Q2 2024 ProFrac Holding Corp Earnings Call

August 8, 2024

Ladies and gentlemen, thank you for your patience. Please remain on the line. Your conference will begin momentarily. Again, we do appreciate your patience. Please remain on the line. Your conference will begin shortly. Thank you.

Operator: The conference will begin momentarily. Again, we do appreciate your patience. Please remain on the line. Your conference will begin shortly. Thank you.

Operator: Again, we do appreciate your patience. Please remain on the line. Your conference will begin shortly. Thank you.

Operator: [music] Good day, ladies and gentlemen, and welcome to the Profrac Holding Corp. Second Quarter Earnings Conference Call. All lines have been placed in a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Michael Messina, Director of Finance. Sir, the floor is yours.

Unknown Executive: Your conference will begin momentarily. Again, we do appreciate your patience.

Unknown Executive: Please remain welcome to the Profrac Holding Corps' second quarter earnings conference call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator.

Michael Messina: Thank you, Operator. Good morning, everyone.

Operator: [music] Good day, ladies and gentlemen, and welcome to the Profac Holding Corp. Second Quarter Earnings Conference Call. All lines have been placed in a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Michael Messina, Director of Finance. Sir, the floor is yours.

Speaker Change: Good day, ladies and gentlemen, and welcome to the Profac Holding Corp. Second Quarter Earnings Conference Call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation.

Operator: If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Michael Messina, Director of Finance. Sir, the floor is yours.

Michael Messina: At this time, it is my pleasure to turn the floor over to your host, Michael Messina, Director of Finance. Sir, the floor is yours.

Michael Messina: Thank you, Operator. Good morning, everyone.

Michael Messina: We appreciate you joining us for Profrac Holding Corp.'s conference call and webcast to review our second quarter 2024 results. With me today are Matt Wilks, Executive Chairman; Ladd Wilks, 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 second quarter before opening the call 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 15, 2024. More information on how to access these replay features is included in the company's earnings release.

Unknown Executive: Thank you, operator.

Matthew Wilks: Good morning, everyone. We appreciate you joining us for ProFrac Holding Corp's conference call and webcast to review our second quarter 2024 results. With me today are Matt Wilks, Executive Chairman, Ladd Wilks, 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 second quarter 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 15, 2024. More information on how to access these replay features is included in the company's earnings release.

Michael Messina: Thank you, Operator. Good morning, everyone. We appreciate you joining us for Profrac Holding Corp.'s conference call and webcast to review our second quarter 2024 results.

Michael Messina: We appreciate you joining us for Profrac Holding Corp.'s conference call and webcast to review our second quarter 2024 results. With me today are Matt Wilks, Executive Chairman; Ladd Wilks, Chief Executive Officer; and Austin Harper, Chief Financial Officer. 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 15, 2024. Please note that information reported on this call applies only as of today, August 8, 2024.

Speaker Change: With me today are Matt Wilks, Executive Chairman, Ladd Wilks, Chief Executive Officer, and Austin Harbour, Chief Financial Officer.

Speaker Change: Following my remarks, management will provide high-level commentary on the operational and financial highlights of the second quarter before opening the call up to your questions.

Michael Messina: 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 15, 2024.

Michael Messina: More information on how to access these replay features is included in the company's earnings release.

Matthew Wilks: Please note that information reported on this call speaks only as of today, August 8, 2024, and therefore your advice 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 ProFrac's management and are not guarantees of future performance. They are for achievements to differ materially from those expressed in management's forward-looking statements.

Michael Messina: 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.

Michael Messina: Please note that information reported on this call speaks only as of today, August 8, 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 Profrac's management and are not guarantees of future performance.

Michael Messina: In the second quarter, we continued to set operating efficiency records delivering strong performance for our customers. However, we successfully executed our commercial strategy to partner with customers that value integrated solutions, which has witnessed material operator consolidation post COVID and is the leading U.S. land market for unconventional completions activity and spending. In the second quarter, we generated $136 million of adjusted EBITDA on $579 million of revenue. Of note, we generated $74 million in free cash flow in the second quarter.

Michael Messina: 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 reader or listener 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.

Speaker Change: 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.

Speaker Change: These forward-looking statements reflect the current views of Profrac's management and are not guarantees of future performance.

Speaker Change: Various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in management's forward-looking statements.

Matthew Wilks: 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 Flow Tech. 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.

Speaker Change: 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.

Michael Messina: The comments today also include certain non-GAAP financial measures, as well as other adjusted figures to exclude the contribution of Flowtech.

Michael Messina: 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. Now, I would like to turn the call over to Profrac's Executive Chairman, Mr. Matt Wilks.

Michael Messina: 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.

Matthew Wilks: And now, I would like to turn the call over to ProFrac's Executive Chairman, Mr. Matt Wilks.

Michael Messina: And now, I would like to turn the call over to Profrac's Executive Chairman, Mr. Matt Wilks.

Matthew Wilks: Thank you, Michael.

Matt Wilks: Thank you, Michael. And good morning, everyone.

Matthew Wilks: And good morning, everyone. After my prepared remarks, Lab will comment further on the performance of our subsidiaries, and Austin will walk through our financial performance. In the second quarter, we continued to set operating efficiency records, delivering strong performance for our customers. We were able to achieve this performance despite the role of multiple fleets to new customers during the quarter, resulting in additional calendar of whites based. Overall, the market for our services has been challenged by operators having reduced drilling and completion activity, particularly in natural gas regions. However, we successfully executed our commercial strategy to partner with customers that value integrated solutions.

Michael Messina: 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 second quarter, we continued to set operating efficiency records, delivering strong performance for our customers.

Matt Wilks: After my prepared remarks, Ladd will comment further on the performance of our subsidiaries, and Austin will walk through our financial performance. In the second quarter, we continued to set operating efficiency records, delivering strong performance for our customers. We were able to achieve this performance despite the rollover of multiple fleets to new customers during the quarter, resulting in an additional calendar of white space. Overall, the market for our services has been challenged by operators having reduced drilling and completion activity, particularly in natural gas regions.

Michael Messina: We were able to achieve this performance despite the rollover of multiple fleets to new customers during the quarter, resulting in an additional calendar of white space.

Michael Messina: Overall, the market for our services has been challenged by operators having reduced drilling and completion activity, particularly in natural gas regions.

Matt Wilks: However, we successfully executed our commercial strategy to partner with customers that value integrated solutions. As we've conveyed in prior quarters, we firmly believe that consolidation by upstream operators will benefit Profrac. Larger operators driving consolidation prefer to collaborate with service companies that deliver efficiency at scale. Given Profrac's leading position throughout the completions value chain, we are able to take advantage of opportunities in a rapidly evolving marketplace. For example, the majority of our customers have completed a transaction in the last two years.

Michael Messina: however we successfully execute our commercial strategy to partner with customers that value integrated solutions

Matthew Wilks: As we've conveyed in prior quarters, we firmly believe that consolidation by upstream operators will benefit ProFrac. Larger operators driving consolidation prefer to collaborate with service companies that deliver efficiency at scale. Given Profrac's leading position throughout the completion's value chain, we were able to take advantage of opportunities in a rapidly evolving marketplace. For example, the majority of our customers have completed a transaction in the last two years. Additionally, we successfully increased market share in our largest operating region, West Texas, which has witnessed material operator consolidation post-COVID and is the leading U.S. land market for unconventional completions activity and spending.

Michael Messina: As we've conveyed in prior quarters, we firmly believe that consolidation by upstream operators will benefit Profrac.

Michael Messina: Larger operators driving consolidation prefer to collaborate with service companies that deliver efficiency at scale.

Michael Messina: Given Profrac's leading position throughout the completions value chain, we are able to take advantage of opportunities in a rapidly evolving marketplace. For example, the majority of our customers have completed a transaction in the last two years.

Matt Wilks: Additionally, we successfully increased market share in our largest operating region, West Texas, which has witnessed material operator consolidation post COVID and is the leading U.S. land market for unconventional completions activity and spending. In the second quarter, we generated $136 million of adjusted EBITDA on $579 million of revenue.

Michael Messina: Additionally, we successfully increased market share in our largest operating region, West Texas, which has witnessed material operator consolidation post-COVID and is the leading U.S. land market for unconventional completions activity and spending.

Matthew Wilks: In the second quarter, we generated 136 million of adjusted EBITDA on 579 million of revenue. Of note, we generated 74 million in free cash flow in the second quarter. These results illustrate that, at scale, Profrac is built to navigate market headwinds while generating free cash flow. Furthermore, our recent efforts to align with customers that prefer integrated offerings should enable ProFrac to continue to take advantage of opportunities through the cycle. Our performance in the second quarter is underpinned by a record-setting efficiency per active fleet – a direct result of our team's successful execution in the field.

Michael Messina: In the second quarter, we generated $136 million of adjusted EBITDA on $579 million of revenue.

Matt Wilks: Of note, we generated $74 million in free cash flow in the second quarter. These results illustrate that at scale, Profrac is built to navigate market headwinds while generating free cash flow. Furthermore, our recent efforts to align with customers that prefer integrated offerings should enable Profrac to continue to take advantage of opportunities through the cycle. Our performance in the second quarter is underpinned by record-setting efficiency per active fleet, a direct result of our team's successful execution in the field. Additionally, Profrac's internal manufacturing and service capabilities enable us to rapidly repair, maintain, upgrade, and redeploy fleets. We believe that in-basin scale, particularly in the most active basins, is a critical differentiating factor for Profrac.

Michael Messina: Of note, we generated $74 million in free cash flow in the second quarter. These results illustrate that at scale, Profrac is built to navigate market headwinds while generating free cash flow.

Michael Messina: These results illustrate that at scale, Profrac is built to navigate market headwinds while generating free cash flow. Furthermore, our recent efforts to align with customers that prefer integrated offerings should enable us to continue to take advantage of opportunities through the cycle. Our performance in the second quarter is underpinned by record-setting efficiency per active fleet, a direct result of our team's successful execution in the field. Additionally, Profrac's internal manufacturing and service capabilities enable us to rapidly repair, maintain, upgrade, and redeploy fleets. We believe that in-basin scale, particularly in the most active basins, is a critical differentiating factor for Profrac.

Michael Messina: Furthermore, our recent efforts to align with customers that prefer integrated offerings should enable Profrac to continue to take advantage of opportunities through the cycle.

Michael Messina: Our performance in the second quarter is underpinned by record-setting efficiency per active fleet.

Michael Messina: a direct result of our team's successful execution in the field. Additionally, Profrac's internal manufacturing and service capabilities enable us to rapidly repair, maintain, upgrade, and redeploy fleets.

Matthew Wilks: Additionally, Profrac's internal manufacturing and service capabilities enable us to rapidly repair, maintain, upgrade, and redeploy fleets. We believe that an in-basin scale, particularly in the most active basins, is a critical differentiating factor for Profrac. We not only continue to invest in oil-weighted regions, but also purposely maintained our positions in gas-weighted markets. This strategy enables us to strengthen our customer relationships with operators based on a track record of delivering service quality and operational performance. Further, we believe we will benefit from increased levels of activity as a recovery in natural gas basins and material losses.

Michael Messina: We believe that in-basin scale, particularly in the most active basins, is a critical differentiating factor for Profrac. We not only continue to invest in oil-weighted regions, but also purposely maintained our positions in gas-weighted markets.

Michael Messina: We have not only continued to invest in oil-weighted regions but have also purposely maintained our positions in gas-weighted markets. This strategy enables us to strengthen our customer relationships with operators based on a track record of delivering service quality and operational performance. Further, we believe we will benefit from increased levels of activity as a recovery in natural gas basins materializes. In mid-June, we executed on an opportunity to strategically add scale at an attractive entry point through the acquisition of Advanced Stimulation Technologies, or AST. Importantly, ASD enhances Profrac's earnings profile and improves our market position in the most active region in the lower 48. AST's core values of best-in-class service and efficiency align extremely well with Profrac's culture.

Matt Wilks: We have not only continued to invest in oil-weighted regions but have also purposely maintained our positions in gas-weighted markets. This strategy enables us to strengthen our customer relationships with operators based on a track record of delivering service quality and operational performance. Further, we believe we will benefit from increased levels of activity as a recovery in natural gas basins materializes. In mid-June, we executed on an opportunity to strategically add scale at an attractive entry point through the acquisition of Advanced Stimulation Technologies, or AST. Importantly, ASD enhances Profrac's earnings profile and improves our market position in the most active region in the lower 48. AST's core values of best-in-class service and efficiency align extremely well with Profrac's culture.

Michael Messina: This strategy enables us to strengthen our customer relationships with operators based on a track record of delivering service quality and operational performance.

Michael Messina: Further, we believe we will benefit from increased levels of activity as a recovery in natural gas basins materializes.

Matthew Wilks: In mid-June, we executed on an opportunity to strategically add scale at an attractive entry point through the acquisition of Advanced Stimulation Technologies, or AST. Importantly, AST enhances Profrac's earnings profile and improves our market position in the most active region in the lower 48. AST's core values of best-in-class service and efficiency align extremely well with ProFrac's culture. Looking forward, we will continue to invest in next-generation equipment that enables diesel substitution, utilizing natural gas as the primary fuel source. Demand for our e-fleets and our dual fuel or dynamic gas blending assets remains strong, and we continue to make progress on fleet deployments.

Michael Messina: In mid-June, we executed on an opportunity to strategically add scale at an attractive entry point through the acquisition of Advanced Stimulation Technologies, or AST.

Michael Messina: Importantly, AST enhances Profrac's earnings profile and improves our market position in the most active region in the lower 48. AST's core values of best-in-class service and efficiency align extremely well with Profrac's culture.

Matt Wilks: Looking forward, we will continue to invest in next-generation equipment that enables diesel substitution, utilizing natural gas as the primary fuel source. Demand for our E-fleets and our dual fuel or dynamic gas blending assets remains strong, and we continue to make progress on fleet deployment. Today, 70% of our active fleets include E-fleet or natural gas-capable equipment. Our ability to provide customers with significant fuel savings, high reliability, and efficient operations has made our next generation assets highly sought after and a critical part of our service offering, in line with our vertically integrated customer-centric strategy.

Michael Messina: Looking forward, we will continue to invest in next-generation equipment that enables diesel substitution, utilizing natural gas as the primary fuel source. Today, 70% of our active fleets include E-fleet or natural gas capable equipment. We are actively evaluating alternatives related to power generation. As of today, approximately 70% of our active fleets utilize next-generation technology.

Michael Messina: Looking forward, we will continue to invest in next-generation equipment that enables diesel substitution, utilizing natural gas as the primary fuel source.

Michael Messina: Demand for our E-fleets and our dual fuel or dynamic gas blending assets remains strong and we continue to make progress on fleet deployments. Today, 70% of our active fleets include E-fleet or natural gas capable equipment.

Matthew Wilks: Today, 70% of our active fleets include e-fleet or natural gas capable equipment. 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.

Michael Messina: 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.

Matthew Wilks: In line with our vertically integrated customer-centric strategy, we are actively evaluating alternatives related to power generation. There has been a significant surge in demand for power generation across a number of end markets, driven at least in part by grid constraints and failures, AI-driven computing power requirements, and broader industrial scale electrification trends. In particular, our customers are increasingly requiring solutions that enabled diesel substitution coupled with on-demand power generation at the well-hit. As a leader in next-generation e-fleets and diesel substitution solutions, we are well positioned to organically diversify to provide power generation.

Michael Messina: In line with our vertically-integrated, customer-centric strategy, we are actively evaluating alternatives related to power generation.

Matt Wilks: We are actively evaluating alternatives related to power generation. There has been a significant surge in demand for power generation across a number of end markets, driven at least in part by grid constraints and failures, AI-driven computing power requirements, and broader industrial-scale electrification trends.

Michael Messina: There has been a significant surge in demand for power generation across a number of end markets, driven at least in part by grid constraints and failures, AI-driven computing power requirements, and broader industrial-scale electrification trends.

Matt Wilks: In particular... Our customers are increasingly requiring solutions that enable diesel substitution coupled with on-demand power generation at the wellhead. As a leader in next-generation E-fleets and diesel substitution solutions, we are well-positioned to organically diversify to provide power generation. Turning to Alpine.

Michael Messina: In particular, our customers are increasingly requiring solutions that enable diesel substitution coupled with on-demand power generation at the wellhead.

Michael Messina: As a leader in next-generation E-fleets and diesel substitution solutions, we are well-positioned to organically diversify to provide power generation.

Matthew Wilks: Turning to Alpine, weakness in natural gas regions and general activity softness impacted our results. Although volumes in pricing were negatively impacted during the second quarter and into the third quarter, we are encouraged by the recent uptick and commercial opportunities and potential additional volumes that could materialize as we move through Q3. As a company, we continue to make progress on our priorities, and I'm proud of our team's execution and commitment to excellence in summer.

Matt Wilks: Weakness in natural gas regions and general activity softness impacted our results. Although volumes and pricing were negatively impacted during the second quarter and into the third quarter, we are encouraged by the recent uptick in commercial opportunities and potential additional volumes that could materialize as we move through Q3. As a company, we continue to make progress on our priorities, and I'm proud of our team's execution and commitment to excellence. In summary, we continue to receive new inbound requests for additional integrated fleet deployments with the highest demand for electric and Tier 4 dual fuel or DGB technology.

Michael Messina: Turning to alpine, weakness in natural gas regions and general activity softness impacted our results.

Michael Messina: Although volumes and pricing were negatively impacted during the second quarter and into the third quarter, we are encouraged by the recent uptick in commercial opportunities and potential additional volumes that could materialize as we move through Q3.

Michael Messina: As a company, we continue to make progress on our priorities, and I'm proud of our team's execution and commitment to excellence. In summary,

Ladd Wilks: Secretary. We continue to field new and bound requests for additional integrated fleet deployments, with the highest demand for electric and Tier 4 dual fuel or DGB technologies. Neds of today approximately 70% of our active fleets utilize the next generation technology. We achieve the new record for efficiencies based on pump hours per active fleet, a testament to best in class execution by our employees in the field and our repair and maintenance and manufacturing capabilities. Although we witnessed a slight decrease in overall utilization during the second quarter, we expect continued improvement in efficiencies as we progress through the third quarter.

Michael Messina: We continue to field new inbound requests for additional integrated fleet deployments with the highest demand for electric and Tier 4 dual-fuel, or DGB, technologies. As of today, approximately 70% of our active fleets utilize next-generation technology.

Matt Wilks: As of today, approximately 70% of our active fleet utilizes next-generation technology. We achieved a new record for efficiencies based on pump hours per active fleet, a testament to best-in-class execution by our employees in the field and our repair and maintenance and manufacturing capabilities. Although we witnessed a slight decrease in overall utilization during the second quarter, we expect continued improvement in efficiencies as we progress through the third quarter. Strengthened by our vertically integrated model, we generated $74 million of free cash flow despite market headwinds.

Michael Messina: We achieved a new record for efficiencies based on pump hours per active fleet, a testament to best-in-class execution by our employees in the field and in our repair and maintenance and manufacturing capabilities.

Michael Messina: Although we witnessed a slight decrease in overall utilization during the second quarter, we expect continued improvement in efficiencies as we progress through the third quarter.

Ladd Wilks: Strengthened bi overtically integrated model, we generated 74 million of free cash flow despite market headwinds. We increased in-basement scale in the most active region for completions in the lower 48, West Texas, through both organic and in-organic investments. We improved alignment with operators driving consolidation. The majority of our customers have executed M&A. We have positioned Profrac to deliver long-term value for our stakeholders by delivering the most efficient solutions through vertically integrated in-basement scaled offerings, best-in-class service, and the relentless focus on free cash flow generation through the cycle.

Michael Messina: Strengthened by our vertically integrated model, we generated $74 million of free cash flow despite market headwinds.

Matt Wilks: We increased in-basin scale in the most active region for completions in the lower 48, West Texas, through both organic and inorganic investment. Additionally, we improved alignment with operators driving consolidation. The majority of our customers have executed M&A. We've positioned Profrac to deliver long-term value for our stakeholders by delivering the most efficient solutions through vertically integrated, in-basin, scaled offerings, best-in-class service, and the relentless focus on free cash flow generation through the cycle. With that, I'll turn the call over to Ladd.

Michael Messina: We increased in-basin scale in the most active region for completions in the Lower 48, West Texas, through both organic and inorganic investments.

Michael Messina: We improved alignment with operators driving consolidation. The majority of our customers have executed M&A.

Michael Messina: We've positioned Profrac to deliver long-term value for our stakeholders by delivering the most efficient solutions through vertically integrated in-basin scaled offerings, best-in-class service, and the relentless focus on free cashflow generation through the cycle.

Ladd Wilks: With that, I'll turn the call over to Lad.

Ladd Wilks: Thanks, Matt.

Michael Messina: With that, I'll turn the call over to Ladd.

Ladd Wilks: I'll begin with an overview of our performance in each segment, starting with pressure pumping. On proud report, we achieved another record quarter for efficiency despite a challenging market, making this once again the most efficient quarter in ProFrac's history. This is the second consecutive quarter in which Profrac achieved records for pumping hours, pumping hours per fleet, and pumping hours per day for active fleets. Profrac's best performing fleets exceeded 600 hours per month. Our ability to provide best-in-class service is a direct result of the operational improvements we've made internally and the emphasis we placed on our commercial strategy.

Ladd Wilks: I'll begin with an overview of our performance in each segment, starting with pressure pumping. I'm proud to report we achieved another record quarter for efficiency, despite a challenging market, making this once again the most efficient quarter in Profrac's history. This is the second consecutive quarter in which Profrac achieved records for pumping hours, pumping hours per fleet, and pumping hours per day for active fleets. Profrac's best performing fleets exceeded 600 hours per month. Our ability to provide best-in-class service is a direct result of the operational improvements we've made internally and the emphasis we've placed on our commercial strategy. In particular,

Matt: Thanks, Matt.

Speaker Change: I'll begin with an overview of our performance in each segment, starting with pressure pumping.

Michael Messina: I'm proud to report we achieved another record quarter for efficiency despite a challenging market, making this once again the most efficient quarter in Profrac's history.

Michael Messina: This is the second consecutive quarter in which Profrac achieved records for pumping hours, pumping hours per fleet, and pumping hours per day for its active fleet.

Michael Messina: This is the second consecutive quarter in which Profrac achieved records for pumping hours, pumping hours per fleet, and pumping hours per day for active fleets.

Michael Messina: Profrac's best-performing fleets exceeded 600 hours per month. Our ability to provide best-in-class service is a direct result of the operational improvements we've made internally and the emphasis we placed on our commercial strategy.

Ladd Wilks: In particular, we are strategically invested both organically and inorganically to expand in basin scale in West Texas, our largest region and the most active region for completions in U.S. land. Due to weakness in natural gas prices and the completion of several programs early in the quarter, we experienced an average active fleet count that was relatively in line with the first quarter and lower than our expectations. These delays were felt across the industry as operators re-evaluated planned activity and spending, as evidenced by the 6% decline in the horizontal rig count during the quarter. Our profit segment was also impacted by weaker than anticipated natural gas-related activity.

Ladd Wilks: We are strategically investing both organically and inorganically to expand at basin scale in West Texas, our largest region and the most active region for completions in U.S. land. Due to weakness in natural gas prices and the completion of several programs early in the quarter, we experienced an average active leak count that was relatively in line with the first quarter and lower than our expectations. These delays were felt across the industry as operators re-evaluated planned activity and spending, as evidenced by the 6% decline in the horizontal rig count during the quarter.

Michael Messina: In particular, we are strategically invested both organically and inorganically to expand in-basin scale in West Texas, our largest region and the most active region for completions in U.S. land.

Michael Messina: Due to weakness in natural gas prices and the completion of several programs early in the quarter, we experienced an average active leak count that was relatively in line with the first quarter and lower than our expectations.

Michael Messina: These delays were felt across the industry as operators re-evaluated planned activity and spending, as evidenced by the 6% decline in the horizontal rig count during the quarter.

Ladd Wilks: Our profit segment was also impacted by weaker than anticipated natural gas related activity. However, we took action to manage our costs and work to replace volumes with spot opportunities. Prolonged headwinds in the natural gas regions have continued into early Q3, but we believe that volumes have now troughed and anticipate a recovery as we progress through the quarter.

Michael Messina: Our profit segment was also impacted by weaker than anticipated natural gas related activity.

Ladd Wilks: However, we took action to manage our costs and work to replace volumes with spot opportunities. Prolonged headwinds in natural gas regions have continued into early Q3, but we believe that volumes have now troughed and anticipated recovery as we progress through the quarter.

Michael Messina: However, we took action to manage our costs and work to replace volumes with spot opportunities.

Michael Messina: Prolonged headwinds in natural gas regions have continued into early Q3, but we believe that volumes have now troughed and anticipate a recovery as we progress through the quarter. In recent months, we have implemented a number of initiatives aimed at improving utilization and profitability of our mines. I want to thank our outstanding team for their hard work, dedication, and commitment to safety. We're excited to have Austin join the team at Profrac. His extensive knowledge of the industry and financial expertise have strengthened Profrac's team.

Ladd Wilks: In recent months, we have implemented a number of initiatives aimed at improving utilization and profitability of our minds. These include idling our mind in Maryville, Louisiana, making targeted reductions in headcount and continuing to deploy automation across our minds with a goal of increasing operating leverage. In summary, Alpine is positioned to produce higher throughput, higher utilization, and lower cost per ton as market fundamentals improve. I'd like to reiterate that, at scale, we believe we have the lowest cost in the industry. We have a bespoke vertically integrated platform that benefits from higher absorption as we increase activity.

Ladd Wilks: In recent months, we have implemented a number of initiatives aimed at improving utilization and profitability of our mines. These include idleing our mine in Maryville, Louisiana, making targeted reductions in head count, and continuing to deploy automation across our mines with a goal of increasing operating leverage. In summary, Alpine is positioned to produce higher throughput, higher utilization, and lower cost per ton as market fundamentals improve. I'd like to reiterate that, at scale, we believe we have the lowest cost in the industry.

Michael Messina: In recent months, we have implemented a number of initiatives aimed at improving utilization and profitability of our mines.

Michael Messina: These include idling our mine in Maryville, Louisiana, making targeted reductions in head count, and continuing to deploy automation across our mines with a goal of increasing operating leverage.

Michael Messina: In summary, Alpine is positioned to produce higher throughput, higher utilization, and lower cost per ton as market fundamentals improve.

Michael Messina: I'd like to reiterate that at scale we believe we have the lowest cost in the industry. We have a bespoke vertically integrated platform that benefits from higher absorption as we increase activity.

Ladd Wilks: We have a bespoke vertically integrated platform that benefits from higher absorption as we increase activity. Leveraging in-basin scale and integrated offerings coupled with best-in-class service enables us to drive higher operating leverage and partner with operators to deliver efficiencies while generating free cash flow. This is precisely what Profrac is built for.

Ladd Wilks: Leveraging in base and scale and integrated offerings coupled with best in class service enables us to drive higher operating leverage and to partner with operators to deliver efficiencies while generating free cash flow. This is precisely what ProFrac is built for.

Michael Messina: Leveraging in-basin scale and integrated offerings coupled with best-in-class service enabled us to drive higher operating leverage and to partner with operators to deliver efficiencies while generating free cash flow.

Austin: This is precisely what ProFrac is built for.

Ladd Wilks: I want to thank our outstanding team for their hard work, dedication, and commitment to safety. We have the best team in the industry, and their focus on executing our differentiated strategy makes it possible for Profrac to succeed every day. I'll now hand the call over to our new CFO, Austin Harbour, to cover financial results in more detail. We're excited to have Austin join the team at Profrac. His extensive knowledge of the industry and financial expertise have strengthened Profrac's team. We look forward to his contributions as we execute our strategy and capitalize on future opportunities. Austin, please take it away.

Speaker Change: i want to thank our outstanding team for their hard work dedication and commitment to safety we have the best team in the industry and they're focused on executing our differentiated strategy makes it possible for proherag to succeed every day

Ladd Wilks: I'll now hand the call over to our new CFO, Austin Harbour, to cover financial results in more detail. We're excited to have Austin join the team at ProFrac. His extensive knowledge of the industry and financial expertise have strengthened ProFrac's team. We look forward to his contributions as we execute our strategy and capitalize on future opportunities.

Austin Harbor: I'll now hand the call over to our new CFO , Austin Harbor, to cover financial results in more detail.

Michael Messina: We're excited to have Austin join the team at Profrac. His extensive knowledge of the industry and financial expertise have strengthened Profrac's team.

Michael Messina: We look forward to his contributions as we execute our strategy and capitalize on future opportunities. Austin, take it away.

Austin Harbour: Austin, take it away.

Austin Harbour: Thank you for the kind words, Ladd. It's an honor to join the team.

Austin Harbour: Thank you for the con words, lad.

Austin Harbour: It's an honor to join the team. I believe the potential for value creation is significant at ProFrac. I look forward to contributing to the team while maximizing value for stakeholders. With respect to our second quarter results, revenues were flat sequentially at $579 million. We generated $136 million of adjusted EBITDA with an adjusted EBITDA margin of 23%. Second quarter adjusted EBITDA represents a 15% decline relative to the first quarter. Margins were negatively impacted by a decrease in average active fleets, weaker pricing, and lower relative cost absorption. Although adjusted EBITDA declined, Profrac generated free cash flow of $74 million, demonstrating our ability to successfully navigate ebbs and flows and activity.

Austin: thank you for the conwords lad it's an honor to join the team i believe that potential for value creation is significant at proat i look forward to contributing to the team while maximizing value for stakeholders

Austin Harbour: I believe the potential for value creation is significant at Profrac, and I look forward to contributing to the team while maximizing value for stakeholders. With respect to our second quarter results, revenues were flat sequentially at $579 million. We generated $136 million of adjusted EBITDA with an adjusted EBITDA margin of 23%. Second quarter adjusted EBITDA represents a 15% decline relative to the first quarter. Margins were negatively impacted by a decrease in average active fleets, weaker pricing, and lower relative cost absorption.

Speaker Change: with respect to our second quarter results revenues were flat sequentially at fivehundred and seventy nine million we generated onehundred thirty six million of adjusted ebitda with an adjusted ebitda margin of twenty three percent

Michael Messina: Second quarter adjusted EBITDA represents a 15% decline relative to the first quarter. Margins were negatively impacted by a decrease in average active fleets, weaker pricing, and lower relative cost absorption. Although Adjusted EBITDA declined, Profrac generated free cash flow of $74 million, demonstrating our ability to successfully navigate ebbs and flows and activity. Average active fleet count and pricing on equipment and materials witnessed marginal decreases versus the first quarter due to intra-quarter rollover of customers and increased white space.

Austin Harbour: Although Adjusted EBITDA declined, Profrac generated free cash flow of $74 million, demonstrating our ability to successfully navigate ebbs and flows and activity. We utilize cash to invest in our fleet, particularly next generation technologies, sand mine improvements, strategic acquisitions, and for debt service obligations.

Michael Messina: Although Adjusted EBITDA declined, Profrac generated free cash flow of $74 million, demonstrating our ability to successfully navigate ebbs and flows and activity.

Austin Harbour: We utilized cash to invest in our fleet, particularly next generation technologies, sandmined improvements, strategic acquisitions, and for debt service obligations. Turning to our segments, simulation services revenues were $506 million and the second quarter in line with the first quarter. Average active fleet count and pricing on equipment and materials witnessed marginal decreases versus the first quarter due to intra-quarter rollover of customers and increased white space. Adjusted EBITDA was $107 million for the second quarter, a decline of approximately 14% versus Q1. Margins declined by approximately 300 basis points as prudent cost management partially offset the impact of reduced pricing and activity.

Michael Messina: We utilize cash to invest in our fleet, particularly next generation technologies, sand mine improvements, strategic acquisitions, and for debt service obligations.

Austin Harbour: Turning to our segments, Stimulation Services revenues were $506 million in the second quarter, in line with the first quarter. Average active fleet count and pricing on equipment and materials witnessed marginal decreases versus the first quarter due to intra-quarter rollover of customers and increased white space. Adjusted EBITDA was $107 million for the second quarter, a decline of approximately 14% versus Q1. Margin declined by approximately 300 basis points as prudent cost management partially offset the impact of reduced pricing and activity.

Michael Messina: Turning to our segments, Stimulation Services revenues were $506 million in the second quarter, in line with the first quarter. Average active fleet count and pricing on equipment and materials witnessed marginal decreases versus the first quarter due to intra-quarter rollover of customers and increased white space.

Michael Messina: Adjusted EBITDA was $107 million for the second quarter, a decline of approximately 14% versus Q1. Despite the sequential decline in stimulation services results, our commercial and operational strategies, coupled with our cost structure, enabled us to generate free cash flow. Of note, we achieved mid-teens EBITDA per fleet and allocated capital to maintain and upgrade our fleet. However, revenue was negatively impacted by a decrease in pricing coupled with a minimal reduction in volume. Activity in natural gas basins remains subdued, and the market in West Texas remains highly competitive.

Michael Messina: Adjusted EBITDA was $107 million for the second quarter, a decline of approximately 14% versus Q1.

Michael Messina: Margins declined by approximately 300 basis points as prudent cost management partially offset the impact of reduced pricing and activity.

Austin Harbour: This segment was impacted by approximately 8 million and shortfall expense related to our supply agreement with Flow Tech in line with the prior quarter. Despite the sequential decline in stimulation services results, our commercial and operational strategies, coupled with our cost structure, enabled us to generate free cash flow. Of note, we achieved mid-teens EBITDAW per fleet, an allocated capital to maintain and upgrade our fleet. The profit production segment generated 70 million of revenue in the second quarter, inclusive of the amortization of acquired contract liabilities of 11 million, representing an 11 percent sequential decline. Revenue was negatively impacted by a decrease in pricing coupled with minimal reduction in volumes.

Austin Harbour: This segment was impacted by approximately $8 million in shortfall expense related to our supply agreement with Flowtech, in line with the prior quarter. However, despite the sequential decline in stimulation services results, our commercial and operational strategies, coupled with our cost structure, enabled us to generate free cash flow. Of note, we achieved mid-teens EBITDA per fleet and allocated capital to maintain and upgrade our fleet. The profit production segment generated $70 million of revenue in the second quarter, inclusive of the amortization of acquired contract liabilities of $11 million, representing an 11% sequential decline. Revenue was negatively impacted by a decrease in pricing coupled with a minimal reduction in volume. Activity in natural gas basins remains subdued, and the market in West Texas remains highly competitive.

Michael Messina: This segment was impacted by approximately $8 million in shortfall expense related to our supply agreement with Flowtech in line with the prior quarter.

Michael Messina: Despite the sequential decline in stimulation services results, our commercial and operational strategies, coupled with our cost structure, enabled us to generate free cash flow. Of note, we achieved mid-teens EBITDA per fleet and allocated capital to maintain and upgrade our fleet.

Michael Messina: The profit production segment generated $70 million of revenue in the second quarter, inclusive of the amortization of acquired contract liabilities of $11 million, representing an 11% sequential decline.

Michael Messina: Revenue was negatively impacted by a decrease in pricing coupled with a minimal reduction in volumes.

Austin Harbour: Activity in natural gas basins remains subdued, and the market in West Texas remains highly competitive. We executed on initiatives to reduce both capital expenditures and fixed operating costs, including the idling of one mine. Our rapid cost reduction initiatives enabled us to partially mitigate the impact of lower cost absorption. Approximately 75 percent of volumes were sold to third-party customers during the second quarter as we executed on our strategy to diversify exposure. Adjusted EBITDAW for the profit production segment totaled 26 million for the second quarter, representing a 10 percent sequential decrease. Adjusted EBITDAW margins were flat quarter over quarter at approximately 37 percent.

Michael Messina: Activity in natural gas basins remains subdued and the market in West Texas remains highly competitive. We executed on initiatives to reduce both capital expenditures and fixed operating costs, including the idling of one mine.

Austin Harbour: We executed on initiatives to reduce both capital expenditures and fixed operating costs, including the idling of one month. Our rapid cost reduction initiatives enabled us to partially mitigate the impact of lower cost absorption. Approximately 75% of volumes were sold to third-party customers during the second quarter as we executed on our strategy to diversify exposure. Adjusted EBITDA for the profit production segment totaled $26 million for the second quarter, representing a 10% sequential decrease. Adjusted EBITDA margins were flat quarter over quarter at approximately 37%. Activity declines witnessed in late second quarter subsisted into early third quarter.

Michael Messina: Our rapid cost reduction initiatives enabled us to partially mitigate the impact of lower cost absorption. Adjusted EBITDA margins were flat quarter over quarter at approximately 37%. Adjusted EBITDA for the manufacturing segment was approximately $100,000 for the second quarter, a sequential decline of $4.3 million. The increase was primarily driven by stock-based compensation.

Michael Messina: Our rapid cost reduction initiatives enabled us to partially mitigate the impact of lower cost absorption.

Michael Messina: Approximately 75% of volumes were sold to third-party customers during the second quarter as we executed on our strategy to diversify exposure.

Michael Messina: Adjusted EBITDA for the profit production segment totaled $26 million for the second quarter, representing a 10% sequential decrease.

Michael Messina: Adjusted EBITDA margins were flat quarter-over-quarter at approximately 37%.

Austin Harbour: Activity declines witnessed in late second quarter, subsisted into early third quarter. We are beginning to see improved commercial opportunities and anticipate that this segment will witness the recovery in volumes as we progress through the quarter, although pricing remains competitive.

Michael Messina: Activity declines witnessed in late second quarter subsisted into early third quarter. We are beginning to see improved commercial opportunities and anticipate that this segment will witness a recovery in volumes as we progress through the quarter, although pricing remains competitive.

Austin Harbour: We are beginning to see improved commercial opportunities and anticipate that this segment will witness a recovery in volumes as we progress through the quarter, although pricing remains competitive. The manufacturing segment generated second quarter revenues of $56 million, up approximately 29% from the first quarter. Approximately 74% of segment revenues were generated via intercompany sales.

Austin Harbour: The manufacturing segment generated second quarter revenues of 56 million, up approximately 29 percent from the first quarter. Approximately 74 percent of segment revenues were generated via intercompany sales. The increase in sales in the second quarter was a result of hours pumped and engine upgrades at stimulation services. Adjusted EBITDAW for the manufacturing segment was approximately 100,000 for the second quarter, a sequential decline of 4.3 million. Lower pricing enacted early in the second quarter, coupled with flat production costs from legacy inventory, drove the majority of the decline in adjusted EBITDAW. Selling, general and administrative expenses were 54 million in the second quarter compared to 51 million in the first quarter.

Michael Messina: The manufacturing segment generated second quarter revenues of $56 million, up approximately 29% from the first quarter.

Michael Messina: Approximately 74% of segment revenues were generated via intercompany sales. The increase in sales in the second quarter was a result of hours pumped and engine upgrades at Stimulation Services.

Austin Harbour: The increase in sales in the second quarter was a result of hours pumped and engine upgrades at Stimulation Services. Adjusted EBITDA for the manufacturing segment was approximately $100,000 for the second quarter, a sequential decline of $4.3 million. Lower pricing enacted early in the second quarter coupled with flat production costs from legacy inventory drove the majority of the decline in adjusted EBITDA. Selling general and administrative expenses were $54 million in the second quarter compared to $51 million in the first quarter. The increase was primarily driven by stock-based compensation.

Michael Messina: Adjusted EBITDA for the manufacturing segment was approximately $100,000 for the second quarter, a sequential decline of $4.3 million. Lower pricing enacted early in the second quarter coupled with flat production costs from legacy inventory drove the majority of the decline in adjusted EBITDA.

Michael Messina: selling general and administrative expenses were fifty four million in the second quarter compared to fifty one million in the first quarter

Austin Harbour: The increase was primarily driven by stock-based compensation. Cash capital expenditures totaled approximately 62 million in the second quarter, approximately flat from the prior quarter. In addition to activity driven maintenance, we invested in next generation equipment, including but not limited to dual fuel engines, e-fleets, and mine upgrades at Alpine. Just as we acted swiftly to right-size our spending levels in recent quarters to more accurately reflect demand, we are actively evaluating capital expenditure and capital allocation plans. As a result, we now expect to incur total capital expenditures during 2024 that are closer to the lower end of our previous guidance.

Michael Messina: The increase was primarily driven by stock-based compensation.

Austin Harbour: Cash capital expenditures totaled approximately $62 million in the second quarter, approximately flat from the prior quarter. In addition to activity-driven maintenance, we invested in next-generation equipment, including but not limited to dual fuel engines, E-fleets, and mine upgrades at Alpine. Just as we acted swiftly to right-size our spending levels in recent quarters to more accurately reflect demand, we are actively evaluating capital expenditure and capital allocation plans. As a result, we now expect to incur total capital expenditures during 2024 that are closer to the lower end of our previous guidance.

Michael Messina: cash capital expenditures total approximately sixty-two million in the second quarter approximately flat from the prior quarter

Michael Messina: In addition to activity-driven maintenance, we invested in next-generation equipment, including but not limited to dual fuel engines, E-fleets, and mine upgrades at Alpine. Just as we acted swiftly to right-size our spending levels in recent quarters to more accurately reflect demand, we are actively evaluating capital expenditure and capital allocation plans. As a result, we now expect to incur total capital expenditures during 2024 that are closer to the lower end of our previous estimates.

Michael Messina: In addition to activity-driven maintenance, we invested in next-generation equipment, including but not limited to dual-fuel engines, E-fleets, and mine upgrades at Alpine.

Michael Messina: just as we acted swiftly to rightsize our spending levels in recent quarters to more accurately reflect demand we are actively evaluating capital expenditure and capital allocation plans

Michael Messina: as a result we now expect to incur total capital expenditures during two thousand and twenty-four that are closer to the lower end of our previous guidance

Austin Harbour: We anticipate spending between 150 and 200 million in maintenance capital expenditures for the year, along with approximately 100 million on growth-related CAPEX. Additionally, we are executing on cost reduction initiatives with the goal of decreasing operating expenses at our subsidiaries as well as at the corporate level. Total cash and cash equivalence as of June 30th were 24 million, including 5 million attributable to flow tax. Total liquidity at quarter end was approximately 161 million, including 142 million available under the ABL. That outstanding and increased sequentially related to the senior secured floating rate notes issued in connection with the acquisition of AST in June.

Michael Messina: We anticipate spending between $150 million and $200 million in maintenance capital expenditures for the year, along with approximately $100 million on growth-related capex. Additionally, we are executing on cost reduction initiatives with the goal of decreasing operating expenses at our subsidiaries as well as at the corporate level.

Austin Harbour: We anticipate spending between $150 and $200 million in maintenance capital expenditures for the year, along with approximately $100 million on growth-related capex. Additionally, we are executing on cost reduction initiatives with the goal of decreasing operating expenses at our subsidiaries as well as at the corporate level.

Michael Messina: We anticipate spending between $150 and $200 million in maintenance capital expenditures for the year, along with approximately $100 million on growth-related CapEx.

Michael Messina: Additionally, we are executing on cost reduction initiatives with the goal of decreasing operating expenses at our subsidiaries as well as at the corporate level.

Austin Harbour: Total cash and cash equivalents as of June 30th were $24 million, including $5 million attributable to FlowTax. Total liquidity at quarter end was approximately $161 million, including $142 million available under the ABL. Borrowings under the ABL Credit Facility ended the quarter at $150 million, up approximately $12 million from the prior quarter. At the end of the second quarter, we had approximately $1.2 billion of debt outstanding, an increase sequentially related to the senior secured floating rate notes issued in connection with the acquisition of AST in June.

Michael Messina: Total cash and cash equivalents as of June 30th were $24 million, including $5 million attributable to Flowtech. Total liquidity at quarter end was approximately $161 million, including $142 million available under the ABL. Borrowings under the ABL Credit Facility ended the quarter at $150 million, up approximately $12 million from the prior quarter. At the end of the second quarter, we had approximately $1.2 billion of debt outstanding, an increase sequentially related to the senior secured floating rate notes issued in connection with the acquisition of AST in June. The majority of our debt does not mature until January 2029. We intend to utilize free cash flow in future periods to deleverage. That concludes our formal remarks. Operator, please open the line for questions.

Michael Messina: Borrowings under the ABL Credit Facility ended the quarter at $150 million, up approximately $12 million from the prior quarter.

Michael Messina: At the end of the second quarter, we had approximately $1.2 billion of debt outstanding, an increase sequentially related to the senior secured floating rate notes issued in connection with the acquisition of AST in June .

Austin Harbour: The majority of our debt does not mature until January 20th, 2029. We intend to utilize free cash flow in future periods to de-leverage.

Austin Harbour: The majority of our debt does not mature until January 2029, and we intend to utilize free cash flow in future periods to deleverage. We look forward to continuing to execute on our strategic priorities, partnering with customers to provide best-in-class integrated solutions, increasing efficiencies across the organization, and generating free cash flow through the cycle. Operator, please open the line for questions.

Michael Messina: The majority of our debt does not mature until January 2029. We intend to utilize free cash flow in future periods to deleverage.

Austin Harbour: We look forward to continuing to execute on our strategic priorities, partnering with customers to provide best-in-class integrated solutions, increasing efficiencies across the organization, and generating free cash flow through the cycle.

Michael Messina: We look forward to continuing to execute on our strategic priorities, partnering with customers to provide best-in-class integrated solutions, increasing efficiencies across the organization, and generating free cash flow through the cycle.

Austin Harbour: That concludes our formal remarks.

Unknown Executive: Operator, please open the line for questions. Thank you; the lines are now open for questions. Please press star one on your telephone keypad at this time.

Michael Messina: That concludes our formal remarks. Operator, please open the line for questions.

Operator: Thank you. The lines are now open for questions. Please press star 1 on your telephone keypad at this time. If your question has been answered, you can remove yourself from the queue by pressing 1.

Speaker Change: Thank you. The lines are now open for questions. Please press Star 1 on your telephone keypad at this time. If your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, it's Star 1.

Unknown Executive: If your question has been answered, you can remove yourself from the queue by pressing one. Again, ladies and gentlemen, it's Star One.

Operator: Again, ladies and gentlemen, it's Star 1, and our first question comes from Stephen Gengaro from SIFL. Go ahead, Stephen.

Stephen Gengaro: And our first question comes from Steven Gigaro from Cipherl.

Operator: And our first question comes from Stephen Gengaro from SIFL. Go ahead, Stephen.

Speaker Change: And our first question comes from Stephen Gengaro from CYFL. Go ahead, Stephen. Thanks. Good morning, everybody.

Stephen Gengaro: Go ahead, Steven. Thanks. Good morning, everybody. Two questions from me. One's a bigger picture, one's probably more specific.

Stephen Gengaro: Thanks. Good morning, everybody. Good morning.

Stephen Gengaro: Thanks. Good morning, everybody. Good morning. I have two questions for you. One's a bigger picture, and one's probably more specific.

Stephen Gengaro: Two questions for me. One's a bigger picture, and one's probably more specific.

Stephen Gengaro: Good morning. Two questions for me. One's a bigger picture, one's probably more specific. But the first one I had was, when you think about...

Matthew Wilks: But the first one I had was, when you think about your competitive advantage, what drives competitive advantage at the well site? I mean, one of them, I think, is the asset, right? One of them is the integration. But as the industry evolves into more people having similar types of assets, how do you hold the competitive advantage, you know, two, three years out, as sort of equipment normalizes? If that's a reasonable assumption? There's a lot to that question. So, I mean, essentially, your next gen fuel efficient fleets are in high demand, and that definitely provides a huge competitive advantage.

Stephen Gengaro: But the first one I had was, when you think about your competitive advantage and kind of what drives competitors' advantages at the well site, I mean, one of them, I think, is the assets, right? One of them is the integration. But as the industry kind of evolves into more people having similar types of assets, at least, how do you hold on?

Speaker Change: Unknown Executive, Matthew Wilks, Lance Turner, Michael Messina, Johnathan Wilks, Rick Black

Stephen Gengaro: More people having similar type assets at least. How do you hold the competitive advantage, you know, two, three years out as sort of equipment normalizes, if that's if that's a reasonable assumption?

Stephen Gengaro: But the first one I had was, when you think about your competitive advantage and kind of what drives competitors' advantages at the well site? I mean, one of them, I think, is assets, right? One of them is integration. But as the industry kind of evolves into more people having similar-type assets, at least, how do you hold the competitive advantage, you know, two, three years out, as sort of equipment normalizes, if that's if that's a reasonable assumption?

Matt Wilks: Umm... There's a lot to that question. So I mean, essentially, your next-gen fuel efficient fleets are in high demand, and that definitely provides a huge competitive advantage. But when we look at the, you know, you know, the competitive landscape and who can participate with those equipment types, it's a smaller and smaller group. While we are seeing a little bit of a lot more people with those types of assets, or more of those assets out there. It's all consolidated within a smaller and smaller group. It's difficult to go from Tier 2 diesel and upgrade in this environment.

Unknown Executive: There's a lot to that question. So I mean, essentially, your next-gen fuel efficient fleets are in high demand. And that definitely provides a huge competitive advantage. But when we look at the, you know, you know, the competitive landscape and who can participate with those equipment types, it's a smaller and smaller group. While we are seeing a little bit of a lot more people with those types of assets, or more of those assets out there, it's all consolidated within a smaller and smaller group. It's difficult to go from Tier 2 diesel and upgrade in this environment.

Speaker Change: All that and more at www.youtube.com or www.facebook.com or www.instagram.com

Unknown Executive: There's a lot to that question. So, I mean, essentially, your next-gen fuel-efficient fleets are in high demand, and that definitely provides a...

Matthew Wilks: But when we look at the competitive landscape and who can participate with those equipment types, it's a smaller and smaller group. While we are seeing a little bit of a lot more people with those types of assets, or more of those assets out there, it's all consolidated within a smaller and smaller group. It's difficult to go from tier two diesel and upgrade in this environment. So we're not too concerned. We love competition. We're happy with the smaller group having the same similar assets, but I think it reinforces our overall strategy, and what we really focus on is, you know, I don't think it's good for the industry to have a competitor come in and fail with a new technology.

Unknown Executive: A huge competitive advantage, but when we look at the, you know, the competitive landscape and who can participate with those equipment types, it's a smaller and smaller group while we are seeing a little bit of a lot more people.

Unknown Executive: with those types of assets.

Unknown Executive: or more of those assets out there it's all consolidated within a smaller and smaller group

Unknown Executive: It's difficult to go from Tier 2 diesel and upgrade in this environment. So we're not too concerned. We love competition. We're happy with the smaller group having the same, similar assets, but I think it...

Unknown Executive: So we're not too concerned. We love competition. We're happy with a smaller group having the same or similar assets, but I think it reinforces our overall strategy. And what we really focus on is, I don't think it's good for the industry to have a competitor come in and fail with a new technology. It really diminishes the entire category. And it can take a little bit to get that customer to try the technology again. But I like the fact that our largest three or four competitors are doing a relatively good job with newer technology.

Matt Wilks: So we're not too concerned. We love competition. We're happy with a smaller group having the same or similar assets, but I think it reinforces our overall strategy. And what we really focus on is, I don't think it's good for the industry to have a competitor come in and fail with a new technology. It really diminishes the entire category. And it can take a little bit to get that customer to try the technology again. But I like the fact that our largest three or four competitors are doing a relatively good job with newer technologies.

Unknown Executive: I think it reinforces our overall strategy and what we really focus on is, I don't think it's good for the industry to have a competitor come in and fail with the new technology.

Matthew Wilks: It really diminishes the entire category, and it can take a little bit to get that customer to try the technology again. I like the fact that our largest three or four competitors are doing a relatively good job with newer technologies.

Unknown Executive: It really diminishes the entire category and it can take a little bit to get that customer to try the technology again. I like the fact that our largest three or four competitors are doing a relatively good job with newer technologies.

Matthew Wilks: Thank you very much. But as far as our competitive advantage, I think the competitive advantage really comes from not just the overall technology offerings, but the fully integrated approach from controls, and really focusing on providing solutions and making it as easy as possible for our customers to complete wells. Okay, thank you.

Unknown Executive: But as far as our competitive advantage, I think the competitive advantage really comes from not just overall technology offerings but the fully integrated approach from controls and really focusing on providing solutions and making it as easy as possible for our customers to complete wells. Pricing and profitability per fleet, as we just think about the back half of this year

Matt Wilks: But as far as our competitive advantage is concerned, I think the competitive advantage really comes from not just overall technology offerings but the fully integrated approach from controls and really focusing on providing solutions and making it as easy as possible for our customers to complete wells. Okay, thank you. And then, when we think about the second half of this year, can you give us any color on how we should be thinking about pricing and profitability per fleet as we just think about the back half of this year?

Unknown Executive: But as far as our competitive advantage, I think the competitive advantage really comes from not just overall technology offerings, but the fully integrated approach from controls.

Unknown Executive: and really focusing on providing solutions and making it eas easy as possible for our customers to complete wells

Matthew Wilks: And then when we think about the second half of this year, can you give us any color on how we should be thinking about pricing and profitability per fleet, as we just think about the back half of this year? You know, we expect it to be relatively flat. You know, of course, you know, we watch the overall market or main focuses on what we can control: the overall macro environment, geopolitical risks, things like that. Those are always an element, but you can't plan a business around any of those items. We're managing this business in a flat profile and focusing on the things that we can control from a cost structure and the Tory management and really managing the market we have now.

Speaker Change: Okay, thank you. And then when we think about the second half of this year, can you give us any color on how we should be thinking about

Unknown Executive: pricing and and profitability per fleet as we just think about the back half of this year

Unknown Executive: You know, we expect it to be, you know, relatively flat. Of course, we watch the overall market, our main focus on what we can control, the overall macro environment, geopolitical risks, things like that. Those are always an element, but you can't plan a business around any of those items. We're managing this business in a flat profile and focusing on the things that we can control from a cost structure, inventory management, and really managing the market we have now. And, and that's along with the cyclical nature throughout the year that

Stephen Gengaro: You know, we expect it to be, you know, relatively flat. Of course, we watch the overall market, our main focus on what we can control, the overall macro environment, geopolitical risks, things like that. Those are always an element, but you can't plan a business around any of those items. We're managing this business in a flat profile and focusing on the things that we can control from a cost structure, inventory management, and really managing the market we have now. And, and that's along with the cyclical nature throughout the year that, you know, that we're faced with. Okay.

Unknown Executive: to

Unknown Executive: You know what, we...

Unknown Executive: We expect it to be, you know, relatively flat. You know, of course, we watch the overall market. Our main focus is on what we can control, the overall macro environment, geopolitical risks, things like that. Those are always an element, but you can't plan a business around any of those items. We're managing this business in a flat profile.

Operator: Your conference will begin momentarily. Again, we do appreciate your patience. Please remain welcome to the Profrac Holding Corps second quarter earnings conference call.

Unknown Executive: and focusing on the things that we can control from a cost structure, inventory management, and really managing the market we have now. And that's along with the cyclical nature throughout the year that we're faced with.

Matthew Wilks: And that's along with the cyclical nature throughout the year that we're faced with.

Matthew Wilks: Okay, thank you for the color.

Stephen Gengaro: Okay, thank you for the color.

Stephen Gengaro: Okay, Matt, thank you for the color.

Operator: Thank you. And our next question comes from Dan Kutz from Morgan Stanley. Go ahead.

Daniel Kutz: And our next question comes from Dan Krutz from Morgan Stanley.

Operator: to

Speaker Change: Thank you. And our next question comes from Dan Kutz from Morgan Stanley . Go ahead.

Daniel Kutz: Go ahead. Hey, thanks. Good morning.

Daniel Kutz: Hey, thanks, good morning. Maybe, maybe if I could just put a, or come at the second half and third quarter question from a different angle, if we kind of think about some of the puts and takes that you guys disclosed in the prepared remarks and then the press release, you know, kind of flat stimulation services pricing, some room for, you know, kind of cost-based profitability per fleet improvement, some inbound for additional integrated fleet deployments, and then, you know, kind of But if we think about the second quarter result, my takeaway from those comments would be that in the third quarter, EBITDA could be growing. Do you think that's fair?

Dan Kutz: Hey, thanks, good morning. Maybe, maybe if I could just put a different spin on the second half and third quarter question from a different angle. If we kind of think about some of the puts and takes that you guys disclosed in the prepared remarks and in the press release, you know, kind of flat stimulation services pricing, some room for, you know, kind of cost-based profitability per fleet improvement, some inbound for additional integrated fleet deployments, and then, you know, kind of some puts and takes in profit and production.

Unknown Executive: And if so, is there anything else?

Daniel Kutz: Maybe if I could just put a comment the second half and third quarter question from a different angle, if we kind of think about some of the puts and takes that you guys disclosed, and then prepared remarks in the press release, you know, kind of flat simulation services pricing, some room for, you know, kind of cost-based profitability per fleet improvement, some inbound for additional integrated fleet appointments, and then, you know, kind of some puts in takes and prop in production, but that sounds like that might be might be down a little bit in the third quarter.

Speaker Change: Hey, thanks, good morning.

Speaker Change: Maybe, maybe if I could just put a, um, or come at the second half.

Unknown Executive: and third quarter question from a different angle.

Unknown Executive: If we kind of think about some of the puts and takes that you guys disclosed in the prepared remarks and in the press release, you know, kind of flat.

Speaker Change: Stimulation, Services, Pricing, some room for, you know, kind of cost-based profitability per fleet improvement, some inbound for additional integrated fleet deployments, and then, you know, kind of some puts and takes.

Dan Kutz: But that sounds like it might be down a little bit in the third quarter. But if we think about the second quarter result, my takeaway from those comments would be that in the third quarter, EBITDA can be growing. Do you think that's fair? And if so, is there anything?

Speaker Change: Profit and Production, but that sounds like that might be down a little bit in the third quarter, but if we think about the second quarter result, my takeaway from those comments would be that the third quarter

Matthew Wilks: But if we think about the second quarter, result might take away from those comments would be that the third quarter EBITDA can be growing. Do you think that's fair, and if so, is there anything you could share on the magnitude of potential growth in the third quarter? Thanks.

Speaker Change: EBITDA can be growing. Do you think that's fair? And if so, is there anything you could share on the magnitude?

Operator: All lines have been placed on a listen only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator.

Dan Kutz: You could share the magnitude of potential growth in the third quarter. Thanks.

Speaker Change: of potential growth in the third quarter. Thanks.

Matthew Wilks: Yeah, there's certainly the potential, but, you know, what we're focused on right now is going in and executing on the integrated model. You know, growing that side of the portfolio and, you know, working with a relatively flat market, managing costs, managing working capital, and inventory. And I think we can we can generate some respectable results, but we're also looking at the overall customer mix and making sure that we provide all of our customers incredible service. And, but I definitely think that there's a tremendous opportunity to grow it, but what we're looking at and managing around is a flat market with.

Ladd Wilks: Yeah, there's certainly the potential. But, you know, what we're focused on right now is going in and executing on the integrated model, growing that side of the portfolio, and, you know, working with a relatively flat market, managing costs, managing working capital, and inventory. And I think we can generate some respectable results. But we're also looking at the overall customer mix and making sure that we provide all of our customers with incredible service.

Speaker Change: Yeah, there's certainly the potential, but, you know, what we're focused on right now is going in and executing on the integrated model.

Michael Messina: At this time, it is my pleasure to turn the floor over to your host, Michael Messina, director of finance, sir, the floor is yours. Thank you operator. Good morning everyone. We appreciate you joining us for Profrac Holding Corps conference call and webcast to review our second quarter 2024 results. With me today are Matt Wilks, Executive Chairman, Ladd Wilks, 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 second quarter before opening the call up to your questions.

Speaker Change: You know, growing that side of the portfolio and, you know, working with a relatively flat market, managing costs, managing working capital and inventory.

Speaker Change: and I think we can we can generate some respectable results but we're also looking at the the overall customer mix and and making sure that we provide all of our customers incredible service and but

Ladd Wilks: And, but Yeah, I definitely think that there's a tremendous opportunity to grow it. But what we're looking at and managing around is a flat market with growth and opportunity coming from the things we can control.

Speaker Change: I do.

Speaker Change: I definitely think that there's a tremendous opportunity to grow it, but what we're looking at and managing around is a flat market with a

Michael Messina: 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 15, 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 August 8, 2024, and therefore your advice that any time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.

Matthew Wilks: You know, growth and opportunity coming from the things we can control. Yep, understood. That makes a lot of sense.

Unknown Executive: You know, growth and opportunity come from the things we can control.

Speaker Change: You know, growth and opportunity coming from the things we can control.

Dan Kutz: Yep, I understand. That makes a lot of sense. And then, if I could just ask about the AST acquisition, so, and you guys already kind of elaborated on the strategic rationale and the prepared remarks, but I guess you guys have consistently communicated the acquire, retire, replace strategy; this fits into that strategy, but, you know, more recently, I guess, presumably you have some idle fleets and, you know, delevering has moved up on the capital allocation priority list, so just, you Thank you.

Daniel Kutz: Yep, I understand. That makes a lot of sense.

Matthew Wilks: And then if I could just ask on the AST acquisition, so, and you guys already kind of elaborated on the strategic rationale and the prepared remarks, but I guess you guys have consistently communicated the choir of a tire of a play strategy. This fits into that strategy, but you know, more recently, I guess presumably you have some idle fleets. And you know, delivering has moved up on the capital allocation priority list. So just, you know, in light of those two factors, just wondering if you could expand on the strategic rationale for the AST acquisition. Thank you.

Daniel Kutz: Yep understood that makes a lot of sense and then if I could just ask on the AST acquisition so and you guys already kind of

Unknown Executive: And then, if I could just ask about the AST acquisition, so, you guys have already kind of elaborated on the strategic rationale and the prepared remarks, but I guess you guys have consistently communicated the acquire, retire, replace strategy. This fits into that strategy. But, you know, more recently, I guess, presumably you have some idle fleets, and, you know, delevering has moved up on the capital allocation priority list. So, just, you know, in light of those two factors, I was wondering if you could expand on the strategic rationale for the AST acquisition. Thank you.

Unknown Executive: elaborated on the strategic rationale and the prepared remarks. But I guess you guys have consistently communicated the acquire, retire, replace strategy, this fits into that strategy. But, you know, more recently, I guess, presumably, you have some idle fleets, and you know, de-levering has moved up on the capital.

Michael Messina: 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 Profrac's management and are not guarantees of future performance. They are for achievements to differ materially from those expressed in management's forward looking statements. The listener or reader is encouraged to read Profrac's form 10K 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.

Speaker Change: allocation priority with so just in light of those two factors just wondering if you could expand on the strategic rationale for the ast acquisition thank you

Matthew Wilks: Certainly, this was an asset that came at a great value, a great price, and a credible asset base and workforce, and a great reputation in West Texas. I think it, it compliments our portfolio out there really, really well with really high quality customers attached to it. The quality of the fleet was, you know, certainly a high quality. It does compliment our acquire retirement place. It's not, it's not particularly reflected in our Q, Q two numbers, you know, to the level that we would want it to be, as we only had a just over a couple of weeks in, in June, that, that our numbers were complimented by.

Ladd Wilks: Certainly, this was an asset that came at a great value, a great price and, you know, a credible asset base and workforce and a great reputation in West Texas. I think it complements our portfolio out there really, really well with really high-quality customers attached to it. The quality of the fleet was, you know, certainly of high quality. It does complement our acquisition, retire, and replace strategy. It's not particularly reflected in our Q2 numbers, you know, to the level that we would want it to be as we only had just over a couple weeks in June that, you know, that our numbers were complimented by. So I look forward to having a full quarter with it and, you know, many years beyond having that package added to our profile. Great

Speaker Change: certainly this this was an asset they came at at a great value of great priceand

Speaker Change: and, you know, credible asset base and workforce and a great reputation in West Texas. I think it complements our portfolio out there really, really well.

Speaker Change: with really high-quality customers attached to it. The quality of the fleet was, you know,

Speaker Change: certainly of high quality.

Speaker Change: It does complement our Acquire, Retire, Replace. It's not particularly reflected in our Q2 numbers, you know, to the level that we would want it to be as we only had just over a couple weeks in

Michael Messina: The comments today also include certain non-gap financial measures, as well as other adjusted figures to exclude the contribution of flow tech. Additional details and reconciliations to the most directly comparable consolidated and gap financial measures are included in the quarterly earnings press release, which can be found on the company's website.

Speaker Change: In June , that our numbers were complimented by, so I look forward to having a full quarter with it and many years beyond having that package added to our profile.

Matthew Wilks: So look forward to having a full quarter with it and, you know, many years beyond having that, that package added to our profile. Great. Thanks a lot. Appreciate that color. I'll turn it back.

Dan Kutz: Great. Thanks a lot. I appreciate that color. I'll turn it back.

Matt Wilks: And now, I would like to turn the call over to Profrac's executive chairman, Mr. Matt Wilks. Thank you, Michael. And good morning, everyone. After my prepared remarks, lab will comment further on the performance of our subsidiaries, and Austin will walk through our financial performance. In the second quarter, we continued to set operating efficiency records delivering strong performance for our customers. We were able to achieve this performance despite the role of multiple fleets to new customers during the quarter, resulting in additional calendar of whites based.

Speaker Change: Great. Thanks a lot. I appreciate that color. I'll turn it back.

Unknown Executive: Thank you.

Unknown Executive: Again, ladies and gentlemen, to ask a question at star one, our next question comes.

Operator: Again, ladies and gentlemen, to ask a question, it's star 1. Our next question comes from Saurabh Pant from Bank of America. Go ahead.

Unknown Executive: thank

Unknown Executive: Again, ladies and gentlemen, to ask a question, it's star 1. Our next question comes from Saurabh Pant from Bank of America. Go ahead.

Saurabh Pant: Saurabra Pat from Bank of America, go ahead. Hi, good morning, Matt and Lad. Maybe I'll start with a question on the gas side of things. I know you guys have an outsize exposure relative to your peers on the gas side of things. Maybe you can talk a little bit to your outlook for the balance of the year on the gas activity side. Do things get worse before they get better? Because listening to the ENP cause the season. It sounds like there's some risk of more activity curtailment in the very near term. Yeah, I mean, I, I, we're, we're cautiously optimistic about the gas markets going into the back half of the year, but look, you know, we're not guiding towards it.

Unknown Executive: Hi, good morning, Matt and Ladd. Maybe I'll start with a question on the gas side of things. I know you guys have an outsized exposure relative to your peers on the gas side of things. Maybe you can talk a little bit about your outlook for the balance of the year on the gas activity side. Do things get worse before they get better? Because listening to the ENP calls this season, it sounds like there's some risk of more activity curtailment in the very near term.

Saurabh Pant: Hi, good morning, Matt and Ladd. Maybe I'll start with a question on the gas side of things. I know you guys have an outsized exposure relative to your peers on the gas side of things. Maybe you can talk a little bit about your outlook for the balance of the year on the gas activity side. Do things get worse before they get better? Because listening to the ENP calls this season, it sounds like there's some risk of more activity curtailment in the very near term.

Unknown Executive: Hi, good morning Matt and Ladd. Maybe I'll start with a question on the gas side of things. I know you guys have an outsized exposure relative to your peers on the gas side of things. Maybe you can talk a little bit to your outlook for the balance of the year on the gas activity side. Do things get worse before they get better? Because listening to the ENP calls this season,

Matt Wilks: Overall, the market for our services has been challenged by operators having reduced drilling and completion activity, particularly in natural gas regions. However, we successfully executed our commercial strategy to partner with customers that value integrated solutions. As we've conveyed in prior quarters, we firmly believe that consolidation by upstream operators will benefit Profrac. Larger operators driving consolidation prefer to collaborate with service companies that deliver efficiency at scale. Given Profrac's leading position throughout the completion's value chain, we were able to take advantage of opportunities in a rapidly evolving marketplace.

Unknown Executive: It sounds like there is some risk of more activity curtailment in the very near term.

Saurabh Pant: Yeah, I mean, we're cautiously optimistic about the gas markets going into the back half of the year. But look, you know; we're not guiding towards it.

Speaker Change: Yeah, I mean, we're cautiously optimistic about the gas markets going into the back half of the year, but look, you know, we're not...

Matthew Wilks: We're in constant conversations with customers, and we're seeing opportunities that, you know, come in, come in with it. You know, but in Q2, we certainly had an impact from gas market slow and down fashion that we expected them to. But, you know, rather than getting, you know, all pulled up and too overly excited about a bounce back where we're planning our business for a flat environment from year. Working with customers that seem to be, you know, rating for some, some additional activity, but we're letting them manage the macro environment and we're managing our costs, managing our business in a very disciplined way.

Matt Wilks: We're in constant conversations with customers, and we're seeing opportunities that are coming with it. But in Q2, we certainly had an impact from gas markets slowing down faster than we expected them to. But, you know, rather than get, you know, all bulled up and overly excited about a bounce back, we're planning our business for a flat environment from here, working with customers that seem to be, you know, readying for some additional activity.

Speaker Change: guiding towards it. We're in constant conversations with customers, and we're seeing opportunities that, you know, coming, coming with it. Um, you know, but in Q two, we certainly had a an impact from from, uh, gas market slowing down faster than we expected him to.

Matt Wilks: For example, the majority of our customers have completed a transaction in the last two years. Additionally, we successfully increased market share in our largest operating region, West Texas, which has witnessed material operator consolidation, post-COVID, and is the leading U.S, land market for unconventional completions activity and spending. In the second quarter, we generated 136 million of adjusted EBITDA on 579 million of revenue. Of note, we generated 74 million in free cash flow in the second quarter.

Speaker Change: But, you know, rather than getting, you know, all bulled up and overly excited about a bounce back, we're planning our business for a flat environment from here.

Speaker Change: Working with customers that seem to be, you know, readying for some additional activity. But we're letting them manage the macro environment, and we're managing our costs, managing our business in a very disciplined way.

Matt Wilks: But we're letting them manage the macro environment, and we're managing our costs, and managing our business in a very disciplined way. And, you know, what I will say is when we do see a recovery in the gas markets and activity pick up with it, you're going to see a very substantial impact on our performance. And so we're really looking forward to those gas markets coming back, and activity to come with them, and we'll be in a position to show the full effect of our integrated model.

Matthew Wilks: And, you know, what I will say is when we see, when we do see a recovery in the gas markets and activity pickup with it, you're going to see a very substantial impact on our performance. And so we're really looking to those gas markets to come back and activity to come with it. And we'll be in a position to show the full effect of our integrated model. No, absolutely not. I know you got more leverage to the gas markets than many of your peers. So that makes sense. And then one classification, I know you, you don't talk about absolute fleet count, but I think Austin, you had in your prepare marks that I think you said, Anvalesie, but up of lead in the quarter was around my team.

Unknown Executive: and

Speaker Change: What I will say is when we do see a recovery in the gas markets and activity pick up with it.

Matt Wilks: These results illustrate that at scale, Profrac is built to navigate market headwinds while generating free cash flow. Furthermore, our recent efforts to align with customers that prefer integrated offerings should enable Profrac to continue to take advantage of opportunities through the cycle. Our performance in the second quarter is underpinned by a record-setting efficiency per active fleet – a direct result of our team's successful execution in the field. Additionally, Profrac's internal manufacturing and service capabilities enable us to rapidly repair, maintain, upgrade and redeploy fleets.

Speaker Change: You're going to see a very substantial impact on on our performance and so we're really looking to those gas markets to come back and activity to come with it and we'll be in a position to show the the full effect of our integrated model.

Saurabh Pant: Right. No, absolutely not, Matt.

Unknown Executive: Right. No, absolutely, Matt. I know you got more leverage to the gas markets than many of your peers, so that makes sense.

Saurabh Pant: I know you've got more leverage in the gas markets than many of your peers, so that makes sense. And then one clarification, I know you don't talk about absolute fleet counts, but I think Austin, you had in your prepared remarks that you said annualized EBITDA per fleet in the quarter was around mid-teens. So if I try to do that math, it sounds like you would have had maybe 30 or slightly less than 30 fleets in the second quarter. First thing, am I roughly doing that math right? And then, just on the fleet count side of things, how should we think about where things go in the backup?

Unknown Executive: And then one clarification, I know you don't talk about absolute fleet count, but I think, Austin, you had in your prepared remarks that I think you said annualized EBITDA per fleet in the quarter was around mid-teens, so if I try to do that math, it sounds like you would have had

Matt Wilks: We believe that an in-basin scale, particularly in the most active basins, is a critical differentiating factor for Profrac. We not only continue to invest in oil-weighted regions, but also purposely maintained our positions in gas-weighted markets. This strategy enables us to strengthen our customer relationships with operators based on a track record of delivering service quality and operational performance. Further, we believe we will benefit from increased levels of activity as a recovery in natural gas basins and material losses.

Austin Harbour: So if I try to do that, it sounds like you would have had maybe 30 or slightly less than 30 fleets in the second quarter. The first thing I'm at roughly doing that math, right? And then just on that fleet concept of things, how should we think about where things go in the back of the year? Yeah, I think you're thinking about it kind of in between the ride and the fairway on that. I think if we look going forward, right? We're managing to the things that we can control. As you think about fleet count, and you think about the opportunities that we have, you know, I think there are absolutely opportunities for us to improve on the numbers that you laid out.

Speaker Change: Maybe 30 or slightly less than 30 fleets in the second quarter. First thing, am I roughly doing that math right? And then just on that fleet count side of things, how should we think about where things go in the back half of the year?

Austin Harbour: Yeah, I think you're thinking about it kind of in between the ride on the fairway on that. I think as we look going forward, right, we're managing to the things that we can control as you think about as you think about fleet count and you think about the opportunities that we have. You know, I think there are absolutely opportunities for us to improve on the numbers that you laid out. And, equally as importantly, there are more opportunities for us to focus on efficiencies from a cost perspective, in addition to efficiencies with specific customers that we have in the portfolio today. And so I think going forward, you know, that kind of mid-teens EBITDA number should ring true.

Speaker Change: Yeah, I think you're thinking about it kind of in between the ride and the fairway on that. I think as we look going forward, right,

Unknown Executive: We're managing to the things that we can control as you think about the fleet count and you think about the opportunities that we have. You know, I think there are absolutely opportunities for us to improve on the numbers that you laid out. I think, equally as importantly, there are more opportunities for us to focus on efficiencies from the cost perspective, in addition to efficiencies with specific customers that we have in the portfolio today. And so I think going forward, that kind of mid-teens EBITDA number should ring true.

Unknown Executive: We're managing to the things that we can control as you think about as you think about fleet count and you think about the opportunities that we have.

Matt Wilks: In mid-June, we executed on an opportunity to strategically add scale at an attractive entry point through the acquisition of advanced stimulation technologies, or AST. Importantly, AST enhances Profrac's earnings profile and improves our market position in the most active region in the lower 48. AST's core values of best-in-class service and efficiency align extremely well with Profrac's culture. Looking forward, we will continue to invest in next-generation equipment that enables diesel substitution, utilizing natural gas as the primary fuel source.

Unknown Executive: You know, I think there are absolutely opportunities for us to improve on the numbers that you laid out. I think equally as importantly, there are more opportunities for us to focus on efficiencies from the cost perspective.

Austin Harbour: I think it equally is importantly; there are more opportunities for us to focus on efficiencies from the cost perspective. In addition to efficiencies with specific customers that we have in the portfolio today. And so I think going forward, you know, that kind of mid-teens, even down number should bring true. Okay, fantastic. No, I know the RSPCs in it's coming up. You would have more opportunities to get a volume, but again, it's more about profitability. So appreciate that.

Unknown Executive: In addition to efficiencies with specific customers that we have in the portfolio today. And so I think going forward, you know, that kind of mid-teens EBITDA number should ring true.

Saurabh Pant: Okay, fantastic. No, I know the RFP season is coming up, so you will have more opportunities to get volume.

Matt Wilks: Demand for our e-fleets and our dual fuel or dynamic gas blending assets remains strong and we continue to make progress on fleet deployments. Today, 70% of our active fleets include e-fleet or natural gas capable equipment. 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.

Speaker Change: Okay, fantastic. Now, I know the RFP season is coming up, so you would have more opportunities to get volumes, but again, it's more about profitability, so I appreciate that. Okay, guys, thank you, I'll turn it back.

Saurabh Pant: But again, it's more about profitability. So I appreciate that. Okay, guys. Thank you. I'll turn it back.

Austin Harbour: Okay, guys, thank you.

Austin Harbour: I'll turn it back. Thank you.

Operator: Thank you. And our next question comes from John Daniel from Daniel Energy Partners. Go ahead, John, your line is open.

John Daniel: And our next question comes from John Daniel from Daniel and She Partners. Go ahead. John, you're line. It's open. Thanks. Thank you for including me. Matt, I know the market is tough right now, but it seems like pumping hours per day. Keep grinding higher each quarter. And at the same time, EMP companies often love that often. It's almost always are citing the virtues of their DNC efficiency games. It just makes you wonder, like if you looked at your very best fleets today. And maybe as you approach 25 during our PC season, and could you rate, do you think you could raise rates on those a fleets.

John Daniel: Thank you.

Speaker Change: Thank you. And our next question comes from John Daniel from Daniel Energy Partners. Go ahead, John . Your line is open.

John Daniel: Thanks. Thank you for including me. Matt, I know the market is tough right now, but it seems like pumping hours per day keep grinding higher each quarter, and maybe as you approach 25 during RFP season and can rate, do you think you could raise rates on those fleets?

John Daniel: Thanks, thank you for including me. Matt, I know the market is tough right now, but it seems like pumping hours per day keep grinding higher each quarter. And at the same time, E&P companies often, well, they don't often, almost always cite the virtues of their DMC efficiency gains. It just makes you wonder, like, if you looked at your very best fleets today and maybe as you approach 25 during RFP season, do you think you could raise rates on those fleets? Do you think the customers would take it to maintain that efficiency, or would they risk that efficiency and go lower prices?

John Daniel: Thanks. Thank you for including me. Matt, I know the market is tough right now, but it seems like pumping hours per day keep grinding higher each quarter.

Matt Wilks: In line with our vertically integrated customer-centric strategy, we are actively evaluating alternatives related to power generation. There has been a significant surge in demand for power generation across a number of end markets, driven at least in part by grid constraints and failures, AI-driven computing power requirements and broader industrial scale electrification trends. In particular, our customers are increasingly requiring solutions that enabled diesel substitution coupled with on-demand power generation at the well-hit. As a leader in next-generation e-fleets and diesel substitution solutions, we are well positioned to organically diversify to provide power generation.

Speaker Change: And at the same time, E&P companies often, well they don't often, almost always are citing the virtues of their DMC efficiency gains.

Speaker Change: And it just makes you wonder, like, if you looked at your very best fleets today,

John Daniel: And maybe as you approach 25 during RFP season, do you think you could raise rates on those fleets?

John Daniel: Do you think the customers would take it to maintain that efficiency, or would they risk that efficiency and go lower price?

Speaker Change: Do you think the customers would take it to maintain that efficiency or would they risk that efficiency and go lower price?

Matthew Wilks: Yeah, I think that's a difficult question for a lot of reasons. You know, we would always look to get paid more, but I think focusing on the overall relationship with the customers is the most important thing. When we look at our ability to get higher and higher efficiencies that comes from a partnership and a customer who's focused on his efficiencies as much as you are. And, you know, and good markets, you know, I think tide looks all boats. But in markets like this, we get a margin from efficiencies and stability and a great relationship and partnership with the customers you're working with.

Unknown Executive: Yeah, I think that's a difficult question for a lot of reasons. We would always love to get paid more. But I think focusing on the overall relationship with the customers is the most important thing. When we look at our ability to get higher and higher efficiencies, that comes from a partnership and a customer who's focused on efficiencies as much as you are. And, you know, in good markets, a rising tide lifts all boats.

Matt Wilks: Yeah, I think that's a difficult question for a lot of reasons. We would always love to get paid more. But I think focusing on the overall relationship with the customers is the most important thing. When we look at our ability to get higher and higher efficiencies, that comes from a partnership and a customer who's focused on efficiencies as much as you are. And, you know, in good markets, a rising tide lifts all boats.

Unknown Executive: Yeah, I think that's a difficult question for a lot of reasons, you know, we would always love to get, you know, paid more, but I think focusing on the overall relationship with the customers is the most important thing when we look at

Unknown Executive: Our ability to get higher and higher efficiencies that comes from a partnership and a customer who's focused on his efficiencies as much as you are and, you know, in good markets, you know, a rising tide lifts all boats.

Matt Wilks: Turning to Alpine, weakness in natural gas regions and general activity softness impacted our results. Although volumes in pricing were negatively impacted during the second quarter and into the third quarter, we are encouraged by the recent uptick and commercial opportunities and potential additional volumes that could materialize as we move through Q3. As a company, we continue to make progress on our priorities and I'm proud of our team's execution and commitment to excellence in summer.

Matt Wilks: But in markets like this, we get our margin from efficiencies and stability and a great relationship and partnership with the customers you're working with. So, that's really where we're looking for margin expansion through things we can control, such as cost rationalization, inventory rationalization, and grinding out the value from operating leverage. And so, that's what we're focused on. If a better market comes along and lifts all boats, then ours will be lifted with it.

Unknown Executive: But in markets like this, we get our margin from efficiencies and stability and a great relationship and partnership with the customers you're working with. So that's really where we're looking for margin expansion through things we can control such as, you know, cost rationalization, inventory rationalization, and grinding out the value from operating leverage. And so that's what we're focused on. If a better market comes along and lifts all boats, then ours will be lifted with it.

Matthew Wilks: So that's that's really where we're looking for margin expansion is through things we can control from cost rationalization, inventory rationalization, and and grinding out the value from operating leverage. And so that's that's what we're focused on. If a better market comes along and lifts all boats, then ours will be lifted with it. And so that's that's what we're focused on.

Matt Wilks: Secretary. We continue to field new and bound requests for additional integrated fleet deployments with the highest demand for electric and tier 4 dual fuel or DGB technologies. Neds of today approximately 70% of our active fleets utilize the next generation technology. We achieve the new record for efficiencies based on pump hours per active fleet, a testament to best in class execution by our employees in the field and our repair and maintenance and manufacturing capabilities.

Unknown Executive: Inventory Rationalization and grinding out the the value from operating leverage and so that's that's what we're focused on. If a better market comes along and and lifts all boats then ours will be lifted with it.

John Daniel: Fair enough. And then as you look at mines that were idled, or the mine that was idled, and try to fast forward four to five quarters from now in the hopes of higher activity, would you be inclined to reactivate it in anticipation of higher activity? Or would you wait until your other stuff is sold out, and the prices have gone up to reactivate? Just any thoughts on how you would go about that process?

John Daniel: Fair enough.

John Daniel: And then as you look at like the minds that were idled or the mind that was idled, and kind of fast forward four to five quarters, shamelin in the hopes of higher activity, would you be inclined to reactivate it in anticipation of higher activity, or would you wait until your other stuff has sold out, pricing's gone up to reach, or just any thoughts on how you would go about that process. Yeah, the mind that we idled was, you know, was logistically a little bit out of pretty good ways outside of the, you know, really the outer bounds of the Haynesville.

Speaker Change: enough and then as you look at like the minds that were idled or the mine that was tidled

Speaker Change: and try to fast forward four to five quarters from now in the hopes of higher activity. Would you be inclined to reactivate it in anticipation of higher activity or would you wait until your other stuff is sold out, pricing's gone up to reactivate? Just any thoughts on how you would go about that process?

Matt Wilks: Although we witnessed a slight decrease in overall utilization during the second quarter, we expect continued improvement in efficiencies as we progressed through the third quarter. Strengthened bi overtically integrated model, we generated 74 million of free cash flow despite market headwinds. We increased in-basement scale in the most active region for completions in the lower 48, West Texas, through both organic and in-organic investments. We improved alignment with operators driving consolidation. The majority of our customers have executed M&A.

Matt Wilks: Yeah, the mine that we idled was, you know, was logistically a little bit out of the way outside of the, you know, really the outer bounds of Haynesville. But there was one customer that was in close enough proximity to it.

Speaker Change: Yeah, the man that we idled was, you know, was...

Speaker Change: Logistically a little bit out of a pretty good ways outside of the the you know really the outer bounds of of the Haynesville there was one customer that was

Matthew Wilks: There was one customer that was in close enough proximity to it. One of the things we like about that particular asset is that it's, you know, has some industrial opportunities. So, regardless of what gas markets do on that particular mind, we may find some industrial opportunities that would warn us to kick that back on. And that's probably the most likely outcome; even if we did see a gas recovery, that's just a better use case for that asset. But the other three minds that we have in that basin have tremendously logistics advantages. And that's why, even in this environment, we've been able to keep those.

Matt Wilks: One of the things we like about that particular asset is that it, you know, has some industrial opportunities. So regardless of what gas markets do with that particular mine, we may find some industrial opportunities that would warrant us to bring it back on. And that's probably the most likely outcome, even if we did see gas recovery. That's just a better use case for that asset. Okay. But the other three mines that we have in that basin have tremendous logistics advantages, and that's why, even in this environment, we've been able to keep them.

Speaker Change: inclclousion of proximity to it one of the things we will like about that particular asset is that it's has some industrial opportunity so regardless awhite gas markets do

Matt Wilks: We have positioned Profrac to deliver long-term value for our stakeholders by delivering the most efficient solutions through vertically integrated in-basement scaled offerings, best in class service, and the relentless focus on free cash flow generation through the cycle.

Speaker Change: On that particular mine, we may find some industrial opportunities that would warrant us to kick that back on. And that's probably the most likely outcome, even if we did see a gas recovery. That's just a better use case for that asset.

Ladd Wilks: With that, I'll turn the call over to Lad. Thanks, Matt.

Ladd Wilks: I'll begin with an overview of our performance in each segment, starting with pressure pumping. On proud report, we achieved another record quarter for efficiency despite a challenging market, making this once again the most efficient quarter in Profrac's history. This is the second consecutive quarter in which Profrac achieved records for pumping hours, pumping hours per fleet, and pumping hours per day for active fleets. Profrac's best performing fleets exceeded 600 hours per month.

Speaker Change: Okay, but the the other three lines that we have in that basin have have tremendous logistics advantages and And that's that's why even in this environment. We've we've been able to keep those

John Daniel: All right, okay, that's all I've got. Thank you for letting me ask some questions. Definitely.

John Daniel: Okay, that's all I've got. Thank you for letting me ask some questions.

John Daniel: That's all I've got.

John Daniel: Thank you for letting me ask some questions. Definitely.

John Daniel: All right. Okay. That's all I've got. Thank you for letting me ask some questions.

Unknown Executive: Thank you.

Unknown Executive: This is conclude our question and answer session today.

Speaker Change: Definitely. Thank you.

Matthew Wilks: I would now like to turn it back to Matt Wilkes for any closing remarks. Definitely, we thank everybody for joining this morning. We look forward to a Q3 and the remainder of the year. We've got a lot of great things going on at ProFract. Really proud of our team. As we look forward, we're really excited to be focusing on our operating leverage or integrated model and the managing of cost controls and inventory management. We're excited about what we'll be able to do with that and with the market recovery. Maybe we'll get some top-line growth, but right now this is all about cost rationalization and expansion of margin through execution.

John Daniel: Thank you. This does conclude our question and answer session today. I would now like to turn it back to Matt Wilks for any closing remarks.

Ladd Wilks: Our ability to provide best in class service is a direct result of the operational improvements we've made internally and the emphasis we placed on our commercial strategy. In particular, we are strategically invested both organically and inorganically to expand in basin scale in West Texas, our largest region and the most active region for completions in U.S, land. Due to weakness in natural gas prices and the completion of several programs early in the quarter, we experienced an average active fleet count that was relatively in line with the first quarter and lower than our expectations.

Speaker Change: Definitely. We thank everybody for joining this morning. We look forward to Q3 and the remainder of the year. We've got a lot of great things going on at Profrac. Really proud of our team.

John Daniel: As we look forward, we're really excited to be focusing on our operating leverage or integrated model.

John Daniel: and the Managing of Cost Controls and Inventory Management.

John Daniel: We're excited about what we'll be able to do with that and with the market recovery. Maybe we'll get some top-line growth, but right now, this is all about cost rationalization and expansion of...

Ladd Wilks: These delays were felt across the industry as operators re-evaluated planned activity and spending as evidenced by the 6% decline in the horizontal rig count during the quarter. Our profit segment was also impacted by weaker than anticipated natural gas related activity. However, we took action to manage our costs and work to replace volumes with spot opportunities. Prolonged headwinds in natural gas regions have continued into early Q3, but we believe that volumes have now troughed and anticipated recovery as we progress through the quarter.

Matthew Wilks: We appreciate everybody joining our call today. And thank you.

Speaker Change: of Margin Through Execution. We appreciate everybody joining our call today.

Unknown Executive: Thank you.

Unknown Executive: This is conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

John Daniel: And thank you.

Ladd Wilks: In recent months, we have implemented a number of initiatives aimed at improving utilization and profitability of our minds. These include idling our mind in Maryville, Louisiana, making targeted reductions in headcount and continuing to deploy automation across our minds with a goal of increasing operating leverage. In summary, Alpine is positioned to produce higher throughput, higher utilization, and lower cost per ton as market fundamentals improve. I'd like to reiterate that at scale we believe we have the lowest cost in the industry.

Ladd Wilks: We have a bespoke vertically integrated platform that benefits from higher absorption as we increase activity. Leveraging in base and scale and integrated offerings coupled with best in class service enables us to drive higher operating leverage and to partner with operators to deliver efficiencies while generating free cash flow. This is precisely what Profrac is built for. I want to thank our outstanding team for their hard work, dedication, and commitment to safety. We have the best team in the industry, and their focus on executing our differentiated strategy makes it possible for Profrac to succeed every day.

Austin Harbour: I'll now hand the call over to our new CFO, Austin Harbour, to cover financial results in more detail. We're excited to have Austin join the team at Profrac. His extensive knowledge of the industry and financial expertise have strengthened Profrac's team. We look forward to his contributions as we execute our strategy and capitalize on future opportunities. Austin, take it away. Thank you for the con words, Lad. It's an honor to join the team. I believe the potential for value creation is significant at Profrac. I look forward to contributing to the team while maximizing value for stakeholders.

Austin Harbour: With respect to our second quarter results, revenues were flat sequentially at $579 million. We generated $136 million of adjusted EBITDA with an adjusted EBITDA margin of 23%. Second quarter adjusted EBITDA represents a 15% decline relative to the first quarter. Margins were negatively impacted by a decrease in average active fleets, weaker pricing, and lower relative cost absorption. Although adjusted EBITDA declined, Profrac generated free cashflow of $74 million, demonstrating our ability to successfully navigate ebbs and flows and activity. We utilized cash to invest in our fleet, particularly next generation technologies, sandmined improvements, strategic acquisitions, and for debt service obligations.

Austin Harbour: Turning to our segments, simulation services revenues were $506 million and the second quarter in line with the first quarter. Average active fleet count and pricing on equipment and materials witnessed marginal decreases versus the first quarter due to intra-quarter rollover of customers and increased white space. Adjusted EBITDA was $107 million for the second quarter, a decline of approximately 14% versus Q1. Margins declined by approximately 300 basis points as prudent cost management partially offset the impact of reduced pricing and activity.

Austin Harbour: This segment was impacted by approximately 8 million and shortfall expense related to our supply agreement with flow tech in line with the prior quarter. Despite the sequential decline in stimulation services results, our commercial and operational strategies coupled with our cost structure enabled us to generate free cash flow. Of note, we achieved mid-teens EBITDAW per fleet, an allocated capital to maintain and upgrade our fleet.

Austin Harbour: The profit production segment generated 70 million of revenue in the second quarter, inclusive of the amortization of acquired contract liabilities of 11 million, representing an 11 percent sequential decline. Revenue was negatively impacted by a decrease in pricing coupled with minimal reduction in volumes. Activity in natural gas basins remains subdued, and the market in West Texas remains highly competitive. We executed on initiatives to reduce both capital expenditures and fixed operating costs, including the idling of one mine.

Austin Harbour: Our rapid cost reduction initiatives enabled us to partially mitigate the impact of lower cost absorption. Approximately 75 percent of volumes were sold to third-party customers during the second quarter as we executed on our strategy to diversify exposure. Adjusted EBITDAW for the profit production segment totaled 26 million for the second quarter, representing a 10 percent sequential decrease. Adjusted EBITDAW margins were flat quarter over quarter at approximately 37 percent.

Austin Harbour: Adjusted EBITDAW for the manufacturing segment was approximately 100,000 for the second quarter, a sequential decline of 4.3 million. Lower pricing enacted early in the second quarter coupled with flat production costs from legacy inventory drove the majority of the decline in adjusted EBITDAW.

Austin Harbour: Selling general and administrative expenses were 54 million in the second quarter compared to 51 million in the first quarter. The increase was primarily driven by stock based compensation.

Austin Harbour: Cash capital expenditures totaled approximately 62 million in the second quarter, approximately flat from the prior quarter. In addition to activity driven maintenance, we invested in next generation equipment, including but not limited to dual fuel engines, e-fleets, and mine upgrades at Alpine.

Austin Harbour: Just as we acted swiftly to right size our spending levels in recent quarters to more accurately reflect demand, we are actively evaluating capital expenditure and capital allocation plans. As a result, we now expect to incur total capital expenditures during 2024 that are closer to the lower end of our previous guidance. We anticipate spending between 150 and 200 million in maintenance capital expenditures for the year, along with approximately 100 million on growth-related CAPEX.

Austin Harbour: Additionally, we are executing on cost reduction initiatives with the goal of decreasing operating expenses at our subsidiaries as well as at the corporate level.

Austin Harbour: Total cash and cash equivalence as of June 30th were 24 million, including 5 million attributable to flow tax. Total liquidity at quarter end was approximately 161 million, including 142 million available under the ABL. That outstanding and increased sequentially related to the senior secured floating rate notes issued in connection with the acquisition of AST in June. The majority of our debt does not mature until January 20th, 2029.

Austin Harbour: We intend to utilize free cash flow in future periods to de-leverage. We look forward to continuing to execute on our strategic priorities, partnering with customers to provide best in-class integrated solutions, increasing efficiencies across the organization, and generating free cash flow through the cycle.

Unknown Executive: That concludes our formal remarks.

Operator: Operator, please open the line for questions. Thank you, the lines are now open for questions. Please press star one on your telephone keypad at this time.

Operator: If your question has been answered, you can remove yourself from the queue by pressing one. Again, ladies and gentlemen, it's star one.

Stephen Gengaro: And our first question comes from Steven Gigaro from Cipherl. Go ahead, Steven. Thanks. Good morning, everybody. Two questions from me. One's a bigger picture, one's probably more specific.

Matt Wilks: But the first one I had was, when you think about your competitive advantage, what drives competitive advantage at the well site? I mean, one of them, I think, is the asset, right? One of them is the integration. But as the industry evolves into more people having similar types of assets, how do you hold the competitive advantage, you know, two, three years out, as sort of equipment normalizes? If that's a reasonable assumption?

Matt Wilks: There's a lot to that question. So, I mean, essentially, your next gen fuel efficient fleets are in high demand, and that definitely provides a huge competitive advantage. But when we look at the competitive landscape and who can participate with those equipment types, it's a smaller and smaller group. While we are seeing a little bit of a lot more people with those types of assets, or more of those assets out there, it's all consolidated within a smaller and smaller group.

Matt Wilks: It's difficult to go from tier two diesel and upgrade in this environment. So we're not too concerned. We love competition. We're happy with the smaller group having the same similar assets, but I think it reinforces our overall strategy, and what we really focus on is, you know, I don't think it's good for the industry to have a competitor to come in and fail with a new technology. It really diminishes the entire category, and it can take a little bit to get that customer to try the technology again. I like the fact that our largest three or four competitors are doing a relatively good job with newer technologies. Thank you very much.

Matt Wilks: But as far as our competitive advantage, I think the competitive advantage really comes from not just the overall technology offerings, but the fully integrated approach from controls, and really focusing on providing solutions and making it as easy as possible for our customers to complete wells. Okay, thank you.

Matt Wilks: And then when we think about the second half of this year, can you give us any color on how we should be thinking about pricing and profitability per fleet, as we just think about the back half of this year? You know, we expect it to be relatively flat. You know, of course, you know, we watch the overall market or main focuses on what we can control the overall macro environment, geopolitical risks, things like that.

Matt Wilks: Those are always an element, but you can't plan a business around any of those items. We're managing this business in a flat profile and focusing on the things that we can control from a cost structure and the Tory management and really managing the market we have now. And that's along with the cyclical nature throughout the year that we're faced with. Okay, thank you for the color. Thank you.

Dan Krutz: And our next question comes from Dan Krutz from Morgan Stanley. Go ahead. Hey, thanks.

Matt Wilks: Good morning. Maybe if I could just put a comment the second half and third quarter question from a different angle, if we kind of think about some of the puts and takes that you guys disclosed, and then prepared remarks in the press release, you know, kind of flat simulation services pricing some room for, you know, kind of cost-based profitability per fleet improvement, some inbound for additional integrated fleet appointments, and then, you know, kind of some puts in takes and prop in production, but that sounds like that might be might be down a little bit in the third quarter.

Matt Wilks: But if we think about the second quarter result might take away from those comments would be that the third quarter EBITDA can be growing. Do you think that's fair and if so, is there anything you could share on the magnitude of potential growth in the third quarter? Thanks. Yeah, there's certainly the potential, but, you know, what we're focused on right now is going in and executing on the integrated model. You know, growing that side of the portfolio and, you know, working with a relatively flat market, managing costs, managing working capital and inventory.

Matt Wilks: And I think we can we can generate some respectable results, but we're also looking at the overall customer mix and making sure that we provide all of our customers incredible service. And, but I definitely think that there's there's a tremendous opportunity to grow it, but what we're looking at and managing around is a flat market with with. You know, growth and opportunity coming from the things we can control. Yep, understood. That makes a lot of sense.

Dan Krutz: And then if I could just ask on the AST acquisition, so, and you guys already kind of elaborated on the strategic rationale and the prepared remarks, but I guess you guys have consistently communicated the choir of a tire of a play strategy. This fits into that strategy, but you know more recently, I guess presumably you have some idle fleets. And you know, delivering has moved up on the capital allocation priority list.

Matt Wilks: So just, you know, in light of those two factors, just wondering if you could expand on the strategic rationale for the AST acquisition. Thank you. Certainly this was an asset that came at a great value, a great price and a credible asset base and workforce and a great reputation in West Texas. I think it, it compliments our portfolio out there really, really well with really high quality customers attached to it. The quality of the fleet was, you know, certainly a high quality.

Matt Wilks: It does compliment our acquire retirement place. It's not, it's not particularly reflected in our Q, Q two numbers, you know, to the level that we would want it to be as we, we only had a just over a couple of weeks in, in, in June, that, that, you know, that our numbers were complimented by. So look forward to having a full quarter with it and, you know, many years beyond having that, that package added to our, our profile. Great. Thanks a lot. Appreciate that color. I'll turn it back. Thank you.

Saurabh Pant: Again, ladies and gentlemen, to ask a question at star one, our next question comes. Saurabra Pat from Bank of America, go ahead. Hi, good morning, Matt and Lad. Maybe I'll start with a question on the gas side of things. I know you guys have an outsize exposure relative to your peers on the gas side of things. Maybe you can talk a little bit to your outlook for the balance of the year on the gas activity side do things get worse before they get better because listening to the ENP cause the season.

Saurabh Pant: It sounds like there's some risk of more activity curtailment in the very near term. Yeah, I mean, I, I, we're, we're cautiously optimistic about the about the gas markets going into the back half of the year, but look, you know, we're, we're not guiding towards it. We're in constant conversations with customers and we're seeing opportunities that, you know, come in, come in with it. You know, but in Q2, we certainly had an impact from gas market slow and down fashion that we expected them to.

Saurabh Pant: But, you know, rather than getting, you know, all pulled up and too overly excited about a bounce back where we're planning our business for a flat environment from year. Working with customers that seem to be, you know, rating for some, some additional activity, but we're letting them manage the macro environment and we're managing our costs, managing our business in a, in a very disciplined way. And, you know, what I will say is when we see, when we do see a recovery in the gas markets and activity pickup with it, you're going to see a very substantial impact on, on our performance.

Saurabh Pant: And so we're really looking to those gas markets to come back and activity to come with it. And we'll be in a position to show the full effect of our integrated model. No, absolutely not, I know you got more leverage to the gas markets than many of your peers. So that makes sense. And then one classification, I know you, you don't talk about absolute fleet count, but I think Austin, you had in your prepare marks that I think you said, Anvalesie, but up of lead in the quarter was around my team.

Saurabh Pant: So if I try to do that, it sounds like you would have had maybe 30 or slightly less than 30 fleets in the second quarter. The first thing I'm at roughly doing that math, right? And then just on that fleet concept of things, how should we think about where things go in the back of the year? Yeah, I think you're thinking about it kind of in between the ride and the fairway on that.

Saurabh Pant: I think if we look going forward, right? We're managing to the things that we can control. As you think about fleet count, and you think about the opportunities that we have, you know, I think there are absolutely opportunities for us to improve on on the numbers that you laid out. I think it equally is importantly, there are more opportunities for us to focus on efficiencies from the cost perspective. In addition to efficiencies with specific customers that we have in the portfolio today.

Saurabh Pant: And so I think going forward, you know, that kind of mid teens, even down number should bring true. Okay, fantastic. No, I know the RSPCs in it's coming up. You would have more opportunities to get a volume, but again, it's more about profitability. So appreciate that. Okay, guys, thank you.

Matt Wilks: I'll turn it back. Thank you.

John Daniel: And our next question comes from John Daniel from Daniel and she partners. Go ahead. John, you're line. It's open. Thanks. Thank you for including me. Matt, I know the market is tough right now, but it seems like pumping hours per day. Keep grinding higher each quarter. And at the same time, EMP companies often love that often. It's almost always are citing the virtues of their DNC efficiency games. It just makes you wonder like if you looked at your very best fleets today.

John Daniel: And maybe as you approach 25 during our PC season and could you rate, do you think you could raise rates on those a fleets. Do you think the customers would take it to maintain that efficiency or would they risk that efficiency and go lower price? Yeah, I think that's a difficult question for a lot of reasons. You know, we would always look to get paid more, but I think focusing on the overall relationship with the customers is the most important thing.

John Daniel: When we look at our ability to get higher and higher efficiencies that comes from a partnership and a customer who's focused on his efficiencies as much as you are. And, you know, and good markets, you know, I think tide looks all boats. But and markets like this, we get a margin from efficiencies and stability and a great relationship and partnership with the customers you're working with. So that's that's really where we're looking for margin expansion is through things we can control from cost rationalization inventory rationalization and and and grinding out the value from operating leverage. And so that's that's what we're focused on. If a better market comes along and and lifts all boats, then ours will be lifted with it. And so that's that's what we're focused on.

Matt Wilks: Fair enough. And then as you look at like the minds that were idled or the mind that was idled, and kind of fast forward four to five quarter shamelin in the hopes of higher activity, would you be inclined to reactivate it in anticipation of higher activity, or would you wait until your other stuff has sold out, pricing's gone up to reach, or just any thoughts on how you would go about that process.

Matt Wilks: Yeah, the mind that we idled was, you know, was logistically a little bit out of pretty good ways outside of the, you know, really the outer bounds of the Haynesville. There was one customer that was in close enough proximity to it. One of the things we like about that particular asset is that it's, you know, has some industrial opportunities. So regardless of what gas markets do on that particular mind, we may find some industrial opportunities that would warn us to kick that back on.

Matt Wilks: And that's probably the most likely outcome, even if we did see a gas recovery, that's just a better use case for that asset. But the other three minds that we have in that basin have tremendously logistics advantages. And that's why even in this environment, we've been able to keep those. That's all I've got. Thank you for letting me ask some questions. Definitely. Thank you. This is conclude our question and answer session today.

Matt Wilks: I would now like to turn it back to Matt Wilkes for any closing remarks. Definitely, we thank everybody for joining this morning. We look forward to a Q3 and the remainder of the year. We've got a lot of great things going on at ProFract, really proud of our team. As we look forward, we're really excited to be focusing on our operating leverage or integrated model and the managing of cost controls and inventory management.

Matt Wilks: We're excited about what we'll be able to do with that and with the market recovery. Maybe we'll get some top-line growth, but right now this is all about cost rationalization and expansion of margin through execution. We appreciate everybody joining our call today. And thank you. Thank you.

Operator: This is conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

Q2 2024 ProFrac Holding Corp Earnings Call

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