ProFrac Holding Corp.

Ladies and gentlemen, greetings and welcome to the Profact Holding Corp 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 and 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. Please go ahead.

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 2024 results. With me today are Matt Wilkes, Executive Chairman, Ladd Wilkes, Chief Executive Officer, and Austin Harbour, Chief Financial Officer. Following my remarks, management will provide high-level commentary on the operational and financial highlights of the third quarter before opening the call up to your questions. A replay of today's call will be available by webcast on the company's website at pfholdingscorp.com, and a telephonic recording will be available until November 12, 2024. 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 5th, 2024, 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'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. A listener or reader is encouraged to read Profract'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's Executive Chairman, Mr. Matt Wilkes. Thank you, Michael, and good morning, everyone.

After my prepared remarks, Ladd will comment further on the performance of our subsidiaries, and Austin will walk through our financial performance. In the third quarter, ProFRAC delivered strong results with revenue of $575 million and adjusted EBITDA of $135 million. We continued our recent quarterly trend of setting new operating efficiency records and delivering leading performance for our customers amidst challenging market dynamics. As we have previously highlighted, ProTrac's leading position throughout the completion value chain enables us to deliver robust financial and operational performance through the cycle. We continue to execute on our commercial strategy to partner with operators that value integrated, highly efficient solutions at scale. Bofrac's third quarter performance is underpinned by our record-setting efficiency per active fleet, a testament to the quality of our people and their commitment to safety, efficiency, and leading customer service. In addition to consistent improvement in service quality at the wellhead, I'm also proud of the team's commitment to servicing, maintaining, and upgrading fleets. The company's internal R&D, manufacturing, and maintenance capabilities are an integral element of our strategy. Simply put, we are able to repair, service, and re-ploy fleets rapidly as the market ebbs and flows. Our internal research, design, and development capabilities provide a comprehensive platform to drive commercial innovation. Of note, we are pleased to report that we have successfully tested our newest generation of electric pumps, which was internally designed and developed. ProFrac is also testing a novel software platform providing unique insights into not only pumping performance, but also well performance during live completion operations. While this solution remains subject to further refinement, initial feedback from potential enhancements in operational and maintenance performance are promising. we expect to have more details to share in the future. We manage assets such that the next available fleet in our portfolio is positioned to deliver leading-edge performance while minimizing non-productive time. We are starting to witness equipment attrition across the industry and believe this trend will accelerate in the future. This is driven by lower relative equipment investment, increased hours per fleet and per component, and a lack of new entrants due to limited availability of capital We believe these characteristics are influencing current supply and demand dynamics and believe that attrition may impact efficiencies as incremental activity unfolds. Our equipment, as well as equipment across the industry, have and continue to pump more hours than ever before, resulting in an accelerated reinvestment cycle. At ProFrac, We expect this trend to continue and will prudently manage our portfolio of assets and capital allocation with a returns-focused mindset. Following a preliminary review of our assets, we have identified approximately 400,000 horsepower of legacy diesel burning frag pumps that we are proactively retiring because they do not meet our reinvestment thresholds. Concurrently, ProFrag has strategically allocated capital both to maintain and to improve our fleet. We have purposely reorganized our asset management program to ensure the quality of our ready lines. Our goal is for each incremental fleet to be the best fleet in our portfolio. Simply put, every fleet we deploy meets Profract's high standard of quality and reliability. The partnership model that we share with our customers and the integrated solutions that we provide are the core of our value proposition. As we have discussed previously, We believe our integrated model provides a unique competitive advantage to Profract throughout various market cycles. For example, as operators consolidate, they increasingly favor service companies that can provide integrated solutions at the pad. Given Profract's leading position throughout the completions value chain and our strategic ability to add scale in the most active basins in the U.S., we can take advantage of opportunities in a rapidly evolving marketplace. Looking forward, we expect to continue to invest in next-generation equipment that displaces diesel. We recognize that this technology is the future. Demand for our E-Fleets and our dual-fuel or dynamic gas blending assets that utilize natural gas as the primary fuel source remains strong, and we continue to make progress on fleet upgrades. Today, approximately three-quarters of our active fleets include E-Fleet or natural gas-capable equipment. Of note, our E-sweeps are all active in Q4 despite market headwinds. Our ability to provide customers with significant fuel savings, high reliability, and efficient operations have made our next generation assets highly sought after and a critical part of our service offerings. As we mentioned last quarter, we recognize there is a significant opportunity for Profract to play a meaningful role in power generation. There has been a surge in demand for power generation capabilities in response to grid constraints and failures, AI-driven computing power requirements, and broader industrial-scale electrification trends. As a result, we are making strategic investments around power generation and plan to be an active participant in the solution. As more fuel-efficient technologies become the standards, Our customers are increasingly requiring on-demand power generation at the wellhead and diversifying into power generation. It's a natural organic growth area. In property production, we saw improvement from the drop in July through Q3. However, markets continue to remain challenged. West Texas remains highly competitive. Additionally, our assets in the Amesville were negatively impacted by subdued drilling and completion activity in the region. We anticipate the Q4 results will be impacted by softening demand as we approach year-end. We are actively managing costs while maintaining our strategic position across our mines and anticipate a recovery in activity in 2025, particularly in West Texas and South Texas. Further, we have a unique scaled position in the Hainesville and are focused on increasing efficiencies to enhance profitability upon a potential recovery in activities. I'm proud of our team's execution and commitment to excellence despite a challenging market environment. In summary, we generated $575 million of revenues, $135 million of adjusted EBITDA, and $31 million of free cash flow despite a challenging market. We continue to fill new inbound requests for additional integrated fleet deployments with the highest demand for electric and Tier 4 dual fuel or DGB technologies. And as of today, Approximately three-quarters of active fleets utilize next-generation technology. We continue to invest in our industry-leading technologies that drive increased pump time and reduced non-productive time. We are proactively retiring 400,000 legacy diesel burning horsepower that does not meet our reinvestment thresholds. We have purposely reorganized our asset management program to ensure the quality of our ready lines, so that each incremental fleet meets our standards for quality and reliability. We successfully tested our internally designed and developed next generation e-pump. We achieved our third consecutive new quarterly record for efficiencies based on pump hours per active fleet, a testament to the leading edge execution by our employees in the field. We have positioned ProFrat to generate long-term value for our stakeholders by delivering the most efficient solutions through vertically integrated in-basin scaled offerings, leading edge service, and a relentless focus on free cash flow generation through the cycle. And with that, I'll turn the call over to Ladd.