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. ProFrac's objective is simple. We are 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.