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ProFrac (ACDC) - 2022 Q2 - Earnings Call Transcript
ACDCProFrac (ACDC)2022-08-12 19:07
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Financial Data and Key Metrics Changes - The company reported consolidated revenue of 589.8millionforQ22022,asignificantincreasefrom589.8 million for Q2 2022, a significant increase from 345 million in Q1 2022 and 421.6milliononaproformabasisadjustedfortheFTSacquisition[33]−Netincomeforthequarterwas421.6 million on a pro forma basis adjusted for the FTS acquisition [33] - Net income for the quarter was 70.1 million, with adjusted net income excluding stock compensation at 108.9millioncomparedto108.9 million compared to 24.1 million in the previous quarter [33] - Adjusted EBITDA was 210.6millionforQ12022,increasingto210.6 million for Q1 2022, increasing to 218 million when excluding Flowtek's results, resulting in 28.1millionofEBITDAperfleetonanannualizedbasis[34]BusinessLineDataandKeyMetricsChanges−Thestimulationservicessegmentgeneratedrevenuesof28.1 million of EBITDA per fleet on an annualized basis [34] Business Line Data and Key Metrics Changes - The stimulation services segment generated revenues of 576.6 million in Q2 2022, up 72% from Q1 2022, with adjusted EBITDA for the segment at 196.1million[40]−Themanufacturingsegmentreportedrevenuesof196.1 million [40] - The manufacturing segment reported revenues of 34.9 million, an 8.9% increase from Q1 2022, with adjusted EBITDA slightly down to 9.4million[41]−Theprofitproductionsegmentgeneratedrevenuesof9.4 million [41] - The profit production segment generated revenues of 17.5 million, up 41% from the previous quarter, with adjusted EBITDA increasing to 12.6million[42]MarketDataandKeyMetricsChanges−Thecompanynotedthatthesupplyofpressurepumpinghorsepowerislimited,withmanycompetitorssoldoutandfacingsupplychainchallenges[7]−Thecompanyexpectscontinuedmarginexpansionduetothecurrentmarketdynamics,whichareseenasthebestsinceenteringtheindustryover20yearsago[8]CompanyStrategyandDevelopmentDirection−Thecompanyhasatwo−prongedgrowthstrategyfocusingonacquiring,retiring,andreplacingequipmentwhilescalingverticalintegrationinthesupplychain[10]−TherecentacquisitionofMonahansWestTexassandoperationsandthependingacquisitionofUSWellServicesarepartofthestrategytoenhancecashgenerationandshareholderreturns[12]−Verticalintegrationisemphasizedasameanstoreducecostsandimproveprofitability,withthecompanycontrollingcriticalinputsandlogistics[14][16]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutthefutureoftheindustry,citingstrongpricingpowerandtheabilitytoprovidemorematerialstocustomers[22][26]−ThecompanyexpectstoexitQ32022with32fleetsandplanstodeployadditionalelectricfleets,indicatingafocusoninnovationandefficiency[23]−Managementhighlightedtheimportanceofmaintainingastrongbalancesheetandprioritizingshareholderreturnswhilepursuinggrowthopportunities[11][59]OtherImportantInformation−ThecompanyendedQ22022with12.6 million [42] Market Data and Key Metrics Changes - The company noted that the supply of pressure pumping horsepower is limited, with many competitors sold out and facing supply chain challenges [7] - The company expects continued margin expansion due to the current market dynamics, which are seen as the best since entering the industry over 20 years ago [8] Company Strategy and Development Direction - The company has a two-pronged growth strategy focusing on acquiring, retiring, and replacing equipment while scaling vertical integration in the supply chain [10] - The recent acquisition of Monahans West Texas sand operations and the pending acquisition of US Well Services are part of the strategy to enhance cash generation and shareholder returns [12] - Vertical integration is emphasized as a means to reduce costs and improve profitability, with the company controlling critical inputs and logistics [14][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of the industry, citing strong pricing power and the ability to provide more materials to customers [22][26] - The company expects to exit Q3 2022 with 32 fleets and plans to deploy additional electric fleets, indicating a focus on innovation and efficiency [23] - Management highlighted the importance of maintaining a strong balance sheet and prioritizing shareholder returns while pursuing growth opportunities [11][59] Other Important Information - The company ended Q2 2022 with 477.5 million in outstanding principal and 88millioninliquidity,excludingFlowtek′sliquidity[46]−Operatingcashflowwas88 million in liquidity, excluding Flowtek's liquidity [46] - Operating cash flow was 39.5 million during the quarter, impacted by a working capital build due to higher pricing and efficiency [47] Q&A Session Summary Question: Insights on bundling materials for profitability growth - Management indicated that bundling materials could provide significant profitability growth opportunities, with expectations of increased contributions from bundled services over the next 12 months [50][51] Question: Capital allocation priorities - The company prioritizes maintaining equipment, shareholder returns, and growth initiatives, emphasizing the importance of profitability in the oilfield services sector [56][58] Question: Power generation ownership and approach - Management is taking a cautious approach to power generation, focusing on reliability and control over the supply chain [64][65] Question: Sand capacity and pricing expectations - The company believes it can achieve annual production of 7 to 7.5 million tons of sand, with pricing expected to stabilize between 35and35 and 50 per ton [97][99] Question: Flowtech's profitability timeline - Management expects Flowtech to reach full contracted volumes by early 2023, with economies of scale driving profitability improvements [107] Question: Equipment demand and pricing outlook for 2023 - The company is seeing early demand for equipment in 2023, with expectations of better margins and continued pricing expansion [83]