Core Insights - Beal Bank has provided $637,500,000 to refinance ProFrac Holding Corp's existing term loan, with a total refinancing amount of $885,000,000 [1] - The refinancing includes $520,000,000 in senior secured floating rate notes and a $365,000,000 term loan to ProFrac's subsidiary Alpine Silica [1] - The refinancing extends ProFrac's debt maturity to 2029 and creates a bifurcated capital structure for its pressure pumping and frac sand businesses [1] Company Overview - Beal Bank is one of the largest privately owned financial institutions in the U.S., with combined assets of approximately $31.6 billion as of September 30, 2023 [3] - The bank has a strong reputation as a stable and well-capitalized financial institution [3] Industry Commitment - Beal Bank has a history of lending to oil field service companies, including U.S. Silica Holdings, BJ Services, and U.S. Well Services [2] - The bank continues to support the oil and gas industry, emphasizing its commitment to U.S. energy independence despite social pressures [2]

Core Viewpoint - ProFrac Holding Corp. has successfully completed a refinancing of its existing Senior Secured Term Loan and other debts, totaling $885 million, which will mature in 2029, positioning the company for a strong performance in 2024 [1][2]. Financial Overview - The refinancing includes a $365 million Alpine Term Loan and $520 million in Services Senior Secured Notes, aimed at paying off existing debts and providing a stable financial platform [4][7]. - The transaction is cash neutral and maintains liquidity for working capital to support expected increased activity in 2024 [2][3]. - The refinancing eliminates material near-term maturities, providing additional runway for de-leveraging [2][4]. Strategic Focus - ProFrac plans to increase utilization of its proppant and stimulation assets through a diversified commercial approach in 2024 [2][3]. - The company aims to build a strong foundation in its proppant segment to maximize shareholder value [3]. Debt Structure - The Alpine Term Loan has a floating interest rate and requires mandatory principal payments starting in mid-2024, with a maturity date of January 26, 2029 [5][6]. - The Services Senior Secured Notes also bear a floating interest rate and have similar mandatory prepayment schedules, with a maturity date in 2029 [7]. - The ABL Credit Facility has been amended to reduce its maximum capacity from $400 million to $325 million [8]. Advisory and Legal Support - Piper Sandler & Co acted as the sole financial advisor, while Gibson, Dunn & Crutcher LLP and Brown Rudnick LLP provided legal counsel for the refinancing [9].

Financial Data and Key Metrics Changes - The company generated $149 million in adjusted EBITDA, reduced net debt by $123 million, and produced $73 million of free cash flow [7][20]. - Consolidated revenue for Q3 totaled $574 million, a sequential decrease primarily due to a lower fleet count [20]. - Selling, general and administrative costs were $61 million, down $9 million from the previous quarter [21]. - Cash capital expenditures totaled $52.6 million, down 46% from the second quarter [22][23]. Business Line Data and Key Metrics Changes - The Stimulation Services segment generated revenues of $490 million, down from the second quarter, with adjusted EBITDA of $93 million compared to $123 million [21]. - The Proppant Production segment generated revenues of $98 million, down sequentially, with adjusted EBITDA totaling approximately $52 million [21]. - The Manufacturing segment generated revenues of $44 million, up approximately 41% from the second quarter, with adjusted EBITDA of $1.6 million [22]. Market Data and Key Metrics Changes - Sand pricing was down slightly in Q3, but discussions for 2024 suggest stable pricing levels [18][32]. - Approximately 70% of proppant volumes were sold to third-party customers, similar to the last quarter [21][46]. Company Strategy and Development Direction - The company is evaluating strategic options to unlock the full value of its Proppant Production segment, including increasing throughput and diversifying the customer base [9][10]. - A vertical integration strategy aims to optimize the supply chain of frac materials, enhancing competitive advantage [11][12]. - The company plans to maintain a disciplined capital allocation strategy, focusing on generating free cash flow for debt reduction [26]. Management Comments on Operating Environment and Future Outlook - Management acknowledged challenges in Q3 but expressed confidence in the company's positioning for future success, particularly in 2024 [7][8]. - The company is optimistic about the demand from LNG export facilities and plans to ramp up fleet count in response to customer demand [38][39]. - Management highlighted the importance of maintaining relationships with both large operators and smaller private spot-focused operators [15][16]. Other Important Information - The company has received commitments for 52% of its capacity with third-party customers for 2024 [9][33]. - Total liquidity at the end of Q3 was approximately $137 million, with a focus on generating free cash flow for deleveraging [25][26]. Q&A Session Summary Question: Update on fleet profile regarding gas burning versus non - The majority of active fleets are fuel-efficient, with over half being gas-burning in some form [29]. Question: Pricing and demand perspective for next year - There is a price premium for fuel-efficient assets, which provide lower total spend for operators [30][31]. Question: Thoughts on sand pricing and supply-demand fundamentals for 2024 - Management is not concerned about new capacity coming online and has a strong position with 52% of capacity committed [32][33]. Question: Multiyear arrangements from customers - Some customers are looking for multiyear arrangements to secure pricing and reduce market volatility [34][35]. Question: Plans for ramping up operations in response to LNG demand - The company plans to rehire furloughed workers and expects fleet count to increase in Q1 [40][41]. Question: Clean fleet program and operator engagement - The company is not building new fleets on spec and is focused on securing agreements with customers [43][44]. Question: Utilization rates across mines and sales split - Utilization was around 50%, with 70% of sales going to third-party customers [46][48]. Question: Incremental margin and fixed cost absorption - Every incremental ton sold contributes directly to the bottom line, with expectations for increased margins as capacity is sold out [50][51].

Financial Performance - Consolidated revenues for Q3 2023 were $574.2 million, a decrease of $122.5 million (17.7%) from Q3 2022 and a decrease of $135.0 million (19.0%) from Q2 2023[150]. - Consolidated net loss for Q3 2023 was $17.9 million, a decrease of $157.2 million from Q3 2022 and a decrease of $13.3 million from Q2 2023[150]. - Stimulation services revenues for Q3 2023 decreased by $179.1 million (26.8%) from Q3 2022, primarily due to a decrease in average active fleets and lower fleet utilization[154]. - Proppant production revenues for Q3 2023 increased by $73.7 million (297.6%) from Q3 2022, driven by acquisitions that increased the number of mines operated[155]. - Manufacturing revenues for Q3 2023 decreased by $4.9 million (10.1%) from Q3 2022, attributed to decreased intercompany demand[156]. - Total cost of revenues for Q3 2023 was $368.5 million, a decrease of $23.5 million (6.0%) from Q3 2022[159]. - Selling, general and administrative expenses for Q3 2023 were $61.0 million, an increase of $5.0 million (8.1%) from Q3 2022, primarily due to higher labor and non-labor costs associated with acquisitions[162]. - Interest expense for Q3 2023 was $40.2 million, an increase of $23.9 million (146.0%) from Q3 2022, due to higher average debt balances and interest rates[166]. Cash Flow and Liquidity - As of September 30, 2023, the company had $20.6 million in cash and cash equivalents and $116.0 million available for borrowings, totaling a liquidity position of $136.6 million[172]. - Net cash provided by operating activities increased by $254.2 million to $510.8 million for the nine months ended September 30, 2023, compared to $256.6 million in 2022[175]. - The company raised $50.0 million from the sale of Series A preferred stock in the three months ended September 30, 2023[172]. - The net cash used in investing activities increased by $62.9 million, primarily due to higher cash paid for acquisitions[176]. - The company anticipates that cash and cash equivalents, along with cash provided by operations, will be sufficient to fund capital expenditures and financial obligations for at least the next 12 months[173]. Capital Expenditures and Debt - Capital expenditures for the nine months ended September 30, 2023, were $233.9 million, with an estimated range of $280 million to $290 million for the full year[179]. - The company has $1.1 billion in aggregate principal amount of long-term debt outstanding, with $122.8 million due over the next twelve months[178]. - The company plans to reduce capital expenditures for the remainder of the year to align with customer activity levels and maintain target return thresholds[179]. Strategic Initiatives - The company acquired Performance Proppants for $462.5 million on February 24, 2023, enhancing its proppant production capabilities[151]. - The company plans to increase its fleet count at the beginning of 2024 in response to anticipated demand recovery[151]. - The growth strategy includes potential acquisitions, with funding historically sourced from equity securities and borrowings under credit facilities[182]. Taxation - The effective tax rate for the nine months ended September 30, 2023, was 20.5%, up from 5.2% in the same period in 2022[169].

Financial Data and Key Metrics Changes - The company generated $183 million in adjusted EBITDA and $56 million in free cash flow, while reducing debt by approximately $86 million during the quarter [6][18]. - Consolidated revenue for Q2 totaled $709 million, a decrease attributed to lower activity levels [18]. - Selling, general and administrative costs were $70 million in Q2, down slightly from the first quarter, with a baseline SG&A reduction of approximately $1 million from the prior quarter [18][19]. Business Line Data and Key Metrics Changes - The Stimulation Services segment generated revenues of $608 million in Q2, down from the previous quarter, with adjusted EBITDA of $123 million compared to $206 million [19]. - The Proppant Production segment saw revenues of $110 million in Q2, up approximately 34% sequentially, with adjusted EBITDA totaling $58 million, up approximately 40% from the first quarter [19][20]. - The Manufacturing segment generated revenues of $31 million in Q2, down approximately 54% from the previous quarter, with adjusted EBITDA of $3.1 million [20]. Market Data and Key Metrics Changes - The company noted that pricing remains constructive despite lower asset utilization impacting second quarter earnings, with optimism for a stronger second half of the year [10][11]. - The Proppant segment's third-party sales reached 70% of revenue, indicating a focus on diversifying the customer base [8]. Company Strategy and Development Direction - The company aims to capitalize on increasing industry activity and maintain a disciplined approach to capital allocation, focusing on maximizing utilization and profitability [11][12]. - The strategy includes diversifying the customer base and pursuing long-term dedicated contracts to reduce volatility during market dislocations [15][16]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving industry fundamentals and disciplined behavior from peers, supporting a constructive outlook for the second half of 2023 [7][10]. - The company is adjusting its commercial strategy to target a more diverse customer base and is focused on generating free cash flow for debt repayment [22][23]. Other Important Information - The company plans to reduce capital expenditures for the remainder of the year, targeting approximately $300 million, reflecting the deferral of fleet upgrade programs [21][22]. - Total cash and cash equivalents at the end of the quarter was $27 million, with total liquidity of $164 million [22]. Q&A Session Summary Question: Commentary on active fleets and reductions - Management did not provide specific numbers but emphasized maximizing utilization and rightsizing the cost structure [24]. Question: Fleet reactivations in Q4 or 2024 - Management refrained from guiding fleet count but noted close attention to rig count and industry dynamics [26]. Question: Spot pricing trends in different markets - Management acknowledged some spot pricing decreases in West Texas but highlighted that contracting rates remain above the spot market [30][31]. Question: Cost reductions and profitability improvements - Management indicated that costs are relatively fixed, and profitability is expected to improve as utilization and volumes increase [36]. Question: Working capital release expectations - Management anticipates a release of working capital primarily from inventory management, potentially generating over $50 million [38][39].

Revenue Performance - Consolidated revenues for Q2 2023 were $709.2 million, an increase of $119.4 million from Q2 2022, while revenues for the first half of 2023 reached $1,566.7 million, up $631.9 million year-over-year [127]. - Stimulation services revenues for Q2 2023 increased by $31.7 million from Q2 2022, driven by a rise in average active fleets, with total revenues for the first half of 2023 at $1,398.4 million, up $485.7 million from the same period in 2022 [131]. - Proppant production revenues for Q2 2023 rose by $92.3 million year-over-year, totaling $109.8 million, while the first half of 2023 saw revenues of $192.0 million, an increase of $162.1 million from 2022, largely due to acquisitions [132]. - Manufacturing revenues for Q2 2023 decreased by $3.8 million from Q2 2022, totaling $31.1 million, but increased by $31.3 million for the first half of 2023, reaching $98.2 million [133]. Costs and Expenses - Total cost of revenues for Q2 2023 was $467.8 million, an increase of $128.6 million from Q2 2022, with stimulation services costs rising by $95.3 million year-over-year [136]. - Selling, general and administrative expenses for Q2 2023 were $70.3 million, up $17.3 million from Q2 2022, primarily due to higher labor and non-labor costs associated with acquisitions [139]. - Interest expense for Q2 2023 was $41.0 million, significantly higher than $13.4 million in Q2 2022, attributed to increased debt balances and interest rates [144]. Profitability and Net Income - The company reported a consolidated net loss of $4.6 million for Q2 2023, a decrease of $72.0 million from the same period in 2022, while net income for the first half of 2023 was $55.2 million, down $32.2 million year-over-year [127]. - Income taxes for the six months ended June 30, 2023, were $16.3 million, up from $4.5 million in the same period in 2022, resulting in an effective tax rate of 22.8% compared to 4.9% in 2022 [147]. Liquidity and Cash Flow - As of June 30, 2023, the company had $154.7 million in total liquidity, consisting of $18.1 million in cash and cash equivalents and $136.6 million available for borrowings under the ABL credit facility [150]. - Net cash provided by operating activities increased by $302.7 million to $387.2 million for the six months ended June 30, 2023, compared to $84.5 million in 2022 [153]. - The company anticipates that cash and cash equivalents, along with cash provided by operations, will be sufficient to fund capital expenditures and satisfy financial obligations for at least the next 12 months [151]. Capital Expenditures and Investments - Capital expenditures for the six months ended June 30, 2023, were $181.3 million, with a total expected capital expenditure of $300 million for the entire year [159]. - The net cash used in investing activities increased by $253.4 million, primarily due to a $204.6 million increase in cash paid for acquisitions [154]. - The net cash provided by financing activities decreased by $129.8 million, mainly due to a $301.7 million decrease in net proceeds from the issuance of common stock [155]. - Capital expenditures will be evaluated based on customer demand and expected industry activity levels [160]. Strategic Initiatives - The company acquired Producers for approximately $36.5 million and Performance Proppants for $462.5 million in early 2023, enhancing its operational capacity and market presence [128][129]. - The company is adopting a disciplined approach to capital allocation and has reduced its active fleets to align with customer activity levels, aiming to maintain profitability metrics per fleet [128]. - The company is exploring potential acquisitions and strategic transactions, which may impact liquidity needs [161]. - The company has $1.2 billion in aggregate principal amount of long-term debt outstanding, with $114.4 million due within the next twelve months [158].

Financial Data and Key Metrics Changes - ProFrac reported consolidated revenue of $852 million for Q1 2023, a 7% increase sequentially driven by improved average active fleet count and increased proppant sales [24] - Adjusted EBITDA for the quarter was $255 million, a decrease of 5% sequentially, impacted by approximately $20 million in nonrecurring costs related to acquisitions [24][16] - Free cash flow for the quarter was approximately $150 million, a significant increase from $42 million in the previous quarter [29] Business Line Data and Key Metrics Changes - The Stimulation Services Segment generated revenues of $790 million, up 3% sequentially, but adjusted EBITDA decreased to $206 million from $252 million due to lower utilization and elevated costs [25] - The Profit Production Segment saw revenues of $82 million, up 132% sequentially, with adjusted EBITDA of $41 million, driven by a full quarter contribution from newly operational mines [26] - The Manufacturing Segment generated revenues of $67 million, a 31% increase from the previous quarter, with adjusted EBITDA improving to $8 million [27] Market Data and Key Metrics Changes - The market remains tight with stable service pricing, supporting ProFrac's business model [17] - Demand for services is robust, particularly in the natural gas sector, despite recent price declines [14][21] - ProFrac's sand mining operations are ramping up, with expectations to serve as many as 46 fleets with a production capacity of 23 million tons per year [19] Company Strategy and Development Direction - ProFrac aims to deliver the safest and most consistent service quality while insulating the business from cyclicality through vertical integration [9] - The company is focused on maximizing free cash flow to pay down debt and return capital to stakeholders [10][29] - ProFrac's vertical integration strategy is yielding significant results, allowing for improved cash flow and reduced maintenance costs [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the industry's supply-demand fundamentals, noting that the majority of workable capacity is held by disciplined players [11] - The current commodity market backdrop is seen as constructive, with expectations for continued strong demand for services [12][14] - Management anticipates improved profitability in Q2 2023, driven by the full contribution from all operational mines [23] Other Important Information - ProFrac incurred $20 million in costs related to the conversion and optimization of acquired assets, which were not added back to adjusted EBITDA [24] - The company is committed to enhancing free cash flow generation through materials integration and capturing margins from selling sand and logistics [14] Q&A Session Summary Question: Thoughts on Q2 profitability and stimulation services growth - Management did not provide specific guidance but expects consistent improvement as they digest recent transactions [31] Question: CapEx trends for the next quarters - CapEx is expected to be heavier in Q2 and Q3, with a disciplined approach to capital allocation [33] Question: Dynamics in gas vs. oil basins - Management noted a disciplined approach from customers and a constructive outlook for gas markets, with steady capital deployment [37] Question: Should $20 million be added back to Q1 EBITDA for Q2 starting point? - Management confirmed that the $20 million in nonrecurring costs should be considered when evaluating Q2 performance [40] Question: Electric fleets and fleet count stability - Management believes electric fleets will displace Tier 2 equipment, contributing to a more concentrated and technologically advanced market [44] Question: Free cash flow allocation and debt management - The goal is to minimize the revolver and use free cash flow to pay down debt, with plans for a return of capital program to be presented to the board [48]

Financial Performance - Total revenues for the three months ended March 31, 2023, were $851.7 million, a 147% increase from $345.0 million in the same period in 2022[124] - Stimulation services revenues increased by $454.0 million, or 135%, primarily due to acquisitions, resulting in higher fleet count and pumping hours[126] - Proppant production revenues surged by $69.8 million, or 563%, driven by acquisitions and increased demand, with approximately 39% of revenue being intercompany[126] - Manufacturing revenues rose by $35.1 million, or 110%, attributed to higher demand for products used in the oilfield service industry[127] - Total cost of revenues for the three months ended March 31, 2023, was $541.7 million, a 129% increase from $236.5 million in the same period in 2022[128] Expenses - Selling, general and administrative expenses increased to $76.3 million, up $55.3 million from $21.0 million in the same period in 2022, primarily due to higher personnel costs and stock-based compensation[132] - Depreciation, depletion, and amortization expenses increased to $110.3 million from $44.6 million, reflecting the impact of recent acquisitions and increased capital expenditures[133] Liquidity and Debt - As of March 31, 2023, the company had $57.5 million in cash and cash equivalents and $111.5 million available for borrowings, totaling a liquidity position of $169.0 million[141] - The company has $1.3 billion in long-term debt outstanding, with $140 million due over the next twelve months, indicating a manageable debt maturity profile[148] Capital Expenditures and Acquisitions - Capital expenditures for the three months ended March 31, 2023, were $83.2 million, including investments in electric-powered hydraulic fracturing fleets and engine upgrades[149] - Capital expenditures are expected to accelerate over the next six months due to projected project completions and cash outlays[149] - The company plans to remain disciplined with capital allocation and may reduce capital expenditures based on total fleet activity levels[149] - The company acquired Producers for approximately $36.5 million and Performance Proppants for $464.8 million, enhancing its service capabilities in key regions[123] Future Funding and Market Risk - Future acquisitions may be funded through borrowings under the ABL credit facility and various financing sources, including equity or debt securities[152] - The company believes its cash and cash equivalents, along with cash provided by operations, will be sufficient to fund capital expenditures and obligations for at least the next 12 months[153] - A 1% increase in interest rates would result in an annual increase in interest expense of approximately $11.1 million based on outstanding debt as of March 31, 2023[156] - The company does not engage in speculative transactions and does not utilize financial instruments for trading purposes, limiting its market risk exposure[155] - The company has historically funded acquisitions through equity securities and borrowings under its term loan facility or ABL credit facility[152] - The ability to complete future offerings of equity or debt securities will depend on market conditions and the company's financial condition[152] - Market risk exposure has not materially changed since December 31, 2022[156]

Acquisitions and Growth - ProFrac has completed six acquisitions since its IPO, adding approximately 18.7 million tons of annual sand capacity and 13 frac fleets[15]. - The company completed the acquisition of FTS International for approximately $405.7 million, enhancing its hydraulic fracturing service capabilities[26]. - ProFrac acquired U.S. Well Services for a total consideration of $479.1 million, focusing on electric-powered pressure pumping services[30]. - The acquisition of Performance Proppants for $475.0 million expands ProFrac's frac sand supply in the Haynesville basin[34]. - The company completed acquisitions of five businesses in 2022 for an aggregate consideration of approximately $1.3 billion[214]. - ProFrac's vertically integrated business model allows for faster integration of acquired assets and efficient cannibalization and refurbishment of equipment[17]. - The company has a focused M&A strategy to acquire high-quality businesses at attractive valuations to increase scale and expand technological capabilities[15]. Financial Performance - Revenues for the year 2022 reached $2,425.6 million, a significant increase from $768.4 million in 2021, representing a growth of 215%[230]. - Operating income for 2022 was $412.4 million, compared to an operating loss of $18.0 million in 2021, indicating a turnaround in profitability[230]. - Net income attributable to ProFrac Holding Corp. was $91.5 million in 2022, a recovery from a net loss of $43.5 million in the previous year[230]. - Total current assets increased to $865.4 million in 2022, up from $251.7 million in 2021, reflecting a growth of 243%[228]. - Total liabilities rose to $1,582.9 million in 2022, compared to $516.5 million in 2021, marking an increase of 206%[228]. - Cash and cash equivalents increased significantly to $35.1 million in 2022 from $5.4 million in 2021[228]. - The company reported total operating costs and expenses of $2,013.2 million in 2022, compared to $786.4 million in 2021, an increase of 156%[230]. - Basic and diluted earnings per Class A common share for 2022 were $2.06, reflecting a positive shift from the previous year's loss[230]. - The total assets of the company reached $2,933.6 million in 2022, a substantial increase from $664.6 million in 2021, representing a growth of 341%[228]. - The company reported a net income of $136.7 million for the year, a significant turnaround from the previous year's losses, indicating strong operational performance[236]. Debt and Financial Obligations - The company had a net debt of $924.3 million as of December 31, 2022, with total gross debt of $959.4 million[18]. - A 1% increase in interest rates would have resulted in an annual increase in interest expense of approximately $5.2 million based on outstanding debt as of December 31, 2022[204]. - The total gross debt as of December 31, 2022, was $959.4 million, a substantial increase from $306.7 million in 2021[323]. - The 2022 Term Loan Credit Facility was established with an aggregate amount of $450.0 million, with an effective interest rate of 11.1% as of December 31, 2022[324]. - The company repaid $143.8 million of the 2022 Term Loan Credit Facility using proceeds from its IPO[324]. - The principal maturity schedule for total debt outstanding as of December 31, 2022, is $959.4 million, with significant amounts due in 2023 ($127.6 million) and 2024 ($103.9 million)[345]. Operational Capacity and Production - As of January 3, 2023, ProFrac operates 42 active fleets, positioning it among the largest well stimulation service providers in the United States[15]. - ProFrac operates 42 active fleets, with four additional fleets under construction, including 20 Tier IV fleets and eight electric fleets[19]. - The company has an annual production capacity of approximately 21 million tons of proppants across eight mines, making it the largest producer of in-basin proppants[22]. - ProFrac's Kermit mine has a capacity of three million tons annually and is estimated to have 46 million tons of total recoverable mineral reserves[22]. - The Monarch mine in the Eagle Ford Shale represents approximately 21% of supply in the region, with a production capacity of three million tons annually[22]. - ProFrac's Haynesville mines account for approximately 57% of total production capacity in the Haynesville Shale, with an annual capacity of about 10 million tons[23]. Environmental and Regulatory Considerations - The company aims to equip all conventional fleets with emissions reduction technology, aligning with its environmental focus[19]. - The company is subject to stringent environmental regulations, which may impose costly compliance measures and could materially affect operations[42]. - The company has observed seasonal variations in operations, particularly a slowdown during the fourth quarter holiday season[37]. - The company recognizes the importance of ESG principles and has established an internal ESG committee to document sustainability efforts[35]. - The Biden Administration aims to reduce U.S. emissions by 50-52% below 2005 levels by 2030, with a focus on methane emissions reduction of at least 30% by 2030 relative to 2020 levels[48]. - The Inflation Reduction Act (IRA) commits approximately $375 billion over a decade to promote clean energy, including incentives for solar, wind power, and electric vehicles[48]. - Increased regulatory risks and costs related to GHG emissions and hydraulic fracturing could adversely impact demand for the company's services[51]. Employee and Safety Metrics - The company employed 3,664 people as of December 31, 2022, with a Total Reportable Incident Rate of 0.59, outperforming the industry average of 0.70[38]. - The Total Reportable Incident Rate (TRIR) for ProFrac was 0.59 for the year ended December 31, 2022, compared to the industry average of 0.70[18]. - The company has adopted enhanced safety measures in response to COVID-19 to protect employee health and minimize business disruption[38]. Stock and Equity Information - The company completed its IPO on May 17, 2022, raising net proceeds of $301.7 million from the sale of 16,000,000 shares at $18.00 per share[243]. - The company issued Class A shares in an IPO, raising $72.9 million, which contributed positively to its capital structure[236]. - ProFrac Corp. owned 34.1% of ProFrac LLC, with 54.0 million Class A shares and 104.2 million Class B shares outstanding[248]. - The company recognized stock-based compensation of $4.1 million, which includes $2.2 million related to deemed contributions, indicating ongoing investment in employee incentives[236]. - The company reported stock-based compensation of $45.6 million for the year ended December 31, 2022[248].

Financial Data and Key Metrics Changes - For Q4 2022, consolidated revenue was $794 million, representing a nearly 14% sequential increase, driven by a higher average active fleet count of 36 [21] - Adjusted EBITDA for Q4 was $269 million, slightly up from the previous quarter, with annualized adjusted EBITDA per fleet at approximately $30 million [22] - Full year revenue totaled $2.4 billion, with adjusted EBITDA of $836 million [22] Business Segment Data and Key Metrics Changes - The Simulation Services segment generated $767 million in revenue for Q4, with adjusted EBITDA of $252 million, reflecting higher active fleet count [22] - Proppant Production segment revenue increased approximately 44% in Q4 to $35 million, with adjusted EBITDA growing 120% to roughly $20 million [23] - The Manufacturing segment generated $51 million in revenue for Q4, up 5% sequentially, but faced cost pressures leading to negative adjusted EBITDA of $3.1 million [24] Market Data and Key Metrics Changes - The company averaged 2 mines operating in Q4, with expectations to exit the quarter with a total of 8 mines and nearly 23 million tons of in-basin annual nameplate production capacity [14] - The company reported that 59% of its fleets are next-generation, fuel-efficient fleets, which offer significant fuel cost savings and emission reductions [16] Company Strategy and Development Direction - The company emphasized its "Acquire, Retire, Replace" strategy, focusing on vertical integration to reduce market volatility and enhance profitability [6][7] - Recent acquisitions, including Producer Services Corp and Rev Energy Services, are aimed at improving the economics of acquired fleets and expanding manufacturing presence [10] - The company aims to increase materials penetration to 60% or 70% and is focused on optimizing its supply chain and service offerings [14][19] Management's Comments on Operating Environment and Future Outlook - Management noted that lower commodity prices have impacted customer business, but service pricing levels remained steady [17] - The company is optimistic about maintaining financial expectations for 2023, despite potential headwinds from the commodity market [20] - Management highlighted the importance of maintaining high-quality assets and operational efficiency through fleet retirements and upgrades [12][20] Other Important Information - Total debt balance at year-end was $941 million, with a pro forma total of approximately $1.3 billion after recent acquisitions [25] - Capital expenditures for 2022 were $356 million, with expectations for 2023 to align with 2022 levels [26] Q&A Session Summary Question: Clarification on EBITDA bridge and active fleets - Management clarified that the additional 12 active fleets come from a combination of acquisitions and new builds, with a significant increase in sand capacity expected [30] Question: Thoughts on debt levels and deleveraging plans - Management is focused on deleveraging and believes cash flow generation will address leverage concerns [32] Question: Capacity reduction and fleet retirements - Management confirmed the retirement of 3 fleets and discussed the strategy behind evaluating fleet quality before deciding on retirements [35][36] Question: Vertical integration strategy and sand capacity - Management acknowledged the potential for increased fleet deployment in the Haynesville but emphasized a cautious approach due to market conditions [40] Question: Customer preference for dual fuel versus electric fleets - Management noted that customer preferences vary by region, with a focus on displacing diesel fuel as a key trend [48]