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ProFrac (ACDC) - 2021 Q3 - Earnings Call Transcript
ACDCProFrac (ACDC)2021-11-13 02:58

Financial Data and Key Metrics Changes - U.S. Well Services reported total revenue of 56.5millionforQ32021,down2856.5 million for Q3 2021, down 28% from 78.8 million in Q2 2021, primarily due to a reduction in active fleet count [14] - The average active fleet count during the quarter was 5.7, with a utilization rate of 89%, equating to five fully utilized fleets [14] - Revenue per fully utilized fleet increased by 13% in Q3 compared to Q2, indicating improved revenue-generating potential [15] - Adjusted EBITDA was a loss of 465,000forQ32021[19]BusinessLineDataandKeyMetricsChanges−Thecompanytransitionedtoafullyelectricpressurepumpingserviceprovider,retiringitslastconventionalfleetbytheendofAugust2021[8]−Thefleetcountdecreasedfromapeakof11to5fleets,impactingstaffinglevelsandoperationalcosts[9]−U.S.WellServicesspentnearly465,000 for Q3 2021 [19] Business Line Data and Key Metrics Changes - The company transitioned to a fully electric pressure pumping service provider, retiring its last conventional fleet by the end of August 2021 [8] - The fleet count decreased from a peak of 11 to 5 fleets, impacting staffing levels and operational costs [9] - U.S. Well Services spent nearly 2 million in Q3 to transition to an outsourced power generation model and prepare legacy equipment for sale [9] Market Data and Key Metrics Changes - The company faced inflationary pressures across its supply chain, including rising input prices and increased costs for trucking and logistics [10] - Labor costs increased due to a 15% wage hike implemented in September, which was not immediately passed on to customers due to existing fixed pricing agreements [16] Company Strategy and Development Direction - U.S. Well Services aims to position itself as a leader in electric pressure pumping technology, with plans to deliver the first Nyx Clean Fleets in late Q1 2022 [11] - The company is focused on reducing its debt load and simplifying its capital structure, having repaid nearly 90millionofitsseniorsecuredtermloansincethebeginningoftheyear[13]−Thecompanybelievesthatongoingdebtreductionswillcreatevalueforshareholders[13]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutthefuture,notingashiftinthepressurepumpingindustrytowardselectricanddualfuelfleets,whicharenowinhighdemand[10]−Thecompanyanticipateschallengesduringthetransitionperiodbutexpectstorampupoperationswithnewfleetsinearly2022[24]−Managementhighlightedtheimportanceofmaintainingkeypersonnelduringthetransitiontoensuregrowth[24]OtherImportantInformation−U.S.WellServicesendedQ3with90 million of its senior secured term loan since the beginning of the year [13] - The company believes that ongoing debt reductions will create value for shareholders [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, noting a shift in the pressure pumping industry towards electric and dual fuel fleets, which are now in high demand [10] - The company anticipates challenges during the transition period but expects to ramp up operations with new fleets in early 2022 [24] - Management highlighted the importance of maintaining key personnel during the transition to ensure growth [24] Other Important Information - U.S. Well Services ended Q3 with 47.5 million in total liquidity, consisting of 30.6millionincashand30.6 million in cash and 16.9 million available under its ABL [20] - The company recognized $1 million in equity compensation expense related to share-based awards during the quarter [18] Q&A Session Summary Question: Visibility into Q4 and expected utilization rates - Management indicated that Q4 may experience typical seasonal slowdowns, affecting utilization rates [23] Question: Recovery of wage increases and EBITDA outlook - Wage recovery is expected to materialize in 2022 as existing contracts roll over to new agreements [25] Question: Economics of conventional horsepower disposals - Management noted that they do not expect to compete with buyers of their diesel horsepower, as most customers prefer electric fleets [27] Question: Premium on bids for electric horsepower - Management has not yet observed an increase in premiums for electric horsepower bids despite rising diesel prices [29] Question: Cost structure and future EBITDA expectations - Management anticipates achieving mid-teens EBITDA per fleet in the second half of next year as new fleets are deployed [31] Question: Repair and maintenance costs during fleet transition - Elevated repair and maintenance costs were attributed to preparing diesel fleets for sale [37] Question: Debt load and cash balance covenants - There are no financial covenants related to cash balance, focusing instead on debt levels for interest relief [40] Question: Q4 adjusted EBITDA expectations - Q4 is expected to resemble Q3 in terms of adjusted EBITDA performance, with potential for slight declines due to seasonality [42] Question: Customer conversations regarding shared economics - Management emphasized that the business model aims for shared economics, targeting a payback period of 2 to 2.5 years for new fleets [44]