ProFrac (ACDC) - 2022 Q3 - Quarterly Report

IPO and Acquisitions - The company completed its IPO on May 12, 2022, raising net proceeds of $303.9 million from the sale of 16,000,000 shares at$18.00 per share, with an additional 2,228,153 shares sold through an over-allotment option[238]. - The company acquired FTS International, Inc. for a total purchase price of $405.7 million, consisting of$332.8 million in cash and $72.9 million in equity interests[241]. - The company acquired SP Silica of Monahans, LLC for$97.7 million in cash, with the purchase price subject to a working capital adjustment to be finalized in Q4 2022[246]. - The company merged with U.S. Well Services, Inc., issuing approximately 12.9 million shares valued at $270 million and retiring$170 million of USWS debt[247]. - Recent acquisitions, including USWS and Monahans, have contributed to revenue growth and operational changes not reflected in historical results[270]. Operational Performance - The company operates 34 hydraulic fracturing fleets, with 31 active as of September 30, 2022, positioning itself as one of the largest providers in North America[250]. - The company has experienced improved operational results due to increased fleet utilization and higher prices for products and services, despite facing inflationary pressures[254]. - Stimulation services revenues increased by $477.9 million, or 251$28.9 million, or 145%, for Q3 2022 compared to Q3 2021, attributed to increased demand for oilfield service components[280]. - Proppant production revenues grew by $18.2 million, or 285$696.7 million, a significant increase from $195.9 million in Q3 2021[277]. - Adjusted EBITDA for Q3 2022 was$256.1 million, compared to $34.5 million in Q3 2021, reflecting improved operational performance[277]. Financial Performance - The average oil price per barrel was$93.18 in Q3 2022, up from $70.62 in Q3 2021, indicating favorable market conditions[277]. - The average natural gas price per thousand cubic feet was$8.30 in Q3 2022, compared to $4.53 in Q3 2021, reflecting increased energy prices[277]. - The company recorded a net income of$143.4 million for Q3 2022, compared to a net loss of $14.1 million in Q3 2021[277]. - Total revenues for Q3 2022 increased by$500.8 million, or approximately 20.5%, compared to Q3 2021, driven by increased customer activity and pricing[283]. Costs and Expenses - Stimulation services costs for Q3 2022 rose by $236.2 million, or 162$20.0 million, or 121%, compared to Q3 2021, attributed to higher demand and raw material costs[285]. - Proppant production costs for Q3 2022 surged by $10.0 million, or 314$50.2 million, or 251%, compared to Q3 2021, mainly due to stock-based compensation and higher personnel costs[290]. - Adjusted EBITDA for stimulation services increased by $218.0 million for Q3 2022, reflecting higher active fleets and pricing[297]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was$256.7 million for the nine months ended September 30, 2022, compared to $37.7 million for the same period in 2021[314]. - Net cash used in investing activities was$629.8 million for the nine months ended September 30, 2022, primarily due to acquisitions and capital expenditures[315]. - Working capital increased by $285.9 million to$290.9 million as of September 30, 2022, driven by higher activity levels[311]. - The 2022 capital expenditure budget is estimated to be between $330 million and$350 million, focusing on growth-related initiatives[308]. - Capital expenditures for the nine months ended September 30, 2022, were $239.5 million, up from$70.6 million in the same period in 2021, with expectations for further increases in 2022 and 2023[355]. Debt and Liquidity - The New ABL Credit Facility was amended on November 1, 2022, increasing the Maximum Revolver Amount from $200 million to$280 million and the Incremental Facility to $120 million, raising the potential size to$400 million[325]. - As of September 30, 2022, the Company had approximately $525.7 million outstanding under the New Term Loan Credit Facility, which matures on March 4, 2025[326]. - The interest rate for the New Term Loan Credit Facility was 11.10$6.7 million at all times, while the New Term Loan Credit Facility requires a minimum liquidity of $30 million[324][336]. - The New Term Loan Credit Facility is subject to a quarterly mandatory prepayment starting December 31, 2022, based on the Applicable ECF Percentage, which ranges from 50$164 million under the Amended ABL Credit Facility in connection with the acquisition of USWS on November 1, 2022[325]. - The New ABL Credit Facility bears an unused line fee ranging from 0.250% to 0.375% depending on average daily availability over the last three months[321]. - The New Term Loan Credit Facility prohibits Capital Expenditures exceeding $275 million for the fiscal year ended December 31, 2022, or 50% of Consolidated EBITDA for any four consecutive fiscal quarters[337]. - The New ABL Credit Facility interest rate was 7.00% as of September 30, 2022[321]. - The Company was in compliance with all covenants related to both the New ABL Credit Facility and the New Term Loan Credit Facility as of September 30, 2022, with no defaults reported[324][338]. - ProFrac LLC must maintain a Total Net Leverage Ratio of no greater than 3.00:1.00 and a Fixed Charge Coverage Ratio of at least 1.00:1.00 as per the First Financial Loan agreement[343]. Risk Management - ProFrac LLC's material and fuel purchases expose it to commodity price risk, particularly in proppants, chemicals, and fuel costs, which are subject to market volatility[362]. - The company does not engage in commodity price hedging activities, which may affect its ability to pass on price increases to customers in the future[362]. - ProFrac LLC has established procedures to manage credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts[365]. - The company does not utilize derivative instruments to manage interest rate risk associated with its variable rate debt[363].