ProFrac (ACDC) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated $183 million in adjusted EBITDA and$ 56 million in free cash flow, while reducing debt by approximately $86 million during the quarter [6][18]. - Consolidated revenue for Q2 totaled$ 709 million, a decrease attributed to lower activity levels [18]. - Selling, general and administrative costs were $70 million in Q2, down slightly from the first quarter, with a baseline SG&A reduction of approximately$ 1 million from the prior quarter [18][19]. Business Line Data and Key Metrics Changes - The Stimulation Services segment generated revenues of $608 million in Q2, down from the previous quarter, with adjusted EBITDA of$ 123 million compared to $206 million [19]. - The Proppant Production segment saw revenues of$ 110 million in Q2, up approximately 34% sequentially, with adjusted EBITDA totaling $58 million, up approximately 40% from the first quarter [19][20]. - The Manufacturing segment generated revenues of$ 31 million in Q2, down approximately 54% from the previous quarter, with adjusted EBITDA of $3.1 million [20]. Market Data and Key Metrics Changes - The company noted that pricing remains constructive despite lower asset utilization impacting second quarter earnings, with optimism for a stronger second half of the year [10][11]. - The Proppant segment's third-party sales reached 70% of revenue, indicating a focus on diversifying the customer base [8]. Company Strategy and Development Direction - The company aims to capitalize on increasing industry activity and maintain a disciplined approach to capital allocation, focusing on maximizing utilization and profitability [11][12]. - The strategy includes diversifying the customer base and pursuing long-term dedicated contracts to reduce volatility during market dislocations [15][16]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving industry fundamentals and disciplined behavior from peers, supporting a constructive outlook for the second half of 2023 [7][10]. - The company is adjusting its commercial strategy to target a more diverse customer base and is focused on generating free cash flow for debt repayment [22][23]. Other Important Information - The company plans to reduce capital expenditures for the remainder of the year, targeting approximately$ 300 million, reflecting the deferral of fleet upgrade programs [21][22]. - Total cash and cash equivalents at the end of the quarter was $27 million, with total liquidity of$ 164 million [22]. Q&A Session Summary Question: Commentary on active fleets and reductions - Management did not provide specific numbers but emphasized maximizing utilization and rightsizing the cost structure [24]. Question: Fleet reactivations in Q4 or 2024 - Management refrained from guiding fleet count but noted close attention to rig count and industry dynamics [26]. Question: Spot pricing trends in different markets - Management acknowledged some spot pricing decreases in West Texas but highlighted that contracting rates remain above the spot market [30][31]. Question: Cost reductions and profitability improvements - Management indicated that costs are relatively fixed, and profitability is expected to improve as utilization and volumes increase [36]. Question: Working capital release expectations - Management anticipates a release of working capital primarily from inventory management, potentially generating over $50 million [38][39].