ProFrac (ACDC) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2023, the company generated $688 million of adjusted EBITDA on$2.6 billion in revenue, resulting in an overall EBITDA margin of 26% [23] - Free cash flow for the year was $293 million, an increase of 173$489 million, a sequential decrease primarily due to a lower fleet count [23] - EBITDA for the fourth quarter was $110 million, impacted by lower efficiencies and pricing [24] Business Line Data and Key Metrics Changes - Stimulation services revenues in the fourth quarter decreased to$403 million, with 75% of the reduction attributed to a lower number of fleets [24] - The Proppant Production segment generated $383 million in full-year revenues, significantly up from$90 million in 2022, with fourth quarter revenues at $93 million, down approximately 6$34 million in the fourth quarter, down approximately 22% from the third quarter [26] Market Data and Key Metrics Changes - The company expects to improve utilization by at least 30% in 2024, with a focus on dedicated agreements with operators at favorable prices [16][18] - Current spot pricing for frac sand is in the $20s to$30s, with a focus on minimizing exposure to the spot market [41] Company Strategy and Development Direction - The company aims to enhance its position as a leader in the oilfield services industry through strategic acquisitions and operational improvements [8][14] - Focus areas for 2024 include maximizing vertical integration, improving asset utilization, and maintaining low operating costs [12][13] - The company plans to generate significant cash flow to deleverage its balance sheet and potentially return cash to shareholders [14] Management Comments on Operating Environment and Future Outlook - Management acknowledged challenges in 2023 due to market conditions but expressed optimism for improved results in 2024 [6][10] - The company is committed to correcting past mistakes and regaining market share, regardless of overall market activity [11][61] - Management expects to achieve profitability per active fleet in the range of $20 million to$25 million in the first half of 2024 [34][46] Other Important Information - The company completed several acquisitions in 2023, expanding its asset base and geographic footprint [7] - A recapitalization of the senior secured term loan was completed, enhancing financial flexibility [8] Q&A Session All Questions and Answers Question: Can you talk about the market structure and your strategy regarding fleet reactivations? - The company added 10 fleets, primarily in the first quarter, and expects to reach around 41% to 42% utilization, potentially increasing to 45% if market conditions allow [33] Question: What are the current dynamics in pricing and supply-demand? - The market is currently flat, with the company adding fleets in an environment without an increase in active fleets, focusing on cost absorption and reducing per unit costs [39] Question: Can you provide insights on free cash flow expectations for 2024? - The company expects to generate significant free cash flow and aims to cut its debt in half this year [43] Question: What is the company's exposure to the natural gas market? - Approximately one-third of the business is exposed to gas markets, and the company remains committed to its customer base in these areas [49] Question: What are the drivers for the expected increase in utilization? - Improved demand in the Permian assets and a focus on providing excellent service to customers are key drivers for increased utilization [52]