ProFrac Holding Corp.

Greetings and welcome to the Profact Holding Corporation third 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, Michael Messina, Director of Finance. Thank you. You may begin, sir.

Thank you, operator. Good morning, everyone. We appreciate you joining us for ProFrac Holding Corp's conference call and webcast to review our third 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 a high-level commentary on the financial highlights of the third quarter of 2023, 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 November 16th, 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, November 9th, 2023. And therefore, you're 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 future performance. Various risks, 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 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 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'd like to turn the call over to ProFrac Executive Chairman, Mr. Matt Wilkes.

Thanks, Michael, and good morning, everyone. 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 third quarter results were challenged, but we took the necessary actions to position Profract for future success. Despite these challenges, we generated $149 million in adjusted EBITDA, reduced our net debt by $123 million, and generated $73 million of free cash flow. As we grew through acquisitions and scaled up our stimulation segment, we maintained a commercial strategy that was focused on flexibility, which ultimately put ProFrac at a disadvantage as the industry softened. We have now adapted with a multi-pronged strategy suited for all customer types and have built a more dedicated business model with more through-cycle resiliency. We continue to operate with utilization and cost control in mind, further reducing our number of active fleets in the third quarter and believe the actions we have taken will position Profract for the fourth quarter and beyond. I am also encouraged to see the industry moderate utilization by prudently managing deployed horsepower. These actions give us a strong foundation for 2024 and a positive outlook to reactivate some of the fleets that we idled in the second half of 2023. Over the past 18 months, we have built ProFrac into the premier vertically integrated pressure pumping service provider in the market. With a robust platform including electric, dual fuel, and traditional diesel frac equipment complemented by our dominant market position in profits. We offer customers best in class, industry leading services. This has earned us the reputation as one of the safest and most efficient pressure pumping providers in the industry. Combined with our persistent cost control priorities across the organization, we are also focused on how we can best realize the full value of our assets. On October 2nd, we announced that we are evaluating strategic options meant to unlock the full value of our profit production segment, which operates through our wholly owned subsidiary, Alpine Silica. The first step of this process is to increase throughput and diversify the customer base of the sand mines. We are confident that we will have a significant amount of volume contracted with third-party customers in 2024. Our confidence stems from the fact that we have already received commitments for 52% of our capacity with third-party customers and are in final discussions with other independent customers that will leave us sold out in 2024. We see tremendous potential at Alpine, which should significantly improve profitability and facilitate a more stable earnings profile with higher cash conversion. The second step of this process is to explore and pursue asset-level financing. Positive conversations with lenders around this topic are currently underway, and we believe the risk profile of the profit production segment is very different than the stimulation services segment. This in turn opens the prop and segment up to a different lender base as well as credit requirements. We believe an asset level financing will simplify our capital structure and extend our current maturities. We anticipate being able to announce further details before year end. The third step of this process is to exploit the captive value at Alpine for our shareholders, which could take various forms, including an IPO of the prop and segment. Our objective here is to recapitalize the business, not to divest the business away from our control. We're actively evaluating the options and will take the best path forward to accomplish this objective for all stakeholders. Now I would like to discuss our vertical integration strategy. Our vertical integration strategy has always been part of our vision for ProFrac, which we believe provides a unique competitive advantage. We want to be the preferred pressure pumper in the industry, and we also want to provide materials to our customers because we believe the supply chain of fracked materials represents value that should be optimized and accretive for customers. That has not changed. We have already begun positioning Alpine Silica to operate as an independent entity. What I mean by that is if Alpine can sell sand at a higher price to a third party, then they will sell it to that third party. If ProFret can buy sand at a lower price or at a more optimal location, they will do so. This will ensure that we secure the best product for our customers. The goal of this strategy is to build a sustainable foundation of volumes from customers of our stimulation services segment, as well as third-party profit customers and competitors enabling Alpine to maximize utilization and reduce its cost per ton. We will continue to execute upon our strategic goals and maintain focus on our key priorities. That is to create long-term value for our stakeholders and provide best-in-class services to our customers. We believe the moves of the last year, this year, and our positioning into 2024 will enable us to accomplish our objectives. With that, I'll turn the call over to Lad.