ProFrac Holding Corp.

Greetings and welcome to the ProFrac Holding Corp second quarter earnings conference call. At this time, all participants are in 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 with Investor Relations. Thank you, Rick. You may begin.

Thank you, Operator, and good morning, everyone. We appreciate you joining us for ProFrac Holding Corp's conference call and webcast to review our second quarter 2023 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 second quarter of 2023, as well as provide 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 August 17, 2023. Thank you. 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, August 10, 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. The forward-looking statements reflect the current views of Profax management and are not guarantees of future 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 Profax Form 10-Q and the 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 and uncertainties and contingencies. The comments made today also include certain non-GAAP financial measures, as well as other adjusted figures to exclude the contributions of FLOTEC. Additional details and reconciliations to the most direct 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 Profact's Executive Chairman, Matt Wilkes. Matt?

Thanks, Rick, and good morning, everyone. Thanks for taking the time to join us on the call today. After my prepared remarks, Ladd will take a deeper dive into the performance of our subsidiaries, and Lance will provide additional insight into our financial performance. Our second quarter results were challenged as a result of customer consolidation, coordination with customer CapEx schedules, and the impacts of the recent banking crisis on private operators. Despite these external challenges, we generated $182.5 million in adjusted EBITDA, reduced our debt by $86 million, and generated $56 million of free cash flow. We have adjusted our cost structure to right-size our organization through the acceleration of acquisition synergies and headcount reductions. Most of these reductions will be reflected in our third quarter results. As we move through the second half of our year, we expect to see our mining assets grow sales and expand customer footprint. We're pleased to see improving industry fundamentals and disciplined behavior from our peers, which support a constructive outlook in the second half of 23. I want to take a few minutes to discuss how we think about ProFrac Holdings and how we view the industry in relation to our subsidiaries. The first thing I want to emphasize is that we are a holding company, and we are the premier vertically integrated energy services holding company, offering a modern suite of complementary services and technologies to the industry. While we started out as a FRAC company, we have expanded and transformed into three major segments. stimulation services, prop and production, and manufacturing. The fastest growing of these segments has been our prop and segment, which is the largest in-basin prop and producer in the country. We believe this business is underappreciated, both in terms of potential and in terms of value it contributes to the ProFract platform, as well as ACDC stakeholders. We have been focused on diversifying the customer base and signing contracts for the profit production division. In Q2, we were pleased that third-party sales reached 70% of revenue. We continue to pursue additional contracts that increase diversification and improve stability, and we expect to grow the customer base and total production at lower cost levels. Lastly, we believe the currently proposed regulation by the Department of Interior and related to the DSL would have a minimal impact on our profit production. This is because we believe that our West Texas assets are well outside of the high-risk habitat zones. Our goal is to provide more certainty and less volatility to our profit division, while boosting our utilization to a level that will optimize profitability. This segment has the potential to generate two to three times the EBITDA that we had in the second quarter. We highlight this segment to illustrate the incredibly high cash conversions of prop and sales, and to demonstrate the stability that a lean multi-mine company can achieve. In terms of the overall market environment, we are optimistic and encouraged. We're optimistic because we're seeing pricing remain constructive. While lower asset utilization impacted second quarter earnings, we are confident that pricing remains at constructive levels and market fundamentals continue to be supportive for a stronger second half of the year. We're encouraged because we see multiple players, idle capacity, and remain steady on pricing. We see a number of smaller players that are aggressively bidding to spot work, but we view this as isolated and unsustainable. The number of fleets idled in the last six months are considerably higher than the number of staffed fleets that could go back to work in a responsive manner. In addition, natural gas pricing is constructive. which we believe will provide a built-in catalyst as we look forward to the remainder of 2023. As we approach the back half of 23, we believe we will see operators ramp activity as they prepare for their 2024 programs. I remain proud of what this team continues to accomplish and believe we are well-positioned to capitalize on increasing industry activity. Our fundamental strategies haven't changed, and neither have our primary goals for ProFrac. We continue to execute on our goals. Our pumping efficiencies are best in class. We offer a portfolio of Tier 4 dual fuel and electric fleets capable of simultaneously delivering cost savings and emissions reductions for our customers, helping to further separate us from our peers. We are focused on maximizing utilization and profitability and continue to adapt our cost structure to further improve our cash flow. As always, Industry discipline remains a welcome narrative. For Profract, we continue to believe that our disciplined approach will produce meaningful shareholder value. With that, I'll turn the call over to Ladd.