ProFrac (ACDC) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2024, ProFrac generated $579 million in revenue, flat sequentially, with adjusted EBITDA of$136 million, representing a 15% decline from Q1 [23][11] - The adjusted EBITDA margin was 23%, with free cash flow of $74 million generated during the quarter [23][11] - Total cash and cash equivalents as of June 30 were$24 million, with total liquidity at approximately $161 million [30] Business Line Data and Key Metrics Changes - Stimulation Services revenues were$506 million, in line with Q1, but adjusted EBITDA declined by approximately 14% to $107 million [24] - Proppant Production segment generated$70 million in revenue, an 11% sequential decline, with adjusted EBITDA of $26 million, a 10$56 million, but adjusted EBITDA declined by $4.3 million to approximately$100,000 [27] Market Data and Key Metrics Changes - The market for ProFrac's services faced challenges due to reduced drilling and completion activity, particularly in natural gas regions [10] - The horizontal rig count declined by 6% during the quarter, reflecting a reevaluation of planned activity and spending by operators [19] - Despite market headwinds, ProFrac increased market share in West Texas, the leading U.S. land market for unconventional completions [11] Company Strategy and Development Direction - ProFrac aims to leverage its leading position in the completions value chain and continue investing in next-generation equipment, particularly for diesel substitution [13][14] - The company executed a strategic acquisition of Advanced Stimulation Technologies (AST) to enhance its earnings profile and market position [13][42] - ProFrac's strategy focuses on integrated solutions and operational efficiency to navigate market challenges and generate free cash flow [11][17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the recovery in natural gas markets, planning for a flat environment while seeking opportunities for growth [46][47] - The company is focused on cost management and operational efficiencies, with expectations for potential EBITDA growth in Q3 [40][41] - Management emphasized the importance of maintaining strong customer relationships and delivering best-in-class service to drive margin expansion [53] Other Important Information - Selling, general, and administrative expenses increased to $54 million, primarily due to stock-based compensation [28] - Total debt outstanding at the end of Q2 was approximately$1.2 billion, with plans to utilize free cash flow for deleveraging [30] Q&A Session Summary Question: Competitive advantage in the evolving industry - Management highlighted that next-gen fuel-efficient fleets provide a competitive advantage, and the focus is on integrated solutions to maintain customer relationships [32][35] Question: Pricing and profitability outlook for the second half of the year - Management expects pricing to remain relatively flat, focusing on controllable factors like cost structure and inventory management [36][37] Question: Potential for EBITDA growth in Q3 - Management acknowledged the potential for growth but emphasized the need to execute on the integrated model while managing costs [40] Question: Strategic rationale for the AST acquisition - The acquisition was seen as a valuable addition to the portfolio, enhancing market position and complementing the company's strategy [41][42] Question: Outlook for gas activity and market conditions - Management expressed cautious optimism for gas markets, planning for a flat environment while monitoring customer activity [46][47] Question: Fleet count and profitability considerations - Management indicated opportunities for improving fleet count and efficiencies, with a focus on maintaining mid-teens EBITDA per fleet [48][49]