ProFrac (ACDC) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - U.S. Well Services reported adjusted EBITDA of $36.9 million for Q2 2021, with an annualized adjusted EBITDA per fleet increasing by 39% to$ 7.3 million [8][15] - Revenue for the second quarter was $78.8 million, reflecting a 3% sequential increase [12] - Cost of sales decreased by 5% to$ 59.3 million, primarily due to lower fleet activity [12][13] - SG&A expenses were $7.2 million, down 2% from the previous quarter [13] Business Line Data and Key Metrics Changes - The company averaged 9.3 active fleets during the quarter, achieving a utilization rate of 85% [12] - Revenue from the sale of materials, including sand and chemicals, grew over 80% sequentially [12] - Adjusted EBITDA from hydraulic fracturing operations was approximately$ 14.4 million, up 25% from the previous quarter [15] Market Data and Key Metrics Changes - The demand for electric fracturing solutions has surged due to increased pressure on E&P companies to reduce greenhouse gas emissions [9][10] - The market for conventional diesel fleets remains oversupplied, with pricing not recovering to pre-COVID-19 levels [9] Company Strategy and Development Direction - U.S. Well Services is transitioning to an all-electric fleet, divesting non-core assets, including conventional diesel-powered frac equipment [10][11] - The company plans to build four new Nyx Clean Fleets, each consisting of 10 dual pump trailers totaling 60,000 horsepower [10] - The strategy includes deploying advanced, cost-effective, and low-emission fleets while reducing debt through asset sales [11] Management Comments on Operating Environment and Future Outlook - Management believes the trends towards electric solutions are permanent and that demand for older diesel equipment will not recover [10] - The company expects to see improved profitability as it transitions to electric fleets and absorbs overhead costs [24][50] Other Important Information - The company ended the quarter with total liquidity of $70.7 million, consisting of cash and availability under its ABL facility [15] - U.S. Well Services has completed over$ 21 million in asset sales to date, with plans to accelerate sales in the third quarter [11][16] Q&A Session Summary Question: Contribution of conventional horsepower to EBITDA - Management indicated that the EBITDA contribution from the diesel fleet was minimal in the first half of the year due to slow recovery in diesel pricing [22][23] Question: Economics and return objectives for new builds - The expected payback period for the new fleet is 24 months on a cash basis, with strong demand for electric fleets [27] Question: Customer preference between electric and Tier IV DGB - Customers are gravitating towards next-generation solutions due to fuel cost savings and emission reductions, with electric fleets offering more complete benefits [30][32] Question: Maintenance cost comparison between electric and diesel fleets - Historically, electric fleets have shown a 35% to 40% cost advantage over diesel fleets [36] Question: Asset sales and debt reduction strategy - The company is targeting approximately $130 million in total asset sale proceeds to reduce debt levels [58]