ProFrac (ACDC)2023-05-14 06:00Financial Data and Key Metrics Changes - ProFrac reported consolidated revenue of 255 million, a decrease of 5% sequentially, impacted by approximately 150 million, a significant increase from 790 million, up 3% sequentially, but adjusted EBITDA decreased to 252 million due to lower utilization and elevated costs [25] - The Profit Production Segment saw revenues of 41 million, driven by a full quarter contribution from newly operational mines [26] - The Manufacturing Segment generated revenues of 8 million [27] Market Data and Key Metrics Changes - The market remains tight with stable service pricing, supporting ProFrac's business model [17] - Demand for services is robust, particularly in the natural gas sector, despite recent price declines [14][21] - ProFrac's sand mining operations are ramping up, with expectations to serve as many as 46 fleets with a production capacity of 23 million tons per year [19] Company Strategy and Development Direction - ProFrac aims to deliver the safest and most consistent service quality while insulating the business from cyclicality through vertical integration [9] - The company is focused on maximizing free cash flow to pay down debt and return capital to stakeholders [10][29] - ProFrac's vertical integration strategy is yielding significant results, allowing for improved cash flow and reduced maintenance costs [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the industry's supply-demand fundamentals, noting that the majority of workable capacity is held by disciplined players [11] - The current commodity market backdrop is seen as constructive, with expectations for continued strong demand for services [12][14] - Management anticipates improved profitability in Q2 2023, driven by the full contribution from all operational mines [23] Other Important Information - ProFrac incurred 20 million in costs related to the conversion and optimization of acquired assets, which were not added back to adjusted EBITDA [24] - The company is committed to enhancing free cash flow generation through materials integration and capturing margins from selling sand and logistics [14] Q&A Session Summary Question: Thoughts on Q2 profitability and stimulation services growth - Management did not provide specific guidance but expects consistent improvement as they digest recent transactions [31] Question: CapEx trends for the next quarters - CapEx is expected to be heavier in Q2 and Q3, with a disciplined approach to capital allocation [33] Question: Dynamics in gas vs. oil basins - Management noted a disciplined approach from customers and a constructive outlook for gas markets, with steady capital deployment [37] Question: Should 20 million be added back to Q1 EBITDA for Q2 starting point? - Management confirmed that the $20 million in nonrecurring costs should be considered when evaluating Q2 performance [40] Question: Electric fleets and fleet count stability - Management believes electric fleets will displace Tier 2 equipment, contributing to a more concentrated and technologically advanced market [44] Question: Free cash flow allocation and debt management - The goal is to minimize the revolver and use free cash flow to pay down debt, with plans for a return of capital program to be presented to the board [48]