Greetings and welcome to the ProFrac Fourth Quarter and Year End 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Michael Messina, Director of Finance. Please go ahead.

Thank you, operator. Good morning, everyone. Thank you for joining us for ProFrac Holding Corp.'s conference call and webcast to review our results for the fourth quarter and year ended December 31st, 2024. With me today are Matt Wilks, Executive Chairman; Ladd Wilks, Chief Executive Officer; and Austin Harbour, Chief Financial Officer. Following my remarks, management will provide high level commentary on the operational and financial highlights of the quarter and year before opening up the call to your questions. A replay of today's call will be available by webcast on the company's website, at pfholdingscorp.com. More information on how to access the replay is included in the company's earnings press release. Please note that the information reported on this call speaks only as of today, March 6th, 2025. And therefore you are advised that any time sensitive information may no longer be accurate at the time of any subsequent replay, listening or transcript reading. Also, comments on this call may contain forward-looking statements within the meaning of the United States Federal Securities laws, including management's expectations of future financial and business performance. These forward-looking statements reflect the current views of ProFrac's management and are not guarantees of future performance. Various risks, uncertainties and contingencies could cause actual results, performance or achievements to differ materially from those expressed in management's forward-looking statements. The listener or reader is encouraged to Read ProFrac's Form 10-K and other filings with the Securities and Exchange Commission, which can be found at sec.gov or on the company's Investor Relations website section under the SEC's filing tab to understand those risks, uncertainties and contingencies. The comments today also include certain non-GAAP financial measures as well as other adjusted figures to exclude the contribution of Flotek. Additional details and reconciliations to the most directly comparable, consolidated and GAAP financial measures are included in the quarterly earnings press release, which can be found on the company's website. And now I would like to turn the call over to ProFrac's Executive Chairman, Mr. Matt Wilks.

Thanks, Michael, and good morning, everyone. I'll start with some brief remarks. Ladd will elaborate on the performance of our subsidiaries and then Austin will walk through our financial performance. ProFrac's leadership across the completion value chain consistently positions us to achieve strong financial and operational performance. We continue to execute our differentiated commercial strategy by partnering with operators who prioritize integrated, highly efficient solutions at scale. As the market evolves and operators consolidate, our ability to provide comprehensive solutions at the pad enables us to capitalize on new opportunities in the most active US basins. In Stimulation services, our emphasis on improving service quality, coupled with our internal R&D, manufacturing and maintenance capabilities has allowed us to efficiently maintain and upgrade our pressure pumping fleet and drive commercial innovation. In essence, every fleet we deploy must consistently meet our rigorous quality and reliability standards. Excellence in operations is also underpinned by having an efficient maintenance program. To this end, our asset management platform, which prioritizes quality control and centralized maintenance is making a big difference in the quality and economics of our pumping operations. Ladd will speak more to this, but at a high level, our integrated asset management program is designed to deliver field ready equipment that is engineered for safety and reliability, purpose built to meet every job requirement, and standardized in both appearance and operation to ensure that our equipment meets the highest industry standards. On our last call, I discussed record efficiencies in our Stimulation business, highlighting the best-in-class execution we see from our employees in the field every day. As Ladd will discuss, we have already seen a sizable improvement in activity in our Stimulation business since the end of 2024 and I am confident that we will be able to surpass our Q3…

Thank you, Matt, and good morning, everyone. I'll provide more color on several themes Matt touched on as I elaborate on the segments, starting with the performance in our Pressure Pumping business. The fourth quarter saw an even more pronounced impact than we expected, which drove a sharper than anticipated drop in our active fleet count. Additionally, pricing softened in part due to lower activity. However, thanks to our cost control and collaboration with customers, we were able to right-size quickly without hampering our ability to redeploy assets. Looking at the Pressure Pumping market today, we have seen improvement in our active fleet count in the first few months of the year. In fact, we have the highest number of active fleets working today since midyear 2024, having already put six fleets back into active service since late 2024 into early 2025. Further, we are effectively sold out of our e-fleet and next generation gas burning equipment. Combined, 80% of our active fleets utilize next generation equipment. The pickup in frac fleets has been more pronounced in West Texas and South Texas operating regions. Perhaps more importantly for you all to know is that we have increased our base of active operating assets from their respective troughs in the fourth quarter in all our ongoing active regions. Looking forward, we believe the frac market will support marginal growth from current levels as we progress through the year. Given our excellence and execution both in our asset management program and the field, we anticipate that we will continue to deliver our new efficiency records in 2025. I would like to genuinely thank our hard working employees for their determination, perseverance and strong performance, despite what has been a challenging run in the market. We are proactively engaging with customers, so that…

Thanks, Ladd. In the fourth quarter revenues were $455 million, as compared with $575 million in the third quarter. We generated $71 million of adjusted EBITDA with an adjusted EBITDA margin of 16%, compared with $135 million in the third quarter or 23% of revenue. Topline and margins were impacted by sharp year-end drop off in activity and continued pricing pressure during the period as referenced earlier. Of note, EBITDA in the fourth quarter included reactivation costs of approximately $4 million in repair and maintenance, and approximately $2 million in labor costs associated with excess crews in anticipation of expected fleet redeployments in the fourth quarter. For full year 2024, revenues were $2.2 billion with adjusted EBITDA of $501 million, and an adjusted EBITDA margin of 23%. Free cash flow was $54 million in the fourth quarter, an increase from $31 million in Q3 due to a step up in asset sales as we generated $41 million primarily from a sale leaseback transaction. For the full year, free cash flow was $185 million. Turning to our segments, Stimulation services revenues were $384 million in the fourth quarter versus $507 million in the third quarter on both the decline in average active fleet count and pricing. Adjusted EBITDA in Q4 was $54 million versus $113 million in Q3 with margins coming in at 14% versus 22% in the prior quarter. This segment was impacted by approximately $9 million in shortfall expense related to our supply agreement with Flotek compared to $7 million in the prior quarter. Of note, as we initiated and implemented our asset management program, we allocated capital to maintain, standardize and activate fleets. As mentioned earlier, we have seen a significant improvement in our Stimulation services business since the Q4 trough, adding six fleets. For full year 2024,…

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from Saurabh Pant with Bank of America. Please proceed with your question.

Hi. Good morning, Matt, Ladd and Austin.

Good morning.

Good morning.

Good morning.

Matt, Ladd, maybe I'll start with a big picture question on activity improvement. I'm thinking Stimulation, but really it sounds like even on the Proppant side you are seeing good improvement early on in the year. You did give a little color in your prepared remarks, but maybe elaborate a little bit on what exactly is driving that? I think some of it is timing, right, because the fleets that were laid down early on in the fourth quarter are coming back. So six fleets, I guess, part of it is that, but what exactly is driving that? And as we think through the rest of the year, I know operating leverage is pretty significant in this business, but pricing might be a little bit of a headwind 4Q to 1Q. How should we think about profitability moving through 2025, any preliminary color?

Yes. I think from an activity standpoint, in Q4, due to seasonality and budget exhaustion, it slowed down. But the year started off really well. Operators getting right back to work and picking up fleets and as well as adding volumes on sand. So it's been a nice start to the year. Pretty excited about that. When we look at the availability on the supply side, whether that's on horsepower or on sand, the demand has picked up quite a bit. And it's put us in a situation where essentially we have a choice between pushing pricing or focusing on de-risking those cash flows and the overall profitability over time. And the number one priority for that is to make sure that we preserve our long-term relationships with customers and deliver something that's stable through the cycle and delivers us the respectable return. So rather than being too aggressive on pricing, we're looking at the long-term benefits of the sustainable pricing and great customer relationships. So our focus is on getting longer term commitments, so that we can deliver longer term financial results for our stakeholders.

Okay. Perfect. I got it. And then the next one, I'm mixing two topics but for a reason. On Livewire and then on CapEx guidance for 2025, $250 million to $300 million. Maybe just give us a little color on how quickly do you think the Livewire business ramps up? How much capital? How quickly are you will to put into that business and then just the pieces within that $250 million to $300 million, how much of that is going towards upgrades? Any more e-fleets? Anything else right? Just a little more color on where that, where those dollars are going?

Yes, certainly. So when we look at the power business, we've got embedded demand internally. That is our first priority and our focus. But we're also evaluating other market opportunities, whether that's in oil and gas or AI or wherever that may be. We're pretty excited about it, see a lot of opportunities, but we're being selective and patient with how we approach that. We look forward to updating everyone soon. As far as the capital outlay, I'll defer to Austin.

Yes. Appreciate the question. So I think just to start right on the growth CapEx side, we're not going to invest capital unless we can see real returns coming back from those investments, particularly on the growth side and on the upgrade side. So I would lead with that. I think to the specific breakdown, right now, the majority of our spend is going to come on the Stim services side. And then in addition to that, we've got a number of ongoing projects and the Proppant Production segment, again all with paybacks that meet our economic return and threshold profile. With respect to Livewire, I'll echo Matt's comments and sentiment there. I think, right, as we have more detail and more appropriate detail to share, we'll do that at that time.

Okay. Perfect. Austin, one very quick follow-up for you, unrelated. The $41 million in asset sales, can you give us any color at all on what that was?

Yes. It was a sale leaseback on some of our Stim services' assets.

Okay. I got it. Okay. Perfect. Thank you, Matt, Ladd, Austin. I'll turn it back.

Appreciate it. Thanks for dialing-in.

Thank you. Our next question is from Stephen Gengaro with Stifel. Please proceed with your question.

Thanks. Good morning, everybody.

Good morning.

Can you give us your perspective on just as we sort of think about '25 as it evolves on just kind of frac supply demand and what your sense is for attrition of older assets and just kind of thinking about maybe what we look like as we get closer to the end of the year?

Certainly. Great question. When we look at the overall fleet for the industry and especially when you couple it with high utilization rates and efficiencies that we're seeing across the market, it's given an accelerated attrition profile to where you use equipment quicker, and it increases your maintenance CapEx and R&M cycles. You're really putting this equipment through a lot. And because of that you've seen an accelerated cycle where there's less equipment available and it's really chewed through this equipment to where a lot of the legacy equipment is just not up to par with where the industry has come. That's why we're so excited about our platform and how well we manage our assets as well as the increased benefits that we're already seeing from the asset management program that we've put in place. So when you look at supply and demand, we think it's pretty tight out there, and when the industry's fleet count is dropping, it's easier to manage assets and allocate the appropriate assets to the right areas and to put up phenomenal efficiencies and utilization rates for your customer. But it chews through a lot of equipment and it's unseen by the market until it stabilizes and starts building the other way. I think that this is going to be a common theme all throughout 2025 across the industry of realizing just how short the market is of horsepower. I think in this part of the cycle it presents a lot of opportunities to get very substantial price improvements. However, we're taking the long game here and looking at what our long-term relationships with customers should be and how we should structure that relationship making sure that we have partnerships over short-term financial game.

I would just add to that too, if we continue to see some green shoots, particularly in the natural gas heavy markets, this is, I think, going to become even more acute as we move throughout the year and into next year. Kind of the two-pronged approach of increased attrition coupled with potential increases in demand on the gas side in addition to kind of flattish activity on the oil side. I think, we're going to see it. We could see a meaningful tightening if that unfolds.

And the most exciting outcome is that really this pushes and accelerates the industry's move into higher spec, higher value platforms that is certainly a benefit to us, because of our fleet configuration.

No. That makes sense. Thank you. And the other question, could you give us a sense or range for where pricing is today on a kind of a contracted and maybe contracted and spot basis versus where it was 12 months ago? I'm just trying to get a sort of just a sense for magnitude of change?

Yes. I know you'd love to have that answer. We're going to pass on that one. I'll tell you. We like the frame up that we have. We like where supply and demand is at and where it's taking us. And our main focus is, we don't want to be greedy here and complicate our relationships with our customers. But there's certainly greater opportunities to push pricing, many of those. That's not something that we're as interested in getting in the short-term. We want to look at preserving our relationships with our customers and finding that right balance for full cycle returns.

Okay. Great.

And I would just add again, I can't overemphasize this enough. Where we are spending on growth CapEx and stim services, it's because we are meeting our economic return thresholds, right. So I just want to put a point in that.

Makes sense.

Yes. So much of this business is about utilization and operating leverage and so there's a good balance by working with the right customers and finding the right relationships, so that you create mutual value and benefit.

Got you. That makes sense. And then one final, since you didn't quite answer the other one. But no, seriously, the other one was, do you see, and I'm not sure how to exactly ask this, but when we think about the electrification of some of the frac fleets and we see power being pulled into other end markets, right, like data centers, et cetera. Is there any concern that the cost of electricity or the cost of reception or whatever it might be will rise because you're getting that power maybe pulled away from the oil patch by a customer who's maybe willing to pay more for it?

That's a -- those are some high class problems. The way that we look at it is that with our vertical integration and our in-house packaging of these platforms, we want to focus on and develop our growth trajectory around supporting our fleets, but it also -- we're allocators and we're going to allocate for the best returns. But again this is about preserving long-term relationships and so we'll meet all of our commitments to our customers. And as we look at the landscape, I think that there's terrific demand in other segments, in other areas. And we're closely evaluating this specifically for what is the best allocation of resources and how do we sustain both businesses without leaving any of our valued customers stranded in any form or fashion. And so there's careful consideration there, and we're allocators looking for the best returns and ultimately the best returns are from sustainable full cycle returns, and looking at the return on assets through the life of the asset. And so we're evaluating this very, very closely. But we see our in-house demand as a proving ground and an excellent launching pad for some of these opportunities that we see in the market.

Great. That's great color. Thank you gentlemen.

Thank you.

Thank you. Our next question is from Dan Kutz with Morgan Stanley. Please proceed with your question.

Hey, thanks. Good morning.

Good morning.

Good morning, Dan.

So I just wanted to kind of roll up a couple of data points that you guys gave on your active frac fleet count. So I think that you'd said that you've reactivated six fleets and that activity is up more than 25% from the 4Q lows. So that would kind of imply maybe you're running mid-20s, maybe low mid-20s fleets before and then now you're around 30 fleets. Am I thinking about that the right way? And is 30 a decent number to think about through 2025 in terms of an active fleet count? Thanks.

Yes. I think the low-30s is a safe place to look at throughout the year. I think and certainly for -- that's about where we are now. What we're looking at is, does it, we're not going to sacrifice financial results for growth. This is about being active and maintaining a healthy footprint in a great market and establishing the right relationships. Now if for whatever reason there's a call from the market for the demand is there, for more supply, our number one priority is that we won't ramp up activity unless we see the economic returns that support it. And so we're patiently watching it, excited about what we're seeing in gas and think that there's -- as we go into the latter part of this year and into next year, that there may be a need there. But our position is that we remain patient and become great allocators of capital.

Great. That's all and really helpful. Then maybe on the Proppant business, you guys have kind of given us a bunch of color on some of the factors driving the improvement that you see for that business this quarter and this year. But a couple other components that I wanted to ask about are market share gains contemplated in the improvement and in terms of just you guys, you'd flag that, you're looking to optimize the utilization at a given mine at a given time. Is there any -- are there any mines that were outright shut down to manage the cost structure, or is it just more a matter of kind of managing the volumes and utilization across the different mines? And then just the last piece is how much -- what's kind of the outlook that's contemplated for your internal versus external Proppant sales, if you don't mind? Thanks.

Yes. In 2024, we communicated that we had idled an asset in the Haynesville market. That asset is still idle. But as we move through 2025 and with the potential of increased activities there, there may be a call on that asset to bring it back. But where we sit now, we have seven assets that you know that are operational and with many of them seeing the best utilization and production rates that they've -- that they've ever had. So we're pretty excited about where these things are at. We've got a robust order book and what we're -- as we move through the year, our goal is to focus on long-term commitments, and rather than taking the first opportunity to push price, which right now we're seeing those types of opportunities. But our focus is let's derisk these cash flows and turn them into longer term commitments instead of just a nice feel good at the beginning of the year.

Got it. It's all really helpful. Thanks a lot. I'll turn it back.

Thank you.

Thanks, Dan.

Thank you. This concludes today's question-and-answer session. I'd like to hand the call back over to Matt Wilks for any closing comments.

Thank you everyone. We appreciate your time today. We are confident that our integrated solutions and strategic partnerships will continue to drive our success in the most active US basins. Our focus on innovation, including next generation equipment and the launch of Livewire Power positions us to capitalize on emerging opportunities. We look forward to connecting with everybody on our first quarter 2025 results call. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.