ACDC ProFrac Holding Corporation

WILLOW PARK, Texas, Nov. 9, 2023 /PRNewswire/ -- ProFrac Holding Corp. (NASDAQ: ACDC) ("ProFrac", or the "Company") today announced financial and operational results for its third quarter ended September 30, 2023.

Third Quarter 2023 Results and Recent Highlights

• Total revenue was $574.2 million compared to $709.2 million in the second quarter of 2023  
• Net loss was $17.9 million compared to a net loss of $4.6 million in the second quarter of 2023
• Adjusted EBITDA⁽¹⁾ was $149.3 million
• Net cash provided by operating activities was $123.6 million
• Free cash flow was $72.6 million, which combined with the preferred equity issuance, reduced net debt by $122.9 million⁽²⁾
• Further right-sized active fleet count in August to optimize calendar efficiencies, increase utilization and reduce costs
• Issued $50 million of perpetual preferred equity securities convertible into ProFrac Holding Corp. Class A common stock at a conversion price of $20.00 per share, subject to adjustment, to The Wilks Family

Matt Wilks, ProFrac's Executive Chairman, stated, "After right-sizing our fleet count and our overall support structure, we believe we have realized the synergies from our acquisitions and positioned the company to capitalize on the operating leverage this business has when we experience incremental customer demand.

"We are now focused on pursuing dedicated agreements in 2024 with operators under contracted terms. Driven by our recent successes in the ongoing RFP season, we expect to be in a position to increase our fleet count in the first quarter, with the majority of those fleets having already been committed.

"In addition, the first step to unlocking the potential of our Proppant Production segment is well underway. We are marketing all eight mines for the first time in an RFP process, and we are seeing positive results to date. We anticipate having more contracts with third parties, in addition to volumes demanded from ProFrac and spot customers. We expect this to greatly increase the utilization of our mining assets and lower our mining costs per ton.

"Our current visibility gives us confidence that 2024 will be much improved over 2023. We are well-positioned and excited for the coming year," concluded Wilks.

Third Quarter 2023 Financial Results

For the third quarter of 2023, consolidated revenues totaled $574.2 million, down approximately 19% sequentially. The decrease was driven primarily by a lower average active fleet count and associated material sales, when compared to the second quarter of 2023.

Selling, general, and administrative costs were $61.0 million in the third quarter, of which $6.6 million was related to Flotek and $4.4 million was related to stock-based compensation.

Net loss for the third quarter was $17.9 million, and basic and diluted loss per Class A common share was $0.21.

In the third quarter, Adjusted EBITDA was $149.3 million, a decrease of 18% from the $182.5 million in the second quarter.

Net cash from operating activities was $123.6 million in the third quarter.

Business Segment Information

The Stimulation Services segment generated revenues of $489.5 million in the third quarter of 2023, which resulted in $93.3 million of Adjusted EBITDA.

The Proppant Production segment generated revenues of $98.4 million in the third quarter of 2023, which resulted in $51.6 million of Adjusted EBITDA. Approximately 29% of the Proppant Production segment's revenue was intercompany.

The Manufacturing segment generated revenues of $43.8 million in the third quarter of 2023, which resulted in $1.6 million of Adjusted EBITDA. Approximately 97% of the Manufacturing segment's revenue was intercompany.

Our Other Business Activities generated revenues of $48.6 million in the third quarter of 2023, which resulted in $2.8 million of Adjusted EBITDA. The Other Business Activities solely relate to the results of Flotek.

Capital Expenditures and Capital Allocation

Cash capital expenditures in the third quarter totaled $52.6 million. During the third quarter, the Company decided to further reduce capital expenditures to help the Company maintain its target return thresholds on capital investments. The Company now expects to incur approximately $280 - $290 million of capital expenditures in 2023.

Balance Sheet and Liquidity

Total net debt outstanding as of September 30, 2023 was $1,055.8 million, a reduction of approximately $122.9 million from the prior quarter.

Total cash and cash equivalents as of September 30, 2023 was $25.1 million, $4.5 million was related to Flotek.

As of September 30, 2023 the Company had $136.6 million of liquidity, including $20.6 million in cash and cash equivalents, excluding Flotek, and $116.0 million of availability under its asset-based credit facility.

Footnotes

Conference Call

ProFrac has scheduled a conference call on Thursday, November 9, 2023 at 11:00 a.m. Eastern time / 10:00 a.m. Central time. Please dial 412-902-0030 and ask for the ProFrac Holding Corp. call at least 10 minutes prior to the start time of the call, or listen to the call live over the Internet by logging on to the website at the address https://ir.pfholdingscorp.com/news-events/ir-calendar. A telephonic replay of the conference call will be available through November 16, 2023 and may be accessed by calling 201-612-7415 and using passcode 13735084#. A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days.

About ProFrac Holding Corp.

ProFrac Holding Corp. is a technology-focused, vertically integrated, innovation-driven energy services holding company providing hydraulic fracturing, proppant production, other completion services and other complementary products and services to leading upstream oil and natural gas companies engaged in the exploration and production ("E&P") of North American unconventional oil and natural gas resources throughout the United States. Founded in 2016, ProFrac was built to be the go-to service provider for E&P companies' most demanding hydraulic fracturing needs. ProFrac is focused on employing new technologies to significantly reduce "greenhouse gas" emissions and increase efficiency in what has historically been an emissions-intensive component of the unconventional E&P development process. ProFrac Corp. operates in three business segments: stimulation services, proppant production and manufacturing. For more information, please visit the ProFrac's website at www.pfholdingscorp.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release may be considered "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. In some cases, the reader can identify forward-looking statements by words such as "may," "should," "expect," "intend," "will," "estimate," "anticipate," "believe," "predict," or similar words. Forward-looking statements relate to future events or the Company's future financial or operating performance. These forward-looking statements include, among other things, statements regarding: the Company's strategies and plans for growth; the Company's positioning, resources, capabilities, and expectations for future performance; customer, market and industry expectations; the Company's pursuit of dedicated agreements in 2024 with operators under contracted terms; the Company's continued success in the RFP process; the Company's ability to increase the utilization of its mining assets and lower our mining costs per ton; the Company's intention to increase the number of fully integrated fleets; the Company's currently expected guidance regarding its 2023 financial and operational results; the Company's ability to earn its targeted rates of return; the Company's currently expected guidance regarding its planned capital expenditures; statements regarding the Company's liquidity; the Company's anticipated timing for operationalizing and amount of contribution from its fleets and its sand mines; the amount of capital that may be available to the Company in future periods; any financial or other information based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; any estimates and forecasts of financial and other performance metrics; and the Company's outlook and financial and other guidance. Such forward-looking statements are based upon assumptions made by the Company as of the date hereof and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to: the ability to achieve the anticipated benefits of the Company's acquisitions, mining operations, and vertical integration strategy, including risks and costs relating to integrating acquired assets and personnel; risks that the Company's actions intended to achieve its 2023 financial and operational guidance will be insufficient to achieve that guidance, either alone or in combination with external market, industry or other factors; the failure to operationalize or utilize to the extent anticipated the Company's fleets and sand mines in a timely manner or at all; the Company's ability to deploy capital in a manner that furthers the Company's growth strategy, as well as the Company's general ability to execute its business plans; the risk that the Company may need more capital than it currently projects or that capital expenditures could increase beyond current expectations; industry conditions, including fluctuations in supply, demand and prices for the Company's products and services; global and regional economic and financial conditions; the effectiveness of the Company's risk management strategies; the transition to becoming a public company; and other risks and uncertainties set forth in the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in the Company's filings with the Securities and Exchange Commission ("SEC"), which are available on the SEC's website at www.sec.gov.

Forward-looking statements are also subject to the risks and other issues described below under "Non-GAAP Financial Measures," which could cause actual results to differ materially from current expectations included in the Company's forward-looking statements included in this press release. Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward looking statements will be achieved, including without limitation any expectations about the Company's operational and financial performance or achievements through and including 2023. There may be additional risks about which the Company is presently unaware or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. The reader should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company anticipates that subsequent events and developments will cause its assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, it expressly disclaims any duty to update these forward-looking statements, except as otherwise required by law.

Non-GAAP Financial Measures

Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures and should not be considered as a substitute for net income (loss) or net cash from operating activities, respectively, or any other performance measure derived in accordance with GAAP or as an alternative to net cash provided by operating activities as a measure of our profitability or liquidity. Adjusted EBITDA and Free Cash Flow are supplemental measures utilized by our management and other users of our financial statements such as investors, commercial banks, research analysts and others, to assess our financial performance. We believe Adjusted EBITDA is an important supplemental measure because it allows us to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization) and items outside the control of our management team (such as income tax rates). We believe Free Cash Flow is an important supplemental liquidity measure of the cash that is available (if any), after purchases of property and equipment, for operational expenses, investment in our business, and to make acquisitions, and Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash in excess of our capital investments in property and equipment.

We view Adjusted EBITDA and Free Cash Flow as important indicators of performance. We define Adjusted EBITDA as our net income (loss), before (i) interest expense, net, (ii) income tax provision, (iii) depreciation, depletion and amortization, (iv) loss on disposal of assets, (v) stock-based compensation, and (vi) other charges, such as reorganization costs, stock compensation expense and other costs related to our initial public offering, certain credit losses, (gain) or loss on extinguishment of debt, unrealized loss (or gain) on investment, acquisition and integration expenses, litigation expenses and accruals for legal contingencies, and acquisition earn-out adjustments. We define Free Cash Flow as net cash provided by or (used in) operating activities less investment in property, plant and equipment plus proceeds from sale of assets.

We believe that our presentation of Adjusted EBITDA and Free Cash Flow will provide useful information to investors in assessing our financial condition and results of operations.

Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income (loss). Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect the most directly comparable GAAP financial measure. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of this Non-GAAP financial measure may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Net cash provided by operating activities is the GAAP measure most directly comparable to Free Cash Flow. Free Cash Flow should not be considered as an alternative to net cash provided by operating activities. Free Cash Flow has important limitations as an analytical tool including that Free Cash Flow does not reflect the cash requirements necessary to service our indebtedness and Free Cash Flow is not a reliable measure for actual cash available to the Company at any one time. Because Free Cash Flow may be defined differently by other companies in our industry, our definition of this Non-GAAP Financial Measure may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The presentation of Non-GAAP Financial Measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. The following tables present a reconciliation of the Non-GAAP Financial Measures of Adjusted EBITDA and Free Cash Flow to the most directly comparable GAAP financial measure for the periods indicated.

- Tables to Follow -