Q2 2025 ProFrac Holding Corp Earnings Call
Greetings, and welcome to the ProFrac Holding Corp. Q2 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
As a reminder, this conference is being recorded. It is now my pleasure to introduce your host. Michael Mina, Director of Finance. Thank you sir, you may begin.
Thank you operator. Good morning everyone. Thank you for joining us, for prorack holding Corps conference call on webcast to review our results for the second quarter. And in June 30th 2025 with me today, our Matt Wills executive chairman land wilts, chief executive officer and Austin Harbor Chief Financial Officer.
Following my remarks management will provide high-level commentary on the operational and financial highlights of the quarter before opening up the call to your questions. A replay of today's call will be made available by webcast on the company's website at PF Holdings corp.com.
More information on how to access the replay is included in the company's earnings release.
please note that information reported on this call speaks only as of today, August 7th, 2025, and therefore, you are advised at any time-sensitive information, May no longer be accurate at the time of any subsequent replay, listening, or transcript reading,
Also comments on this call, may contain forward-looking statements within the meaning of the United States. Federal Security laws, including Management's, expectations of future, financial and business performance.
These forward-looking statements reflects, the current views of profrac management and are not guarantees of future performance.
Various risks uncertainties and contingencies could cause actual results, performance or achievements to differ materially from those expressed in management forward-looking statements.
The Listener or reader is encouraged to read protract 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.
The comments today also include certain non-gaap Financial measures as well as other adjusted figures to exclude the contribution of flowtech additional details and reconciliations to the most directly comparable Consolidated and gaap financial measures are included in the quarterly earnings press release, which can be found at sec.gov and on the company's website.
And now I would like to turn the call over to protracts Executive chairman Mr. Matt wiltz
Good morning to all. I'll begin with your brief remarks. Then turn it over to Lad to elaborate on segment performance and key trends and Austin will run through our second quarter financials.
Q2 performance unfolded largely as anticipated based on the Outlook we provided during our May earnings call.
As we discussed.
The market dynamics that emerged earlier in the quarter, particularly the sharp decline in commodity prices in early April, let operators across our customer base to reassess their near-term. Completion requirements, with several adjusting, their activity levels to varying degrees,
That said, we are encouraged to see the markets that market conditions have modestly. Improved compared to our Q2 exit level commodity prices at firms since early Q2, some Crews have gone back to work and we are having healthy dialogue with our customers around 2026 planning.
This aligns with our previous observation that operators, who reduced activity and maintained the flexibility to quickly resume operations. When conditions improved,
Importantly, we continue to believe that today's hydraulic fracturing market dynamics create a compelling setup for the future, with industry participants exercising capital discipline and responding to current economic conditions and uncertainty.
We see the potential for Meaningful, tightening and Supply. Demand should Drilling and completion activity. Accelerate in response to improved commodity fundamentals in 2026,
turning to our core competitive advantages.
The controllable factors that truly set us apart in the marketplace.
Our vertically integrated manufacturing capabilities, combined, with our sophisticated Asset Management. Platform, represent fundamental differentiators that provide both strategic agility and tangible Financial value.
Our asset management program is generating exceptional results.
The Strategic deployment of our 6 fleets under this programme delivered, our most efficient operational quarter on record in q1, in terms of Fleet efficiency and total maintenance costs. This integrated approach proved particularly valuable during recent Market volatility with our ability to dynamically redeploy assets and adjust maintenance schedules, providing crucial operational flexibility.
Despite the fact that demands on our equipment have significantly grown over time, our asset reliability and pumping performance are the most efficient they’ve ever been, enabling us to extend uptime on our equipment.
And we reduce overall failures.
We believe this is directly attributable to our best-in-class Personnel. In addition to our asset management and Frack automation.
Both of which were internally conceptualized, designed, developed, and successfully implemented. Our in-house manufacturing platform delivers substantial cost advantages, enabling us to build new fleets and upgrade legacy equipment to next-generation specifications.
And standardized previously acquired assets, all at Cost below, third-party alternatives.
This internal capability spends, a significant portion of our equipment portfolio. Providing control over standards of for Quality uniformity and deployment timelines. However, our competitive mode
Extends. Well beyond repair and maintenance and Manufacturing. Our technology leadership continues to drive measurable. Operational improvements and sustainable, competitive advantages.
Our Pro pilot platform. Exemplifies this commitment, delivering transformational improvements and automated fracturing operations.
In the early days of pro pilot 1.0 the platform immediately provided significant operational. Benefits in Frac automation namely by enabling automated pump control and Frack scheduling.
With automated pump control functionality, we were able to quickly reduce the manual inputs required to complete the well, enhancing decision-making and allowing for faster stage completions.
The Frac scheduler functionality was also an early game changer for the platform, integrating completion designs into the automation software to ensure stages are consistently completed to design.
But we didn't stop there and are excited about the further evolution of the profile of platform to its next phase.
Pro pilot 2.0 with 2.0 a number of new functionalities have improved the platform to enhance completion automation. Frac operations. Including horsepower optimization.
dual fuel optimization interlocking, load balancing and 1, Click fully automated stage completions
Efficiency while also minimizing wear and tear on equipment.
It can automatically optimize fuel economy.
That's total fuel gas and gas substitution rates of 2.0. The automated load balancing system monitors pump health in real time, detects anomalies, delivers, and executes proactive recommendations to maintain steady performance and prevent rate fluctuations.
Combined these functionalities enable fully automated track operations eliminating, the guesswork associated with diagnosing equipment and well feedback issues.
The benefits of profile at 2.0 or tangible measurable and benefit both protract and our customers.
New and exciting expansions of the platform. And profil, its utility are also underway, which we plan to roll out in the near future.
Simply put intelligent automation delivers both speed and operational Simplicity while driving Superior well results.
Enhancing cost controls, increasing uptime, and ensuring greater reliability.
Our Innovation pipeline runs deep. Our iotech platform transforms operational intelligence by consolidating multi-source data streams for real-time Edge decisions, while enabling cloud-based analytics and machine learning capabilities.
This integration optimizes data utilization, streamlines, workflows and drives cost reductions across our entire operation.
Further through flowtech. The jp3 technology, continues its expansion.
With VX analyzers, attracting strong interests across market segments from Independent Producers to multinational corporations with global Refinery operations.
We believe our ability to develop tests and, and deploy advanced technology. In-house at a fraction of third party costs. And and on accelerated timelines,
Provides us with a decisive Competitive Edge.
Turning to prop up production, we see our opportunities for growth.
And improved performance across our key operating regions. We maintain a strong Market position in the hanesville region where we offer drought and damp sand.
And anticipate that increase natural, gas activity, will drive improved performance.
In addition, our ongoing throughput improvements in South Texas position us to meet potential demand growth.
Moving to our strategic initiatives and other differentiating value creators.
During the second quarter, we entered into an Innovative partnership with flowtech Industries. This transaction represents far more than a simple asset sale by transferring. What was essentially a cost center within profrac 2. Flowtech where these assets can be leveraged across a much broader Market. We believe we have unlocked significant.
Get value. That the market simply didn't recognize with our within our structure.
These assets which include patented gas monitoring and conditioning technology, formed the foundation of flow Tech's, new power Tech division.
We received immediate financial benefits including over 60% of the proforma, fully diluted Equity ownership of flowtech Industries.
This gives us substantial exposure to a company. That is levered to what we believe is a 3 to 6 billion dollar Global addressable market for gas, quality management, spending oil, and gas, data centers, refineries and other natural gas applications.
This partnership transforms assets that were previously limited to our internal operations into a scalable third-party business model that can serve the broader energy infrastructure Market.
It's a perfect example of how we're thinking creatively about Capital, allocation and value creation for our shareholders.
Finally, I want to touch on our power generation strategy, which positions us uniquely in the rapidly expanding Data Center and power infrastructure market.
Unlike traditional equipment, rental models are approach. Focuses on bespoke holistic, powered land opportunities. That leverage our core competencies
And and project execution and infrastructure development.
Our competitive advantage centers on our ability to accelerate access to electrons at scale.
lab will provide more color on this, as well as the
Other things I just touched on.
In Q2, we generated revenues of 502 million adjusted even, but I have 79 million and free cash flow of 50 more 54 million.
This Compares with revenues of 600 million and adjusted evida of 130 million and free cash flow of negative, 14 million in q1.
While these results are a product of the market headwinds, we experienced.
They also reflect our ability to maintain operational, excellence and generate meaningful free cash flow. Despite challenging conditions,
In summary Q2 results, including generating, 54 million of pre-cast flow, largely aligned with our May Outlook as activity was negatively impact impacted by both macroeconomic and commodity price volatility.
Recent signs are encouraging as Crews. Have returned to work and customer dialogue, around future planning for 2026 intensifies.
We delivered strong operational. Performance through strategic asset allocation with our vertically, integrated manufacturing capabilities and sophisticated Asset Management platform for providing crucial flexibility during periods of Market volatility.
Our technology leadership continues to deliver measurable competitive competitive advantages with our Pro pilot platform driving breakthrough advances in track automation.
Our Innovative partnership with flowtech unlocked, media value, while positioning us with significant ownership in a company leveraged to a multi-billion dollar Global addressable market for gas, quality, management and asset Integrity Solutions.
we continue to see opportunities in proper production, in particular, in the hanesville region, where we expect increased natural, gas activity to drive, improved performance further, strategic, Investments position, as well, for the South Texas demand,
And finally, we maintain our disciplined approach to Capital allocation while positioning ourselves for potential tightening in the market and early 2026.
Lad over to you.
Thanks Matt.
And good morning everyone. I provided more granular detail on several things. Matt touched on starting with our operational performance during the quarter.
And stimulation Services. We experienced the market dynamics. Matt described with increased white space on the calendar. Following the early quarter oil, price, decline and activity levels. Decreasing in the Q2 end.
We responded through our flexible fleet deployment capabilities and implemented cost reduction measures beginning in mid-May.
Though the full benefit didn't flow through until later in the period due to timing lags.
The cost reduction process was impacted by some operational, inefficiencies, including an extended delays between pads that required us to maintain labor equipment, rentals and other SE semi variable costs limit. Limiting our ability to achieve immediate savings
Consistent with Matt's observations regarding the current market, our active leak count, stabilized near the end of the second quarter and into the early, Q3.
And we've seen modest Improvement in activity since then.
We've been purposely selected in deploying The Fleets. In this environment with an emphasis on taking advantage of our vertical Integrated Solutions further, we're being prudent with spending and capital allocation amidst, the current environment, while retaining flexibility to respond to an increased call on activity.
As Matt mentioned, activity can rebound just as rapidly as it slowed.
We are well positioned to respond and encouraged by conversations, we're having regarding 2026.
Turning to our profit and production segment.
We saw volumes decline during the second quarter into June. We anticipate volumes to remain relatively stable in the third quarter from our June run rate.
While realized cost savings helping to offset the expected decline in revenues in the third quarter.
As we spoken about in the past, the operating leverage inherent in our profit business becomes increasingly evident as we drive higher utilization rate and we expect this segment to be a meaningful contributor to our overall performance as activity recovers
We anticipate increased demand next year in the Haynesville, and we are very well positioned with as much as 13 million tons of damp sand capacity or 8 million tons of dry sand capacity.
Meanwhile.
Building on Matt's comments about our South Texas asset initiatives to increase throughput or underway.
I am deeply grateful to our team, across all our businesses, for their dedication, persistence, and excellent work, which enable us to deliver a strong performance.
Jumping into our various differentiators. I'd like to start by highlighting continued progress with our asset management program.
Which Remains the key driver of our operational improvements in capital efficiency initiatives.
This program is fundamentally designed around maintaining firm cost control.
Maximizing utilization and efficiencies and rapidly deploying high-quality fleets.
This enhanced coordination has enabled a better Inventory, management and standardized repair practices directly contributing to faster, turnaround times and reduced waste.
Since implementing our asset management platform.
We've achieved a steady increase in pumping hours on our Fleet. While at the same time, a reduction in equipment failures and non-productive time,
As Matt mentioned, asset management is also responsible for our improved ability to rapidly activate in incremental high quality Fleet.
This allows us to remain nimble to capture emerging opportunities in the market.
In q1, we activated 5 fleets, and so far in Q3 we've activated 3 fleets.
the financial impact is cleared and we expect to continue reducing total maintenance costs per pump our as we build on these operational improvements
Regarding our flowtech partnership.
I'd like to provide some additional operational context on the significant transactions and its implications for our business.
The assets consists of 30. Highly sophisticated mobile units.
15 gas filtration and conditioning units paired with 15 gas distribution units.
Each pairing can support, 1 electric Fleet or equivalent operation.
These aren't just standard equipment.
They incorporate patented real-time BTU. Monitoring technology. That automatically manages aspect, gas preventing catastrophic equipment shutdowns while maintaining operational continuity.
What makes this technology particularly valuable is its versatility.
while we develop the use case specifically for our Frac operations,
the applications extend far beyond our industry to Midstream operations, compressor stations data centers refineries and essentially any industry that consumes or works with natural gas
As Matt noted.
Keeping these assets within profit, limited their potential value.
By placing these assets with flowtech. We've highlighted a pure play technology platform that can scale across multiple in markets.
the transaction structure provides us with multiple benefits, namely meaningful potential upsides through our over 60% proforma fully diluted ownership and flowtech equity
Now, let me take a moment to overview our differentiated power generation strategy.
An elaborate on the operational aspects of this initiative.
While the equipment rental model is viable. We believe it does not fully take advantage of our expertise and existing Partnerships.
We are primarily targeting real property with redundant infrastructure specifically for the data center Market.
Our view is that the technology and solutions developed on the completion industry.
Carry over well for solving many of the issues that are currently presented by the meaningful demand of power assets.
This strategic focus should enable us to generate revenues that are decoupled from the volatility of the completions industry.
Our power generation strategy creates, Synergy opportunities through collaboration between our mobile power generation Solutions, and the acceleration of power delivery at Target sites.
With various opportunities in front of us, we hope to be in a position to further update, you in the future.
Finally on Capital allocation, we're executing effectively on our flexible approach.
Last quarter, we identified approximately $70 to $100 million in potential CAPEX reductions enabled by our disciplined approach to asset management while aligning with evolving market conditions.
We're pleased to report. We're trending in line with our previously cited. Reductions
We now expect capital expenditures to be between $175 million and $225 million for 2025.
I'll now hand the call over to Austin to cover our financial results in more detail.
Thanks lad. In the second quarter revenues were 502 million compared to 600 million in the first quarter.
We generated 79 million of adjusted, EBA with an adjusted. EBA margin of 16% compared to 130 million in the first quarter or 22% of Revenue.
Initiatives until later in the second quarter.
Turning to our segments, stimulation Services, revenues declined to 432 million. In the second quarter from 525 million in the first quarter, primarily due to a reduced Fleet, count and increased white space adjusted. Ebit off fell to 51 million from 105 million in q1 with margins of 12% versus 20% in the prior quarter.
This decline reflects inefficiencies stemming from customers, moderating, their activity levels as they reassess, their operational plans, resulting in a delay and reducing operating costs, until later in the quarter. Additionally, this segment incurred, approximately 8 million in shortfall expenses related to our supply agreement with flowtech consistent with the previous quarter.
Our prop and production segment generated 78, million of revenues, in the second quarter up from 67 million in q1. The increase was primarily attributable to an increase in delivered sand sales, which more than offset the impact of lower volumes approximately. 48% of volumes were sold to third-party customers during the second quarter versus 63% in q1.
Adjusted ebit off for the prophet production. Segment was 15 million for the second quarter versus 18 million in q1. Even on margins came in at 19% in the second quarter versus 27% in q1. With the decline, largely reflecting the lower volumes in the impact of the large Step Up in intercompany sales. We're actively investing to enhance.
Mine productivity and optimize our sourcing mix to improve these Dynamics going forward.
Our manufacturing segment generated second quarter, revenues of 56 million versus 66 million in q1.
Approximately 78% of segments, revenues were generated via intercompany sales compared with 87% in q1, the nearly 4 million sequential increase in external sales, drove an adjusted ibaa Improvement of more than 3 million.
Selling, general, and administrative expenses were $51 million in the second quarter, improved from $54 million in the first quarter as we remain focused on cost controls.
Capital expenditures decreased to 47 million in the second quarter from 53 million in the first quarter. Totaling 99 million for the first half of 2025, with efficient Capital, allocation driven by our asset management platform. We are revising our annual capex guidance down to 175 to 225 million. Our revised guidance is in line with our initial estimate of 70 million to 100 million. In capital expenditure, reductions for 2025
Second quarter spending, primarily encompassed maintenance on our fleets continued upgrades and expansion at Alpine. Designed to increase quality and throughput at the mines.
While these savings partly reflect lower activity levels versus our Outlook earlier. In the year, they also demonstrate the real progress of our asset management program. This program is delivering tangible savings while enhancing operational quality.
Total cash and cash. Equivalents as of June 30th 2025, we're approximately 26 million including approximately 5 million attributable to flowtech.
Total liquidity at quarter-end was approximately $108 million, including $87 million available under the AL.
Borrowings under the abl credit facility into the quarter at 164 million an improvement of 41 million from March 31st.
At June 30th, we had approximately 1.11 billion of debt outstanding with the majority, not due until 2029. We repay the 29 million of long-term debt in the second quarter, and intend to continue to use, free cash flow and future periods to deleverage
Late in the second quarter, we took several strategic steps to enhance our liquidity position and financial flexibility.
We successfully executed a series of transactions that are expected to provide approximately 90 million in incremental liquidity through 2025. These actions included the issuance of 20 million and additional 2029 senior notes. During the second quarter with commitments, for 2 additional 20 million issuances at the company's option, and the third and fourth quarters respectively, for a total of 60 million,
The initial issuance was purchased by our long-term partners, the Wilks family affiliates, demonstrating their continued confidence in our business.
We also amended our Alpine Term Loan agreement. Resulting in a 30 million reduction in our quarterly amortization payments for 2025. Additionally, we successfully negotiated the deferral of the total net leverage ratio test on the Alpine Term Loan to the first quarter of 2027, providing us with enhanced flexibility to navigate current market conditions.
and provide us with additional Financial Resources to execute our business strategy while maintaining our focus on discipline Capital, allocation
Lastly, on the flowtech transaction, we conveyed our Mobile Gas conditioning units and 6-year Lease. In exchange for warrants on 6 million flow, Tech shares, offset mechanisms for order. Shortfall payments under our chemical Supply agreement, and issued a $0 million 5-year seller note at 10%
This transaction strengthened our strategic partnership while providing meaningful Financial benefits.
our 60% plus ProForm of fully diluted ownership and flowtech has resulted in material incremental value, subsequent to the transaction closing in late April,
In closing, we are excited to report. Robust free cash flow generation in the second quarter coupled with a series of strategic initiatives that generated significant incremental value, including the flowtech transaction.
Successful operational execution, in the field and VR Asset Management platform technological innovation and pro pilot and at iotech and enhance the liquidity and financial flexibility via the new notes issuance and Term Loan Amendment.
That concludes our prepared comments operator. Please open the line for questions. Thank you.
Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
You may press star 2 to remove yourself from the queue for participants using speak equipment. It may be necessary to pick up your handset before pressing, the star Keys. Once again, that's star 1 at this time.
1 moment while we pull our first question.
Once again, that's star 1 to ask a question at this time.
The first question comes from John Danielle with Danielle Energy. Please proceed.
Hey, good morning, guys. Thank you for including me, Matt. I was interested to comment about the, uh,
The increasing customer engagement around 2026. I'm sure I would assume nothing is set in stone but I'm just curious.
Is, do you feel like the engagement is higher activity than where we are today? Or can you just elaborate a little bit more on what they're asking for?
Yeah, definitely. Um we're we're seeing a, a lot more engagement around the 2026 programs for for operators. Um, you know, we saw a, a pretty sharp drop off after Liberation day. And
Since then, a lot of the The Operators that have slowed activity of of started coming back, looking at what they need to do to uh to bring some of them back, some of them have already come back.
Okay. But but um, as we look at the RFP season and planning for 2026, uh, we're seeing an increase to current activity levels.
Okay. And then just on the, The increased activity, since the late June early, July 12th, can you just uh give some context whether you know, is that more gas directed or, or just folks in early markets gone back to
Work with the rebound and oil prices. Just any color there would be helpful.
yeah, it's it's it's really it's really a cross gas and oil but um
you know, it's it's
it's, um, you know, the puran, you know, not quite as much of an increase as what we're seeing on gas, but
But there is an uptick from, you know, especially from the lows that we saw in June.
Sure. Okay, that's all I had. Thanks for for having me on.
Thank you.
Thank you. At this time, I would like to turn the call back to Matthew Wilks for closing comments.
We're grateful for your time today. Welcome. Q2 reflected the market headwinds, we discussed on our, on our last call, our vertically integrated manufacturing capabilities. Advanced Asset Management platform and Technology leadership through initiatives, such as propilot, 2.0, continue to differentiate us. Competitively,
Our strategic flowtech partnership has unlocked value and is providing us with exposure to a multi-billion dollar addressable market. Our disciplined capital allocation approach ensures we're well positioned for the supply and demand tightening we expect when activity accelerates.
We remain confident in our ability to capitalize on improving conditions.
We look forward to speaking with you again when we report our third quarter 2025 results. Thank you.
Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.