Acquisitions and Growth - ProFrac has completed six acquisitions since its IPO, adding approximately 18.7 million tons of annual sand capacity and 13 frac fleets[15]. - The company completed the acquisition of FTS International for approximately $405.7 million, enhancing its hydraulic fracturing service capabilities[26]. - ProFrac acquired U.S. Well Services for a total consideration of $479.1 million, focusing on electric-powered pressure pumping services[30]. - The acquisition of Performance Proppants for $475.0 million expands ProFrac's frac sand supply in the Haynesville basin[34]. - The company completed acquisitions of five businesses in 2022 for an aggregate consideration of approximately $1.3 billion[214]. - ProFrac's vertically integrated business model allows for faster integration of acquired assets and efficient cannibalization and refurbishment of equipment[17]. - The company has a focused M&A strategy to acquire high-quality businesses at attractive valuations to increase scale and expand technological capabilities[15]. Financial Performance - Revenues for the year 2022 reached $2,425.6 million, a significant increase from $768.4 million in 2021, representing a growth of 215%[230]. - Operating income for 2022 was $412.4 million, compared to an operating loss of $18.0 million in 2021, indicating a turnaround in profitability[230]. - Net income attributable to ProFrac Holding Corp. was $91.5 million in 2022, a recovery from a net loss of $43.5 million in the previous year[230]. - Total current assets increased to $865.4 million in 2022, up from $251.7 million in 2021, reflecting a growth of 243%[228]. - Total liabilities rose to $1,582.9 million in 2022, compared to $516.5 million in 2021, marking an increase of 206%[228]. - Cash and cash equivalents increased significantly to $35.1 million in 2022 from $5.4 million in 2021[228]. - The company reported total operating costs and expenses of $2,013.2 million in 2022, compared to $786.4 million in 2021, an increase of 156%[230]. - Basic and diluted earnings per Class A common share for 2022 were $2.06, reflecting a positive shift from the previous year's loss[230]. - The total assets of the company reached $2,933.6 million in 2022, a substantial increase from $664.6 million in 2021, representing a growth of 341%[228]. - The company reported a net income of $136.7 million for the year, a significant turnaround from the previous year's losses, indicating strong operational performance[236]. Debt and Financial Obligations - The company had a net debt of $924.3 million as of December 31, 2022, with total gross debt of $959.4 million[18]. - A 1% increase in interest rates would have resulted in an annual increase in interest expense of approximately $5.2 million based on outstanding debt as of December 31, 2022[204]. - The total gross debt as of December 31, 2022, was $959.4 million, a substantial increase from $306.7 million in 2021[323]. - The 2022 Term Loan Credit Facility was established with an aggregate amount of $450.0 million, with an effective interest rate of 11.1% as of December 31, 2022[324]. - The company repaid $143.8 million of the 2022 Term Loan Credit Facility using proceeds from its IPO[324]. - The principal maturity schedule for total debt outstanding as of December 31, 2022, is $959.4 million, with significant amounts due in 2023 ($127.6 million) and 2024 ($103.9 million)[345]. Operational Capacity and Production - As of January 3, 2023, ProFrac operates 42 active fleets, positioning it among the largest well stimulation service providers in the United States[15]. - ProFrac operates 42 active fleets, with four additional fleets under construction, including 20 Tier IV fleets and eight electric fleets[19]. - The company has an annual production capacity of approximately 21 million tons of proppants across eight mines, making it the largest producer of in-basin proppants[22]. - ProFrac's Kermit mine has a capacity of three million tons annually and is estimated to have 46 million tons of total recoverable mineral reserves[22]. - The Monarch mine in the Eagle Ford Shale represents approximately 21% of supply in the region, with a production capacity of three million tons annually[22]. - ProFrac's Haynesville mines account for approximately 57% of total production capacity in the Haynesville Shale, with an annual capacity of about 10 million tons[23]. Environmental and Regulatory Considerations - The company aims to equip all conventional fleets with emissions reduction technology, aligning with its environmental focus[19]. - The company is subject to stringent environmental regulations, which may impose costly compliance measures and could materially affect operations[42]. - The company has observed seasonal variations in operations, particularly a slowdown during the fourth quarter holiday season[37]. - The company recognizes the importance of ESG principles and has established an internal ESG committee to document sustainability efforts[35]. - The Biden Administration aims to reduce U.S. emissions by 50-52% below 2005 levels by 2030, with a focus on methane emissions reduction of at least 30% by 2030 relative to 2020 levels[48]. - The Inflation Reduction Act (IRA) commits approximately $375 billion over a decade to promote clean energy, including incentives for solar, wind power, and electric vehicles[48]. - Increased regulatory risks and costs related to GHG emissions and hydraulic fracturing could adversely impact demand for the company's services[51]. Employee and Safety Metrics - The company employed 3,664 people as of December 31, 2022, with a Total Reportable Incident Rate of 0.59, outperforming the industry average of 0.70[38]. - The Total Reportable Incident Rate (TRIR) for ProFrac was 0.59 for the year ended December 31, 2022, compared to the industry average of 0.70[18]. - The company has adopted enhanced safety measures in response to COVID-19 to protect employee health and minimize business disruption[38]. Stock and Equity Information - The company completed its IPO on May 17, 2022, raising net proceeds of $301.7 million from the sale of 16,000,000 shares at $18.00 per share[243]. - The company issued Class A shares in an IPO, raising $72.9 million, which contributed positively to its capital structure[236]. - ProFrac Corp. owned 34.1% of ProFrac LLC, with 54.0 million Class A shares and 104.2 million Class B shares outstanding[248]. - The company recognized stock-based compensation of $4.1 million, which includes $2.2 million related to deemed contributions, indicating ongoing investment in employee incentives[236]. - The company reported stock-based compensation of $45.6 million for the year ended December 31, 2022[248].

Financial Data and Key Metrics Changes - For Q4 2022, consolidated revenue was $794 million, representing a nearly 14% sequential increase, driven by a higher average active fleet count of 36 [21] - Adjusted EBITDA for Q4 was $269 million, slightly up from the previous quarter, with annualized adjusted EBITDA per fleet at approximately $30 million [22] - Full year revenue totaled $2.4 billion, with adjusted EBITDA of $836 million [22] Business Segment Data and Key Metrics Changes - The Simulation Services segment generated $767 million in revenue for Q4, with adjusted EBITDA of $252 million, reflecting higher active fleet count [22] - Proppant Production segment revenue increased approximately 44% in Q4 to $35 million, with adjusted EBITDA growing 120% to roughly $20 million [23] - The Manufacturing segment generated $51 million in revenue for Q4, up 5% sequentially, but faced cost pressures leading to negative adjusted EBITDA of $3.1 million [24] Market Data and Key Metrics Changes - The company averaged 2 mines operating in Q4, with expectations to exit the quarter with a total of 8 mines and nearly 23 million tons of in-basin annual nameplate production capacity [14] - The company reported that 59% of its fleets are next-generation, fuel-efficient fleets, which offer significant fuel cost savings and emission reductions [16] Company Strategy and Development Direction - The company emphasized its "Acquire, Retire, Replace" strategy, focusing on vertical integration to reduce market volatility and enhance profitability [6][7] - Recent acquisitions, including Producer Services Corp and Rev Energy Services, are aimed at improving the economics of acquired fleets and expanding manufacturing presence [10] - The company aims to increase materials penetration to 60% or 70% and is focused on optimizing its supply chain and service offerings [14][19] Management's Comments on Operating Environment and Future Outlook - Management noted that lower commodity prices have impacted customer business, but service pricing levels remained steady [17] - The company is optimistic about maintaining financial expectations for 2023, despite potential headwinds from the commodity market [20] - Management highlighted the importance of maintaining high-quality assets and operational efficiency through fleet retirements and upgrades [12][20] Other Important Information - Total debt balance at year-end was $941 million, with a pro forma total of approximately $1.3 billion after recent acquisitions [25] - Capital expenditures for 2022 were $356 million, with expectations for 2023 to align with 2022 levels [26] Q&A Session Summary Question: Clarification on EBITDA bridge and active fleets - Management clarified that the additional 12 active fleets come from a combination of acquisitions and new builds, with a significant increase in sand capacity expected [30] Question: Thoughts on debt levels and deleveraging plans - Management is focused on deleveraging and believes cash flow generation will address leverage concerns [32] Question: Capacity reduction and fleet retirements - Management confirmed the retirement of 3 fleets and discussed the strategy behind evaluating fleet quality before deciding on retirements [35][36] Question: Vertical integration strategy and sand capacity - Management acknowledged the potential for increased fleet deployment in the Haynesville but emphasized a cautious approach due to market conditions [40] Question: Customer preference for dual fuel versus electric fleets - Management noted that customer preferences vary by region, with a focus on displacing diesel fuel as a key trend [48]

IPO and Acquisitions - The company completed its IPO on May 12, 2022, raising net proceeds of $303.9 million from the sale of 16,000,000 shares at $18.00 per share, with an additional 2,228,153 shares sold through an over-allotment option[238]. - The company acquired FTS International, Inc. for a total purchase price of $405.7 million, consisting of $332.8 million in cash and $72.9 million in equity interests[241]. - The company acquired SP Silica of Monahans, LLC for $97.7 million in cash, with the purchase price subject to a working capital adjustment to be finalized in Q4 2022[246]. - The company merged with U.S. Well Services, Inc., issuing approximately 12.9 million shares valued at $270 million and retiring $170 million of USWS debt[247]. - Recent acquisitions, including USWS and Monahans, have contributed to revenue growth and operational changes not reflected in historical results[270]. Operational Performance - The company operates 34 hydraulic fracturing fleets, with 31 active as of September 30, 2022, positioning itself as one of the largest providers in North America[250]. - The company has experienced improved operational results due to increased fleet utilization and higher prices for products and services, despite facing inflationary pressures[254]. - Stimulation services revenues increased by $477.9 million, or 251%, for Q3 2022 compared to Q3 2021, driven by higher customer activity and increased pricing[279]. - Manufacturing revenues rose by $28.9 million, or 145%, for Q3 2022 compared to Q3 2021, attributed to increased demand for oilfield service components[280]. - Proppant production revenues grew by $18.2 million, or 285%, for Q3 2022 compared to Q3 2021, due to higher production and pricing in response to increased demand[281]. - Total revenues for Q3 2022 were $696.7 million, a significant increase from $195.9 million in Q3 2021[277]. - Adjusted EBITDA for Q3 2022 was $256.1 million, compared to $34.5 million in Q3 2021, reflecting improved operational performance[277]. Financial Performance - The average oil price per barrel was $93.18 in Q3 2022, up from $70.62 in Q3 2021, indicating favorable market conditions[277]. - The average natural gas price per thousand cubic feet was $8.30 in Q3 2022, compared to $4.53 in Q3 2021, reflecting increased energy prices[277]. - The company recorded a net income of $143.4 million for Q3 2022, compared to a net loss of $14.1 million in Q3 2021[277]. - Total revenues for Q3 2022 increased by $500.8 million, or approximately 20.5%, compared to Q3 2021, driven by increased customer activity and pricing[283]. Costs and Expenses - Stimulation services costs for Q3 2022 rose by $236.2 million, or 162%, compared to Q3 2021, primarily due to increased activity levels and input cost inflation[284]. - Manufacturing costs for Q3 2022 increased by $20.0 million, or 121%, compared to Q3 2021, attributed to higher demand and raw material costs[285]. - Proppant production costs for Q3 2022 surged by $10.0 million, or 314%, compared to Q3 2021, influenced by a litigation charge and increased production costs[286]. - Selling, general and administrative expenses for Q3 2022 increased by $50.2 million, or 251%, compared to Q3 2021, mainly due to stock-based compensation and higher personnel costs[290]. - Adjusted EBITDA for stimulation services increased by $218.0 million for Q3 2022, reflecting higher active fleets and pricing[297]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $256.7 million for the nine months ended September 30, 2022, compared to $37.7 million for the same period in 2021[314]. - Net cash used in investing activities was $629.8 million for the nine months ended September 30, 2022, primarily due to acquisitions and capital expenditures[315]. - Working capital increased by $285.9 million to $290.9 million as of September 30, 2022, driven by higher activity levels[311]. - The 2022 capital expenditure budget is estimated to be between $330 million and $350 million, focusing on growth-related initiatives[308]. - Capital expenditures for the nine months ended September 30, 2022, were $239.5 million, up from $70.6 million in the same period in 2021, with expectations for further increases in 2022 and 2023[355]. Debt and Liquidity - The New ABL Credit Facility was amended on November 1, 2022, increasing the Maximum Revolver Amount from $200 million to $280 million and the Incremental Facility to $120 million, raising the potential size to $400 million[325]. - As of September 30, 2022, the Company had approximately $525.7 million outstanding under the New Term Loan Credit Facility, which matures on March 4, 2025[326]. - The interest rate for the New Term Loan Credit Facility was 11.10% as of September 30, 2022, with SOFR Rate Loans ranging from 7.25% to 8.00% depending on the Total Net Leverage Ratio[329]. - The New ABL Credit Facility requires a minimum liquidity of $6.7 million at all times, while the New Term Loan Credit Facility requires a minimum liquidity of $30 million[324][336]. - The New Term Loan Credit Facility is subject to a quarterly mandatory prepayment starting December 31, 2022, based on the Applicable ECF Percentage, which ranges from 50% to 25% of Excess Cash Flow[332]. - The Company borrowed approximately $164 million under the Amended ABL Credit Facility in connection with the acquisition of USWS on November 1, 2022[325]. - The New ABL Credit Facility bears an unused line fee ranging from 0.250% to 0.375% depending on average daily availability over the last three months[321]. - The New Term Loan Credit Facility prohibits Capital Expenditures exceeding $275 million for the fiscal year ended December 31, 2022, or 50% of Consolidated EBITDA for any four consecutive fiscal quarters[337]. - The New ABL Credit Facility interest rate was 7.00% as of September 30, 2022[321]. - The Company was in compliance with all covenants related to both the New ABL Credit Facility and the New Term Loan Credit Facility as of September 30, 2022, with no defaults reported[324][338]. - ProFrac LLC must maintain a Total Net Leverage Ratio of no greater than 3.00:1.00 and a Fixed Charge Coverage Ratio of at least 1.00:1.00 as per the First Financial Loan agreement[343]. Risk Management - ProFrac LLC's material and fuel purchases expose it to commodity price risk, particularly in proppants, chemicals, and fuel costs, which are subject to market volatility[362]. - The company does not engage in commodity price hedging activities, which may affect its ability to pass on price increases to customers in the future[362]. - ProFrac LLC has established procedures to manage credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts[365]. - The company does not utilize derivative instruments to manage interest rate risk associated with its variable rate debt[363].

Financial Data and Key Metrics Changes - Revenue for Q3 2022 totaled $696 million, up nearly 20% compared to Q2 2022 [25] - Net income was $143 million for the quarter, compared to $70 million in Q2 2022 [26] - Adjusted EBITDA increased to $256 million, or $267 million when excluding losses from other business activities, representing a 22% sequential increase [16][26] - Annualized adjusted EBITDA per fleet rose 23% to $34 million from $28.1 million in Q2 2022 [17][26] Business Segment Data and Key Metrics Changes - Stimulation services segment generated revenues of $669 million, up 16% from Q2 2022, with adjusted EBITDA of $250 million [28][29] - Manufacturing segment revenues increased by 40% to $49 million, with adjusted EBITDA slightly down to $8.4 million [30] - Proppant Production segment revenues rose 41% to $25 million, but adjusted EBITDA decreased to $9.2 million due to lower utilization and selling prices [31][32] Market Data and Key Metrics Changes - Demand for all fleet types remains strong, particularly for newer technology fleets [22] - Pricing levels for equipment types are expected to remain constructive into Q4 and 2023 [23] - The company reported the highest level of utilization in terms of pumping hours during Q3 2022 [21] Company Strategy and Development Direction - The company completed the acquisition of U.S. Well Services, positioning itself as the largest provider of electric fracturing services globally [8] - Focus on vertical integration to capture more of customers' completion budgets, with a goal to provide sand, chemicals, storage, and logistics [19][54] - Plans to increase the number of electric fleets and accelerate Tier 4 dual fuel upgrades to meet customer demand [15][36] Management's Comments on Operating Environment and Future Outlook - Management expressed a bullish outlook for the oil field services market, citing limited supply and strong demand [44][59] - The company anticipates a strong 2023 pipeline and book of contracted work, the strongest seen in 14 years [24][88] - Management highlighted the importance of reducing downtime and increasing efficiency through strategic investments in maintenance and upgrades [51][53] Other Important Information - Capital expenditures for Q3 2022 were $123 million, with expectations for full-year CapEx to range between $330 million and $350 million [34] - The company ended Q3 with $549 million in outstanding principal debt and $246 million in liquidity [38] - The company expects to maintain a leverage ratio below one turn of debt to EBITDA [59] Q&A Session Summary Question: Regarding U.S. Well Service assets and their EBITDA contribution - Management expects a 10% to 15% per fleet dilution across the entire fleet due to the integration of U.S. Well Services [64] Question: Thoughts on shareholder returns and potential buybacks - Management does not expect to see any buybacks, focusing instead on maintaining a high-quality float and returning capital to stakeholders [72][73] Question: Insights on the 2023 book of work and visibility across E&Ps - Management noted a strong backlog for 2023, with a fully sold-out market and challenges in the supply chain [88] Question: Guidance on SG&A expenses post-U.S. Well Services acquisition - Management indicated that SG&A will increase, estimating around $20 million per year for U.S. Well Services, with realization of synergies expected over the next six months [85] Question: Discussion on the ramp-up of new sand mines - Management expects a ramp-up period of two to four months for new mines, with plans to start shipping sand soon [82][84]

IPO and Acquisitions - The company completed its IPO on May 12, 2022, raising net proceeds of $303.9 million from the sale of 16,000,000 shares at $18.00 per share, with an additional 2,228,153 shares sold through an over-allotment option[231]. - The acquisition of FTS International, Inc. was finalized on March 4, 2022, for a total purchase price of $405.7 million, which included $332.8 million in cash and $72.9 million in equity interests[235]. - ProFrac II LLC acquired 100% of SP Silica of Monahans LLC and SP Silica Sales, LLC for $90 million in cash plus approximately $10 million in working capital adjustments on July 25, 2022[240]. - The company announced an agreement to acquire U.S. Well Services, Inc. on June 21, 2022, with total stock consideration estimated at approximately $270 million and the assumption of $55 million in USWS debt[245]. - The company has made strategic acquisitions, including Monahans, FTSI, and West Munger, which are expected to enhance future revenue streams[267]. Business Operations and Capacity - The company operates three business segments: stimulation services, manufacturing, and proppant production, with a focus on providing hydraulic fracturing services to upstream oil and gas companies[249]. - As of June 30, 2022, the company had an installed capacity of 34 conventional fleets, with 31 active fleets[249]. - The average number of active fleets increased to 31 in Q2 2022 from 14 in Q2 2021, reflecting expansion in operational capacity[274]. Financial Performance - Total revenues for Q2 2022 reached $589.8 million, a 237% increase from $174.8 million in Q2 2021[274]. - Stimulation services revenues increased by $408 million, or 242%, for Q2 2022 compared to Q2 2021, driven by higher customer activity and pricing[275]. - Manufacturing revenues rose by $18.6 million, or 115%, for Q2 2022 compared to Q2 2021, attributed to increased demand for products in the oilfield service industry[276]. - Proppant production revenues for Q2 2022 were $17.5 million, up from $7.8 million in Q2 2021, reflecting a significant growth in this segment[274]. - The company recorded a net income of $70.1 million for Q2 2022, compared to a net loss of $8.6 million in Q2 2021, showcasing a turnaround in profitability[274]. Operational Efficiency and Costs - The company has experienced improved operational results due to increased fleet utilization and higher prices for products and services, despite facing supply chain disruptions and inflationary pressures[252]. - Adjusted EBITDA for the stimulation services segment was $196.1 million in Q2 2022, compared to $30.5 million in Q2 2021, indicating improved operational efficiency[274]. - Operating costs for stimulation services increased by $218.1 million, or 172%, in Q2 2022 compared to Q2 2021, mainly due to higher activity levels and input cost inflation[280]. - Selling, general and administrative expenses surged by $73.5 million, or 521%, in Q2 2022 compared to Q2 2021, largely due to stock-based compensation and increased personnel costs[286]. Investments and Future Plans - The company is investing in advanced technologies to reduce greenhouse gas emissions and improve operational efficiency, including upgrading engines from Tier II to Tier IV DGB at a rate of five to ten engines per month[253]. - The 2022 capital expenditure budget is estimated between $265 million and $290 million, with significant investments planned for electric-powered fleets and a sand mine[305]. - Capital expenditures for the six months ended June 30, 2022, were $116.1 million, up from $53.6 million in the same period in 2021, with expectations for further increases in 2022 and 2023[347]. Debt and Financing - The New ABL Credit Facility was amended to increase the borrowing base and lender commitments from $100.0 million to $200.0 million on April 8, 2022[312]. - As of June 30, 2022, the New ABL Credit Facility had $143.4 million of borrowings outstanding and $9.2 million of letters of credit, resulting in approximately $47.4 million of remaining availability[312]. - The New Term Loan Credit Facility has an aggregate principal amount of $450.0 million, with approximately $302.4 million outstanding as of June 30, 2022[320]. - The interest rate for SOFR Rate Loans under the New Term Loan Credit Facility was 8.50% until October 1, 2022[321]. - The New Term Loan Credit Facility requires a Total Net Leverage Ratio of no more than 2.00 to 1.00 for the fiscal quarter ending on June 30, 2022[328]. - The New Term Loan Facility was amended on July 25, 2022, to increase its size by $150.0 million, with an option for an additional $100.0 million[332]. - The New ABL Credit Facility matures on March 4, 2027, while the New Term Loan Credit Facility matures on March 4, 2025[319][320]. - The principal maturity schedule for long-term debt as of June 30, 2022, totals $495.045 million, including $143.350 million under the New ABL Credit Facility and $302.380 million under the New Term Loan Credit Facility[347]. - A 1% increase in interest rates would result in an annual increase in interest expense of approximately $4.5 million based on outstanding debt as of June 30, 2022[355]. Credit Management - ProFrac LLC has established procedures to manage credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts[357].

Financial Data and Key Metrics Changes - The company reported consolidated revenue of $589.8 million for Q2 2022, a significant increase from $345 million in Q1 2022 and $421.6 million on a pro forma basis adjusted for the FTS acquisition [33] - Net income for the quarter was $70.1 million, with adjusted net income excluding stock compensation at $108.9 million compared to $24.1 million in the previous quarter [33] - Adjusted EBITDA was $210.6 million for Q1 2022, increasing to $218 million when excluding Flowtek's results, resulting in $28.1 million of EBITDA per fleet on an annualized basis [34] Business Line Data and Key Metrics Changes - The stimulation services segment generated revenues of $576.6 million in Q2 2022, up 72% from Q1 2022, with adjusted EBITDA for the segment at $196.1 million [40] - The manufacturing segment reported revenues of $34.9 million, an 8.9% increase from Q1 2022, with adjusted EBITDA slightly down to $9.4 million [41] - The profit production segment generated revenues of $17.5 million, up 41% from the previous quarter, with adjusted EBITDA increasing to $12.6 million [42] Market Data and Key Metrics Changes - The company noted that the supply of pressure pumping horsepower is limited, with many competitors sold out and facing supply chain challenges [7] - The company expects continued margin expansion due to the current market dynamics, which are seen as the best since entering the industry over 20 years ago [8] Company Strategy and Development Direction - The company has a two-pronged growth strategy focusing on acquiring, retiring, and replacing equipment while scaling vertical integration in the supply chain [10] - The recent acquisition of Monahans West Texas sand operations and the pending acquisition of US Well Services are part of the strategy to enhance cash generation and shareholder returns [12] - Vertical integration is emphasized as a means to reduce costs and improve profitability, with the company controlling critical inputs and logistics [14][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of the industry, citing strong pricing power and the ability to provide more materials to customers [22][26] - The company expects to exit Q3 2022 with 32 fleets and plans to deploy additional electric fleets, indicating a focus on innovation and efficiency [23] - Management highlighted the importance of maintaining a strong balance sheet and prioritizing shareholder returns while pursuing growth opportunities [11][59] Other Important Information - The company ended Q2 2022 with $477.5 million in outstanding principal and $88 million in liquidity, excluding Flowtek's liquidity [46] - Operating cash flow was $39.5 million during the quarter, impacted by a working capital build due to higher pricing and efficiency [47] Q&A Session Summary Question: Insights on bundling materials for profitability growth - Management indicated that bundling materials could provide significant profitability growth opportunities, with expectations of increased contributions from bundled services over the next 12 months [50][51] Question: Capital allocation priorities - The company prioritizes maintaining equipment, shareholder returns, and growth initiatives, emphasizing the importance of profitability in the oilfield services sector [56][58] Question: Power generation ownership and approach - Management is taking a cautious approach to power generation, focusing on reliability and control over the supply chain [64][65] Question: Sand capacity and pricing expectations - The company believes it can achieve annual production of 7 to 7.5 million tons of sand, with pricing expected to stabilize between $35 and $50 per ton [97][99] Question: Flowtech's profitability timeline - Management expects Flowtech to reach full contracted volumes by early 2023, with economies of scale driving profitability improvements [107] Question: Equipment demand and pricing outlook for 2023 - The company is seeing early demand for equipment in 2023, with expectations of better margins and continued pricing expansion [83]

IPO and Acquisitions - The company completed its IPO on May 12, 2022, raising net proceeds of $303.9 million from the sale of 16,000,000 shares at $18.00 per share, with an additional 2,228,153 shares sold through an over-allotment option[213]. - The acquisition of FTS International, Inc. was completed on March 4, 2022, for a total purchase price of $405.7 million, consisting of $332.8 million in cash and $72.9 million in equity interests[216]. - ProFrac II LLC agreed to acquire the SP Companies for $90 million in cash, with the closing expected to occur shortly after all conditions are met[216]. - The merger with U.S. Well Services, Inc. is anticipated to be completed in Q4 2022, with total stock consideration estimated at approximately $270 million based on the closing price of $21.49 per share[221]. Business Segments and Operations - The company operates three business segments: stimulation services, manufacturing, and proppant production, with installed capacity of 34 conventional fleets, 31 of which were active as of March 31, 2022[225]. - The company has invested in over 140 dual fuel kits for Tier IV engines to enhance its low carbon emission solutions[227]. - The company has experienced improved operational results due to increased fleet utilization and higher prices for products and services, despite facing supply chain disruptions and inflationary pressures[229]. - The company is upgrading five to ten engines per month from Tier II to Tier IV DGB to reduce carbon emissions and improve profitability[230]. - Approximately 84% of the manufacturing segment's revenue for Q1 2022 was intersegment revenue, indicating strong internal demand[233]. - The proppant production segment saw a significant increase in intersegment revenue from 29% in Q1 2021 to 69% in Q1 2022, reflecting enhanced operational integration[235]. Financial Performance - Total revenues increased by $195.4 million, or 130.6%, to $344.98 million for the three months ended March 31, 2022, compared to $149.59 million for the same period in 2021[252]. - Revenues from stimulation services rose by $192.5 million, or 134%, to $336.2 million, driven by increased customer activity and contributions from the FTSI acquisition[253]. - Adjusted EBITDA for the three months ended March 31, 2022, was $91.48 million, a significant increase from $17.69 million in the same period of 2021[252]. - Adjusted EBITDA for Stimulation services increased by $60.6 million to $73.6 million for Q1 2022, compared to $13.0 million in Q1 2021, driven by higher active fleets and increased pricing[268]. - Adjusted EBITDA for Manufacturing rose by $7.7 million to $10.0 million for Q1 2022, up from $2.3 million in Q1 2021, primarily due to increased product volume for oil field services customers[269]. - Adjusted EBITDA for Proppant production increased by $5.5 million to $7.9 million for Q1 2022, compared to $2.4 million in Q1 2021, attributed to higher proppant production and pricing in the Permian basin[270]. Costs and Expenses - Cost of revenues, exclusive of depreciation, increased by $114.29 million, or 96.6%, to $232.6 million, primarily due to higher activity levels and input cost inflation[258]. - Selling, general, and administrative expenses increased by $20.3 million, or 148%, to $34.1 million, largely due to higher personnel costs and expenses related to the FTSI acquisition[263]. - Interest expense rose by $3.2 million, or 53.3%, to $9.3 million, attributed to increased debt balances and higher average interest rates[264]. - The company recorded a loss on extinguishment of debt amounting to $8.3 million due to refinancing transactions during the quarter[265]. Market Conditions - The average oil price per barrel increased to $94.45, up from $57.79 in the previous year, reflecting market trends[252]. - The average natural gas price per thousand cubic feet rose to $4.84, compared to $3.70 in the same period last year[252]. Capital Expenditures and Debt - The company expects to incur approximately $2.5 million in non-recurring costs related to its transition to a publicly traded corporation[247]. - The 2022 capital expenditure budget is estimated to be between $240 million and $290 million, with $65 million to $70 million allocated for constructing three electric-powered fleets[280]. - As of March 31, 2022, the New ABL Credit Facility had $100.0 million in lender commitments, with $70.7 million borrowed and $20.1 million remaining availability[287]. - The New Term Loan Credit Facility has an aggregate principal amount of $450.0 million, with approximately $450.0 million outstanding as of March 31, 2022[295]. - The New Term Loan Credit Facility has an interest rate of 8.50% for SOFR Rate Loans and 7.50% for Base Rate Loans until October 1, 2022, with a three-tier pricing grid thereafter[296]. - The applicable margin for SOFR Rate Loans ranges from 6.50% to 8.00%, and for Base Rate Loans, it ranges from 5.50% to 7.00%, depending on the Total Net Leverage Ratio[297]. - The New Term Loan Credit Facility requires maintaining a Total Net Leverage Ratio of no more than 2.00:1.00 for the fiscal quarter ending June 30, 2022, and no more than 1.25 for each fiscal quarter ending March 31, 2023, and thereafter[304]. - The New Term Loan Credit Facility mandates a minimum liquidity of $30.0 million at all times[305]. - Capital expenditures for the three months ended March 31, 2022, were $41.5 million, up from $17.4 million in the same period in 2021, with expectations for further increases in 2022 and 2023[325]. - The New Term Loan Credit Facility is subject to quarterly amortization beginning June 2022, with excess cash flow payments reducing the required amortization[299]. - The New Term Loan Credit Facility includes a quarterly mandatory prepayment starting from the calendar quarter ending September 30, 2022, based on the Applicable ECF Percentage, which ranges from 50% to 25% of Excess Cash Flow[300]. - ProFrac II LLC entered into a $30.0 million loan agreement with First Financial Bank, with $26.4 million outstanding as of March 31, 2022[308]. - The Equify Bridge Note of $45.8 million was fully paid in June 2022 with net proceeds from the IPO[315]. - The New Term Loan Credit Facility is secured by a lien on substantially all assets of the guarantors, including equipment, real estate, and intellectual property[298]. Risk Management and Accounting - The company evaluates its critical accounting policies and estimates based on historical experience and current conditions, which may lead to actual results differing from estimates[327]. - The company assesses its ownership and interests in variable interest entities (VIE) to determine consolidation in financial statements[329]. - The company faces market risk primarily related to fluctuations in long-term debt fair value due to interest rate changes, with no engagement in speculative transactions[330]. - Material costs for the company include inventory for pressure pumping services and manufacturing, with volatility in prices due to supply and demand dynamics[331]. - A 1% increase in interest rates would result in an annual increase in interest expense of approximately $5.2 million based on outstanding debt as of March 31, 2022[332]. - The company manages credit risk through credit evaluations and maintaining an allowance for doubtful accounts related to trade account receivables[333].

Financial Data and Key Metrics Changes - In Q1 2022, U.S. Well Services generated approximately $41.2 million in revenue, with an adjusted EBITDA loss of $3.5 million, compared to a loss of $7.9 million in Q4 2021 [7][15]. - Total revenue increased by 6% sequentially from $38.9 million in Q4 2021, with service and equipment revenue rising by 17% quarter-over-quarter [14][15]. - The company ended Q1 2022 with $41 million in cash and restricted cash, and $8.5 million of ABL availability [16]. Business Line Data and Key Metrics Changes - The average cash G&A per active fleet increased to approximately $5.7 million in Q1 2022, compared to $4.75 million in the previous three quarters [8]. - Revenue from materials such as sand, chemicals, and trucking declined by 45% sequentially, as no sand was provided to customers during Q1 2022 [14]. Market Data and Key Metrics Changes - The company averaged 4.7 active fleets during the quarter with a utilization rate of 94%, resulting in 4.4 fully utilized fleets [14]. - The month of March 2022 alone accounted for over $20 million in revenue, representing 49% of the total quarterly revenue [9]. Company Strategy and Development Direction - U.S. Well Services is transitioning to an all-electric fleet, with plans to deploy new Nyx Clean Fleets throughout 2022, aiming to meet customer needs with high-spec electric horsepower [12][17]. - The company believes that the electric segment offers premium pricing and lower maintenance costs, positioning itself favorably in the market [10][11]. Management's Comments on Operating Environment and Future Outlook - Management noted that the pressure pumping industry is experiencing tight capacity and rising prices, with most service providers sold out [11]. - The company expects to see continued improvement in revenue and profitability as more fleets are deployed and operational efficiencies are realized [22]. Other Important Information - The company is facing inflationary pressures, with costs increasing by 8% to 10% for most items compared to 2021 levels [15]. - U.S. Well Services plans to spend approximately $95 to $115 million over the remainder of the year to complete the build-out of new fleets [16]. Q&A Session Summary Question: Can you speak to some of the components parts that you may have pre-purchased for the new build program in 2023? - Management confirmed that some longer lead time components have been secured, allowing for potential fleet deliveries in early 2023, but no commitments have been made yet [19]. Question: Is the guidance for Q2 including one diesel fleet? - Management clarified that the guidance for Q2 includes one diesel fleet [20]. Question: What are the drivers of EBITDA per fleet, and is break-even possible in Q2 2022? - Management indicated that increased revenue and more fleets in the field are key drivers for improved EBITDA per fleet, with expectations for continued improvement throughout the year [22].

Financial Data and Key Metrics Changes - U.S. Well Services reported total revenue of $38.9 million for Q4 2021, down 31% from $56.5 million in Q3 2021, largely due to nonproductive time related to sand and water constraints [13][14] - Adjusted EBITDA for Q4 2021 was a loss of $7.9 million, with total liquidity at $20.2 million at year-end, which increased to $84.6 million after recent capital raises [15][16] - The company generated $250 million in revenue for the full year 2021, a modest increase from $244 million in 2020, with a net loss of $70.6 million compared to $229.3 million in 2020 [18][19] Business Line Data and Key Metrics Changes - The average active fleet count during Q4 was five, with a utilization rate of 82%, down from 89% in Q3 2021 [12][13] - Cost of sales in Q4 was $41.4 million, down 29% sequentially, attributed to a lower active fleet count and a 50% reduction in sand and consumables sold [14] - SG&A expenses decreased to $6.8 million in Q4 from $11.1 million in Q3, primarily due to reduced personnel costs [14] Market Data and Key Metrics Changes - The company faced significant operational challenges due to a lack of truck drivers and customers' inability to obtain necessary sand and water, resulting in 67 days of nonproductive time in Q4 [8][13] - Diesel prices rose to over $5 per gallon from $3.50 in Q4, leading to potential savings of $1.25 million per fleet per month for customers [10] Company Strategy and Development Direction - U.S. Well Services is transitioning away from conventional diesel fleets, reducing its active fleet count from 11 in Q1 to five by Q3, and is focusing on electric clean fleets [7][8] - The company plans to roll out four new Nyx Clean Fleets starting in Q2 2022, which are expected to command premium pricing due to their operational efficiencies [9][10] - Management believes the future is bright for the company, emphasizing the advantages of electric pressure pumping technology in terms of economics and environmental benefits [21] Management Comments on Operating Environment and Future Outlook - Management acknowledged the difficulties faced during the strategic transformation and macroeconomic headwinds but expressed confidence in improved results starting in Q2 2022 as new fleets are deployed [8][9] - There is an expectation of increased demand for next-generation solutions, such as electric clean fleets, which positions the company favorably in the market [9][10] Other Important Information - The company executed over 40 asset sales to raise approximately $120 million and reduced its senior secured term loan by $125.6 million during 2021 [7] - U.S. Well Services secured a 0% interest rate for Q1 2022 and a 1% cash interest rate for the remainder of the year, resulting in significant cash savings [17] Q&A Session Summary Question: Expected increase in profitability with fleet rollout - Management indicated that profitability is expected to increase as new fleets are deployed, with the first fleet going to work in Q2 and the last two fleets by Q4 [24][25] Question: Impact of frac sand and mine constraints - Management noted that benefits from new fleets are anticipated to begin in Q2, addressing inefficiencies caused by sand and water constraints [26][27]