion of seven electric fleets acquired from U.S. Well Services for a partial quarter increased the number of average active fleets in the fourth quarter to 36. Furthermore, we continued to benefit from our integrated services model, through which we provide equipment, chemicals, profit, and logistics to our customers. During the quarter, we supplied approximately one-third of the SAM pumped by our frac fleets, compared to roughly 26% in the previous quarter. This allowed us to increase sand sales approximately 9% versus the third quarter of 2022. The improvement was primarily driven by a full quarter contribution from the Monaghan's mine. The goal is to increase our materials penetration even higher, closer to 60 or 70%. We expect to see further gains as the La Mesa mine, which came online at the end of December, and the recently acquired mines for Monarch silica and the performance propense mines will contribute to our results in Q1. During the fourth quarter, we averaged two mines operating, but with the closing of the performance propense acquisition in February, we will exit the quarter with a total of eight mines and nearly 23 million tons of M-Basin annual nameplate production capacity, located strategically throughout major pressure pumping markets. I must also commend the commercial team for their accomplishments as well. Following the closing of the performance profits acquisition, the team successfully placed two fleets with Tier 1 clients in the Haynesville. In addition, the recently acquired fleets from U.S. Well Services were previously operating at below market rates in the fourth quarter, but the team successfully worked with many customers to find win-win solutions for these fleets. That will provide improved returns to ProFrac. While we will begin to see the benefit of these changes in late Q1, we expect the full impact to be realized in the second quarter of 2023. We're very excited about our active electric fleets and those under construction, and we're proud to currently operate eight E-Fleets, the largest number of electric fleets in the industry. We believe next-generation fleets such as electric and dual-fuel fleets are the future, and we continue to see significant demand for these technologies from our customers. The recent sharp decline in gas prices, especially relative to crude oil prices, has magnified the value proposition of our next-generation fleets. Customers are becoming increasingly focused on substituting natural gas for diesel fuel wherever possible in order to capitalize on lower completion costs. As a result, we're seeing incredible levels of inbound interest in our dual fuel and electric fleets from high quality customers. Currently, we have multiple opportunities to place our first in-house manufacturer electric fleet with tier one customers on a dedicated or contracted basis. And we expect to deploy that fleet under such an arrangement in the near future. Today, 59% of Profract fleets are next generation fuel-efficient fleets that offer significant fuel cost savings and emission reductions, which helps differentiate ProFrac from the rest of our industry. We remain firmly committed to delivering premium value while improving our environmental footprint. Lower commodity prices have impacted our customers' business over the last several months. Service pricing levels have remained steady through February, but we will continue to assess the impact. In response to the reduction in gas prices, we have seen a less efficient calendar develop over the course of the first quarter of 2023. The less efficient calendar combined with the seasonal winter weather impact is expected to reduce our efficiencies in the first quarter of 2023. However, we have capitalized on our improved in-basin sand footprint to high-grade customers in the Hainesville and Eagle Fords. Our embrace of these markets has paid off as we have added fully integrated fleets with top tier operators. Importantly, in the Hainesville, we are partnered with customers who are well hedged and expect to maintain activity and completion programs throughout the year. While the market for frac equipment remains tight, we have seen dislocation in the Permian during the first quarter of 2023. driven by EMP consolidation and service companies rotating fleets from natural gas basins to the Permian. In the near term, these trends have limited our ability to grow our penetration of fully integrated fleets in the region. However, we remain committed to our strategy of pursuing work that offers both calendar density as well as full material bundling. As a result, we have reduced our supply of fleets in the Permian in the first quarter and expect to build our active fleet count over the next several months as a shortage of strategically located sand and premium fuel efficient fleets creates a call on Profract services. Right now, we are continuing to deploy our capital for maintenance. In doing so, we are ensuring that our fleet is positioned to continue delivering the high level of service quality we are known for. Additionally, we are laser focused on standardizing the equipment controls, and procedures used by our fleets across all regions, allowing us to optimize both efficiency and inventory levels. As Matt mentioned earlier, we retired three of the fleets we acquired and are actively working to make the rest of the acquired fleet uniform with Profrax legacy assets. This brings our total fleet count to 42 today, which we expect to grow to 46 by the end of the year as we complete construction of our new-build electric fleet. We remain excited for 2023 and believe the market for frac equipment will remain tight for the foreseeable future. Although the commodity market may create a headwind in the near term, we believe our portfolio of next-generation fleets and in-basin sand mine network will allow us to maintain our financial expectations for the remainder of the year. The opportunity to combine significant fuel cost savings, optimize sand and logistics, and best-in-class operating efficiency enables us to generate a mutually beneficial situation where ProFrac achieves premium pricing while still delivering lower all-in completion costs per lateral foot for our customers. And finally, I want to thank all of our employees. Without your tireless work and sacrifice, none of this could be possible. Thank you so much, and I appreciate all of you. With that, I'll turn the call over to Lance. and he'll review our financial results in more detail. Thank you, Ladd.

Good morning, everyone. We're pleased to announce our results and the progress we made during the fourth quarter. On a consolidated basis, revenue for the fourth quarter was $794 million, up almost 14% sequentially. The improvement in revenue was driven by a higher average active fleet count of 36, providing an increased amount of the sand pumped by our fleet, slightly offset by lower efficiencies during the quarter. Adjusted EBITDA, excluding flow tech, was $269 million for the quarter, up slightly from the third quarter. Annualized adjusted EBITDA per fleet was $30 million, down from last quarter due to the lower overall profitability of the U.S. Well Services fleets that were under firm pricing when we acquired them. For the full year, revenue totaled $2.4 billion, and adjusted EBITDA, excluding flow tech, was $836 million. I'll now drill down on our various business segments. The stimulation services segment generated revenue of $767 million for the fourth quarter and $2.3 billion for the year. Adjusted EBITDA for the fourth quarter was $252 million compared to $250 million in the third quarter. Again, this was driven by a higher active fleet count and providing an increased amount of sand pump by our fleets, offset by lower profitability on the U.S. well fleets and efficiencies overall. As we look into the first quarter, we expect average fleets to increase to approximately 41 fleets. The profit production segment revenue increased approximately 44% in the fourth quarter and totaled $35 million, of which 64% was intercompany. The improvement was attributable to improved pricing and an increased number of tons sold. Our ability to provide more sand was in large part due to a full quarter contribution from the Monaghan Sand Mine. For the quarter, adjusted EBITDA grew 120% to roughly $20 million. The profit segment will expand considerably in the first quarter as we add four additional mines operating for the full quarter, and we acquired four mines in the performance acquisition. In addition, we continue to focus on improving utilization of all mines, which will improve revenue, cost per ton, and ultimately total EBITDA generated. As we integrate the profit segment, we expect continued improvement as we build the best-in-class profit mining company. The manufacturing segment generated $51 million of revenue in the fourth quarter, up 5% sequentially. Approximately 93% of this revenue was intercompany. Cost pressures continue to be a headwind for this segment as it absorbs the higher raw material prices of its products and as it ramps up production to accommodate the larger fleet count resulting from the recent acquisitions. Adjusted EBITDA for the quarter was negative 3.1 million. Looking forward, we expect the first quarter to have increased sales volume with normalized profit levels at or exceeding Q3 levels. From a corporate perspective, SG&A, excluding acquisition-related expenses and stock-based compensation, increased to 60 million in the fourth quarter, driven by the expansion of our fleet count and the build-out of our profit segment. Approximately 5 million of this related to flow tech for the quarter. At year end, our total debt balance, excluding amounts attributable to Flowtech, was $941 million. The total debt balance on a pro forma basis for the upsize of our term loan and the recent draw on our ABL facility to close the performance profits acquisition is approximately $1.3 billion. Based on the current interest rates, this equates to an annual run rate interest expense of roughly $10 million per month. We believe the ability to upsize the term loan by $320 million and increase our ABL facility commitments from $280 million to $400 million underscores the earnings power and credit worthiness of our business, as well as the strong commitment from our lenders. More importantly, we believe the earnings potential and the performance acquisition goes beyond profit production capacity and will provide significant benefits to our pressure pumping segment. As Ladd mentioned, we have already started to see some of those benefits. Operating cash flow was $159 million in the fourth quarter, down slightly from the previous quarter. It was impacted by an approximately $50 million working capital build, of which approximately $9 million related to Flowtech. Finally, capital expenditures for the year, excluding acquisitions, were $356 million. For 2023, we expect our capital expenditures to be in line with 2022 levels. Although the total spend will be similar, it will consist of a slightly different mix. We have budgeted approximately 15% to complete the construction of the four electric-powered fleets. We also expect to allocate roughly 30% of our capital expenditure budget to complete engine upgrades and other growth initiatives, as well as 15% for various initiatives in our profit production and manufacturing segments. The remainder of the 2023 capital expenditure budget will be used to fund maintenance capital expenditures estimated to be between $3 and $3.5 million per fleet per year. I'll now turn the call back over to Matt.

I want to thank everyone for joining our conference call today and taking the time to listen to our results. If we've been successful, you all will leave here with three key takeaways. One, ProFrac's significant profit and production footprint across key pressure pumping markets will allow us to offer fully integrated fleets with profit, chemicals, and logistics sold along with our service and equipment. This provides a distinct opportunity for new growth and expanded margins. Two, our vertically integrated business model is resilient and therefore can deliver a differentiated return profile that is profitable through alpha cycle. We continue to execute on our acquire, retire, replace efforts, and by utilizing our scale, we can improve the commercial success of these operations. And with that, operator, we are ready for questions.

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, It may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Stephen Gingaro with Stiefel. Please proceed with your question.

Thanks. Good morning, everybody. Good morning. I guess two things for me. In your presentation you put out this morning, you have this illustrative annual run rate EBITDA bridge. And I just wanted to make sure I completely understood sort of the bridge from 4Q22. I think one of the elements is 12 active fleets and kind of a run rate EBITDA of $34 million, I think you used. Is that the E-fleets plus the two recent acquisitions of REV and producers that drive the incremental 12 fleets? Or what are those? 12 fleets come from? And then I guess the second part of that question is the impact from the sand operations as a separate line kind of embedded in the profitability of the fleets at that $34 million per fleet per year of EBITDA?

No, they're separate. And so when we look at the 12 additional active fleets, those come from a combination of acquisitions as well as the new builds that we've had planned and have disclosed the new electric fleets. And then we've added an additional 16 million tons per year of capacity on the sand side, which we expect to see a pull-through on each of the fleets as we see the fully bundled offering. If you break it down and you look at the full value chain that's associated with bundled services, We believe that there's as much as 50 million a year annualized and that when you own each part of that value chain, you have the ability to pull that through. So we're really excited about being able to do that. And this also takes our capacity on sand mines to 22.3 million tons total. And we're really, really excited about that. We've got some great comps out there. of smaller sand companies that really show just what the value of these assets are worth.

Thanks. Just to clarify, the $34.3 million run rate of EBITDA for those 12 active fleets excludes sand?

That's right.

Okay, great. The other question, and thank you for the call. I appreciate it. The other question is, In a world where investors in general seem to be nervous about debt and you've made a lot of good strategic acquisitions, how do you think about the debt levels that you're comfortable with and then any longer-term plans to sort of delever and return capital?

Yeah, we're certainly in the process of deleveraging, but when we look at the cash flow that we generate, we don't see us as having – you know, any issues with the total amount of leverage. But when we look at the run rate and the cash flow generation that we fully expect to see through the remainder of the year, we think that this will be a shrinking issue.

Okay, great. Thanks for the details.

Our next question comes from the line of Sirad Pan with Bank of America. Please proceed with your questions.

Hi, good morning, guys. Hi, Matt, Ladd, Lance. Thanks for the call. I had a quick question. I think we talked about taking some supply out of the market. You are obviously retiring three fleets, I think, of the six that you acquired in the producers and REV transaction. Plus, I think I also heard you say that you are reducing our supply of fleets in the Permian So if you can just talk to that, how much capacity you're retiring slash taking out from the market, just so that we are on the same page in that, that would be helpful.

Certainly. So we've stayed consistent on our plans for acquire, retire, replace. And so when we go through and we look at any acquisition, the first part of that is going in and looking at the quality, the horsepower, our ability to upgrade it, and the overall cost of upgrading it. We go through a careful process of evaluating whether we should or if we should retire. Based on the quality of some of these fleets, not necessarily fleets, but more so on an individual pump basis. When you go in and you look at these individual pumps, it just doesn't make sense to convert or upgrade them. We've elected to retire them and take capacity away from the market. I think it's a prudent thing to do. Our number one priority is to make sure that the service quality and the execution that we have on location is never compromised by the quality of the equipment. We also focus on standardizing what we have out there, what we make available to our customers as well as to our employees. We want to make sure that everybody has the best tools for the job. So we made that choice to remove three from the mix. And as far as The asset allocation, we're fully aware of seeing the tape on natural gas. But with our footprint and the strength that we're seeing with our overall supply chain, we really like the developments that we've seen there. We've seen a very warm welcome from our customer base in the Hainesville, the Northeast, and then the Eagleford. where we've actually seen an increase of activity from the customers that we target. With that, there's a number of reasons that we think that may have developed. We know that many of our peers have pulled fleets from those areas and taken them back west to the Permian. We're seeing a little bit of a shuffle out there in the Permian. We're really excited about what we're doing and expect to see that our supply chain will continue to show results as we fully bundle our services around our frac fleets. We've taken a position that these frac fleets are packages that sell products. And for that reason, it's allowed us to take a new view of our customer base so that we can focus more exclusively on utilization rates with customers that would expect to see a slightly lower horsepower price. And it's an easier decision for us to make now that we have so many products to offer through our horsepower.

Okay, okay. No, that makes sense. Thanks for that explanation. And then just quickly on the vertical integration strategy, obviously that was part of your strategy from day one, right? So no surprises there. But if I just look at the Hainesville and think about how much sand capacity you have, right? I'm doing this back of the envelope math, about half a million tons per annum of sand required per fleet. It looks like you can uh service 20 to 21 fleets at main plate capacity right obviously it's going to be lower than that on an effective basis but that means a lot of upside potentially to the number of fleets that you can deploy in the hands below the medium term right i understand near term has challenges right but over the medium term you can substantially increase your footprint in the hands will is that is that the strategy how should we think about that uh versus just selling sand to third party pressure pumping companies

Well, you know, it's a tough environment out there, not just with commodities, but also in just the broader markets. I mean, there's potentially a recession coming. You've got this crisis, this banking crisis that's going on. So we're taking a very cautious approach. We're not looking to be too aggressive on deploying more assets to any of these regions. But You know, theoretically, we could support a substantially higher number of fleets in the Haynesville. We're playing this really close to the chest, but, you know, make no mistake, we're long-term believers in the gas markets and love what we see by the end of this decade with the export capacity that's coming on. We especially like seeing operators secure their own offtake agreements with these LNG exports. And so we think that it's really important that we stay committed to these markets and maintain those relationships and to make sure that we have a reputation that doesn't run from a little bit of weakness in the short term. And I think that's being rewarded with that level of commitment that these operators, we've actually added a couple fleets, but we don't anticipate getting too aggressive with too many more additions.

Right, right. Okay, okay. No, that's great. Okay, guys, I'll turn it back. Thank you. Thank you.

Our next question comes from the line of John Daniel with Daniel Energy Partners. Please proceed with your question.

Hey, all. Thanks for including me. I just got a few sort of basic questions initially. Matt, can you tell us, I know it's the guidance for the active countenance, but just given sort of the the choppiness, if you will, what is the typical working fleet count on any given day right now?

So we're not looking to provide any guidance on Q1. We've indicated that there's some softness in West Texas, but we've been able to pick up additional fleets in the Eagleford, in the Haynesville, as well as in the Northeast. So I think that overall, we've got a pretty balanced approach. And our main focus is getting the entire supply chain pulled through, been very successful with it in these smaller markets, and continue to see signs of adoption in West Texas. And what we do like is with the tightness in the sand market that we're seeing out there, we are very, very constructive about our ability to pull that all the way through and show the full benefit of a fully bundled business with all these parts of the value chain included. So what we're guiding to is 46 for the exit. We exit with 46 fleets with 42 active today. Okay. Fair enough. The

Let's assume that we do have a choppy market back after a year. You guys have been very good at consolidating the market. Do you use that as an opportunity to prosecute more deals, or do you think that the story for you, for Profract, for the balance this year is just to integrate from costs and focus on cash flow? Just thoughts there.

So we're concentrating on our business as it is today and focusing on our balance sheet. But, you know, we have always been contrarians. We've always looked at down markets as opportunities, and we'll explore opportunities as they're presented. And our focus is to go in and evaluate them carefully and make sure that we don't put our balance sheet in a precarious position.

Okay. And the final one for me is just you're doing both the dual fuel upgrades as well as the electric upgrades. At this point, are you seeing a customer preference for one versus the other, or is it just very nuanced between people, just any trend there?

Yeah, I think that all comes down to the different regions and the infrastructure that exists. When you look at the dry gas areas where you've got higher pressure for your gathering lines, you've got better infrastructure to supply the gas, and so there's a lot more flexibility in how you approach each customer. There's a lot of excitement overall. I think the main theme is just displacing diesel. I think that's the single biggest area that an operator can look for for saving money on their completions. But when you look at some of the markets with associated gas, you've got lower pressure lines, and so you've got to have a solution that you can bring to the table. to make these platforms more available because, you know, the high-pressure infrastructure lines that you need to run these platforms isn't as readily available.

Fair enough. Thank you for including me and for taking the questions. Thank you.

Our next question comes from the line of Don Chris with Johnson Rice. Please proceed with your question.

Good morning, gentlemen. I wanted to touch a little bit on the sand side. Obviously, I appreciate the bridge that you have on the new capacity coming in, but can we assume that the legacy plants are going to be operating at similar margins and utilization?

You know, so when we look at these, the first thing that we do is we go in and we work carefully with any existing customers and We really like the free volumes that we have so that we can structure them the way that we see the market. And I think the historical financial performance of these assets are certainly not what we expect from them going forward. We've seen tremendous pull through. When you look at our financials, you only see part of the picture. So on the full bundle on existing fleets, we only have a third of our fleets that are fully bundled. And on those fleets that are fully bundled, when we're supplying the sand, you have a much higher profile of profitability at those fleets. Again, highlighting the full value chain, When you can get incredible utilization like our fleets have, you can get an incredible pull-through on your products that you're selling through, which would include the sand, logistics, and chemicals. So having high utilization and pulling those through on a fully bundled service offering is incredible. And with it being such a low percentage in Q4, And seeing that growing on a quarter-over-quarter basis, we think that the annualized EBITDA per fleet has potential to reach well over 50 million a fleet.

I appreciate the color there. And just one more from me, maybe for Lance. How do you see working capital progressing through the year? Obviously, there's been a pretty big build as you've done a bunch of acquisitions through 2022, and it'll probably build again in the first quarter. But do you see a release as we move through the balance of 23? Just thoughts around working capital from here.

Yeah, I mean, I think in the near term for the first quarter, I wouldn't expect a big impact. As you progress through the year, I think it's highly reliant on, obviously, the number of fleets, the pricing of our fleets, the efficiencies of our fleets. As we look to integrate materials into our fleets, that will be a use of working capital. And so I don't know that we would expect to see a significant release going further into the year.

But not as big a build as we saw in 22, correct?

Correct. Yeah, I mean, 22, you had fleet count, you had efficiency growth, you had pricing growth You had, you know, not on a percentage basis, but overall material integration, and you just had a lot of things happening in one year.

Okay. I appreciate the color. Thank you. I'll turn it back.

Yeah, one thing real quick on that. Whenever you've got a – the longer you work with an operator, the better the reconciliation process is and the smoother the invoicing is with each customer. And so – As we continue to establish new relationships and age those relationships appropriately, the reconciliation tightens up and significantly improves your working capital and the timing of payment.

That is all the time we have for questions. I'd like to turn the call back to management for closing remarks.

We thank everybody for a very successful 2022. We thank all of our stakeholders. Appreciate the questions on this call. We look forward to delivering an incredible 23 and showing what our business model is capable of. It's these types of environments where we see a little choppiness in the market where we hope to set ourselves apart and show exactly why we put a vertically integrated business together that captures as much of the value chain as possible. It gives us a very resilient business model and allows us to outperform on a relative basis and show that this is a full cycle business that doesn't just look good in the good times, but outperforms through the cycle. We appreciate everyone and hope that you have a great day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.