ProFrac Stock

Greetings and welcome to the ProFrac Second Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, [ Michael Messina ], Senior Vice President of Finance.

Thank you, operator. Good morning, everyone. We appreciate you joining us for ProFrac Holding Corp.'s conference call and webcast to review our results for the second quarter ended June 30, 2026. 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 color on the operational and financial highlights of the second quarter 2026, before opening up the call to your questions.

A replay of today's call will be made 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 release. Please note that information reported on this call speaks only as of today, August 6, 2026. You are advised that any time-sensitive information may no longer be accurate as of the time of any replay listening or transmission.

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 on the website at SEC.gov or on the company's investor relations website section under the SEC filings tab to better 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 earnings press release, which can be found on the company's website. Now over to Mr. Matt Wilks, Executive Chairman of ProFrac.

Thank you, Michael, and hello, everyone. I'll kick off with some remarks on our overall performance, the broader market environment, and progress on our strategic priorities. I'll then hand it over to Austin, who will take you through the segment results in more detail. We're pleased to report that our second quarter results improved over Q1 results and again came in ahead of expectations. April carried forward the operational momentum we discussed on our last call. And while these levels moderated somewhat as we moved through May and June, utilization remained strong.

As I'll discuss in a moment, the market backdrop remains constructive, and we continue to see an open window for more favorable pricing dynamics. Consistent with what we said on our last call, the majority of that benefit is layering in through the back half of the year rather than the second quarter itself. Looking ahead to the third quarter and the back half of the year, our approach to pricing is to be constructive, not aggressive. We do not plan to deploy incremental fleets speculatively, and any gains we capture from here are about building toward a stronger 2027 rather than chasing a near-term spike.

Given the constructive activity backdrop, RFP season conversations are already underway sooner than usual. We intend to be well positioned through that process into 2027. To the extent we see incremental demand show up in the spot market later in the year, our preference is not to chase it with additional equipment, but rather to capture that value more durably through the RFP process. We expect efficiency to continue improving on a quarterly basis as calendar white space tightens further, and we're encouraged by the consistency building through the back half of the year.

During the quarter, we experienced incremental competitive pricing pressure in sand in the West Texas region. While supply remains tight in both the South Texas and East Texas North Louisiana markets, we remain focused on translating more of our order book into long-term commitments and improving throughput. As we've spoken about in the past, the operating leverage inherent in our proppant business becomes increasingly evident as we drive higher utilization, and we continue to believe this business is capable of improved free cash flow as the efficiencies are realized. We continue to evaluate ways to further strengthen this business over time.

From a regional perspective, South Texas continues to be our strongest performing market, both from a sell-through and a throughput standpoint. We did see some minor weather-related disruption in the quarter from flooding activity, though it was manageable. Looking ahead, we continue to see the Haynesville as an attractive growth market for us, both on the frac side and on the sand side. As gas-directed activity builds in support of LNG export capacity and power demand, we expect to see continued opportunity to increase activity across both of our core service lines.

Zooming out to review the broader market environment, if there's one word that captures the last several months, it's volatility. We think that volatility itself is the signal worth paying attention to. Oil prices this year have ranged from a low in the first days of January to an April peak that was precisely double that trough. Within the second quarter alone, prices fell roughly 40% from their peak to a subsequent low, only to rally back nearly 40% off that low in the following weeks. That is not the behavior of a market that has found its footing. We point to the underlying cause.

The conflict in the Middle East has continued to defy expectations of a long-term resolution. What has looked at various points like a path forward toward de-escalation has repeatedly given way to renewed military action, and recent weeks have brought further strikes. We continue to believe, as we've said on our prior calls, that this is not a transient supply shock but a structural shift in available global capacity. If anything, this extended period of uncertainty has only reinforced the case for domestic energy security.

When global supply can swing this violently on geopolitical developments, the value of reliable, lower-risk North American production only becomes more apparent to operators, policymakers, and importers. We continue to see this dynamic as a structural tailwind for our business. Turning to our cost structure, we remain committed to the $100 million of annualized savings program we outlined at the start of the year. That program has three components. Labor-related reductions that we have targeted at $35 million to $45 million annualized, non-labor operating expense reductions that include SG&A and asset-level OPEX that together we have targeted at $30 million to $40 million. And lastly, capital expenditure efficiency that we've targeted at $20 million to $30 million.

We continue to work through each of these initiatives, and we remain confident in the full program as these efforts mature over the balance of the year. Our vertically integrated model and asset management platform remain central to how we think about our competitive position, not just this quarter, but across the cycle. Our in-house manufacturing capability allows us to build, upgrade, and standardize equipment at a cost basis that's simply not available to others who rely on third parties. Our asset management program continues to be a meaningful driver of fleet reliability and uptime.

These aren't new initiatives, but they remain foundational to how we compete, and we continue to see them as a durable source of advantage as the cycle evolves. Irrespective of where we are in the market cycle, we execute on a routine upgrade program converting diesel equipment to dual fuel and natural gas capable configurations. This quarter, we made the decision to accelerate a portion of that program while maintaining our disciplined approach to capital allocation. We're moving forward with additional engine orders ahead of our original schedule, given the continued strong demand we're seeing from operators for this higher specification equipment.

We view this as an investment decision rather than a departure from our cost discipline. Upgrading this equipment now, while demand for high spec dual fuel capacity remains strong, reduces our repair and maintenance exposure over time, extends the useful life of these assets, and supports our strong positioning as we discussed earlier to discuss 2027 plans with our customers. Additionally, I want to touch briefly on our eBlender program that we introduced on our last call. Deployment continues to progress. With a few additional units placed into service since our last call, we're seeing the efficiency benefits we expected on the units we have deployed, including lower repair and maintenance spend as well as improved uptime relative to legacy equipment.

By the end of the year, we expect to have deployed our new eBlender technology across our fleet. On technology, Machina continues to be central to how we think about subsurface data providers like Seismos. The platform doesn't just mean measure the frac. It acts on it while we're pumping. The near-term focus is uniformity, getting every cluster and every stage to take fluid the way it was designed to, rather than accepting the wide variance the industry has historically treated as normal. That's the foundation for prescriptive completions, designs that adjust in real time based on what the rock is telling us, rather than through a static pump schedule.

We remain in active price discovery on the commercial model, and customer feedback from deployments continues to be encouraging as we structure value share going forward. We also continue to see real promise in Machina's application to acreage that operators have effectively set aside. In many cases nearby offset wells, wastewater infrastructure, where legacy completions create execution risk that leads operators to defer or shelve otherwise attractive locations. Machina's real-time subsurface intelligence and closed-loop control are designed to reduce that risk, which we believe can shift the economic calculus on certain locations and bring stranded inventory back into play without requiring the kind of upfront offset well infrastructure investment that sometimes runs as much as $1 million to $2 million.

We'll continue to share more as our commercial discussions with customers progress. Wrapping up my opening comments, we delivered solid second quarter results, building on that momentum from earlier in the year despite a volatile macro backdrop. That volatility, if anything, has only reinforced the structural case for domestic energy security and the long-term tailwind it represents for our business. Our cost optimization program continues to advance, and we're deploying capital thoughtfully, including accelerating our engine upgrade program to position the business for durable efficiency gains.

Our new eBlenders are yielding the capital efficiency benefits we expected, and incremental deployments remain on schedule. Machina continues to gain traction with customers, and we see real potential for it to unlock previously stranded inventory as commercial discussions progress. In addition, we strengthened our balance sheet this quarter through the ABL refinancing, giving us a longer runway, improved liquidity, and greater flexibility heading into the back half of the year.

Now over to Austin to expand on segment results in more detail. Thanks, Matt. In the second quarter revenues were $498 million, up from $450 million in the first quarter of 2026. We generated $69 million of adjusted EBITDA with an adjusted EBITDA margin of 14%, an increase from the $54 million or 12% of revenue we delivered in Q1. Free cash flow was negative $8 million in the second quarter, an improvement from negative $25 million in Q1. Turning to our segments, stimulation services revenues were $430 million in the second quarter, up from $407 million in the first quarter of 2026.

Adjusted EBITDA in Q2 was $39 million, up from $32 million in Q1, with margins of 9% compared to 8% in Q1. Results reflected an improvement in efficiency, lack of material weather-driven delays as we experienced in Q1, and to a modest degree, improved pricing. We again maintained our fleet count in the low 20s during the second quarter, consistent with the disciplined approach we've held throughout this market cycle. This reflects our continued focus on returns over utilization for its own sake. While April carried forward the type of record efficiency levels we experienced in March, as we discussed on our last call, pumping hours per fleet moderated somewhat in May and June relative to those peaks.

This was primarily a function of more white space in the calendar than we had anticipated entering the quarter. Pricing was up slightly sequentially. As we noted on our May call, the majority of our increases carried renegotiation windows that pushed the benefit into the third and fourth quarters. Proppant production generated $121 million of revenue in the second quarter, a touch higher than the $120 million of revenue we reported in the first quarter of 2026. Approximately 31% of volumes were sold to third-party customers during the second quarter versus 28% in Q1.

During the second quarter and into the third, we continue to navigate incremental competitive pricing pressure in the proppant market, particularly in West Texas. We remain focused on operational improvements throughout the business while leveraging the potential we see in stronger markets, including the Haynesville and South Texas. Adjusted EBITDA for the proppant production segment was $6 million for the second quarter, broadly in line with Q1. On a margin basis, EBITDA margins were 5% in the second quarter versus 5% in Q1 2026. Total volumes were approximately 2.5 million tons.

Our manufacturing segment generated second quarter revenues of $48 million, in line with the first quarter. Approximately 18% of segment revenues were generated from third-party sales compared to approximately 14% in Q1. Adjusted EBITDA for the manufacturing segment was $6 million compared to $7 million in Q1. Flotek generated second quarter revenues of $102 million, significantly higher than the $72 million reported in Q1. Approximately 42% of segment revenues were generated from third-party sales compared to approximately 25% in Q1. Adjusted EBITDA for Flotek was $19 million, or 19% of revenue, also improved relative to the $11 million reported in Q1.

Selling, general, and administrative expenses were $44 million in the second quarter, flat with Q1. Cash capital expenditures of $32 million in the second quarter were down from $41 million in the first quarter of 2026. Consistent with the outlook we issued on our May call, we continue to expect total capital expenditures in 2026, including Flotek spend, to be in the range of $155 million to $180 million. Excluding Flotek, we expect our CapEx to be in a range of $145 million to $175 million. Total cash and cash equivalents as of June 30, 2026, were approximately $19 million, including approximately $5 million attributable to Flotek.

Total liquidity at quarter end was approximately $72 million, including $58 million available under the ABL. Borrowings under the ABL credit facility ended the quarter at $162 million, an increase from $116 million at first quarter end. On July 1st, we closed a new asset-based revolving credit facility with Eclipse Business Capital, and we think this transaction matters more than a typical refinancing headline might suggest. What we secured was a larger commitment, a longer runway, and improved advance rates against our collateral base, which together translate into increased relative liquidity versus our prior facility.

This new $300 million facility replaces our previous $275 million ABL facility and extends our maturity profile. In addition to increasing total commitments by $25 million, the new facility incorporates the ability to request up to an additional $25 million of incremental commitments subject to lender approval and customary conditions. We've said repeatedly that our approach to the balance sheet is disciplined and opportunistic. This transaction is that philosophy in practice, and it leaves us better positioned. The majority of our debt maturities remain concentrated in 2029 and beyond, and we believe we're well positioned from a liquidity perspective as we move through the remainder of 2026 and into 2027.

At quarter end, we had approximately $1.1 billion of debt outstanding. We continue to manage the balance sheet the same way we always have, with discipline, an opportunistic mindset, and a focus on maintaining flexibility to act as conditions shift. With that, I will now turn the call over to Ladd.

Thank you, Austin. As you saw in our earnings press release this morning, I'm resigning my position as Chief Executive Officer of ProFrac. I'll take up the board seat that is being vacated by Mr. Sergey Krylov. I want to thank Mr. Krylov for his years of dedication and service to ProFrac and for the thoughtful and diligent stewardship he has brought to the board throughout his tenure. This transition will take effect tomorrow, August 7th. As a member of the board of directors, I'll continue to help guide the future of the company that I love and help build with an unwavering commitment to it.

While I won't be involved in day-to-day decisions, I remain deeply devoted to this company and will always be available to its management and staff for guidance and support. ProFrac isn't just a company to me. It's part of my family's legacy, and I'll continue to do everything I can to ensure its lasting success. When I think about my time as CEO, my first thought is about the people. The best people in the world work here. We have incredible leaders and employees in every district, region, and division in the ProFrac Holdings family. And while our industry can be volatile at times, I believe the long-term future of our company and our industry has never been stronger.

And I couldn't be more excited for Matt, who will become ProFrac's next CEO, while also continuing to serve as executive chairman. Since the founding of ProFrac, Matt has been one of the key drivers behind our growth and success. I have complete confidence that he will take ProFrac to new heights, and I couldn't be happier that he's the one leading our next chapter. And with that, I'll now turn the call over to the operator for Q&A.

[Operator Instructions] Our first question comes from the line of Donald Crist with Johnson Rice. Please proceed with your question.

Good morning, guys. I wanted to start on the pressure pumping side of the business. Throughout this earning cycle, we've heard many of your competitors talk about their fleets being mostly dedicated for '27 and the fact that not a lot of fleets have been added in relation to the increase in rig count. Can you just talk about what you're seeing out there and how you see '27 shaping up? Because as an analyst, I see a significant increase in pricing potential given that we have a lot more demand than supply out there today.

Yes, I believe that's a fair assessment. We've seen a lot of demand, a very disciplined operator group. Just 2026 budgets have been set. Everybody's relatively stay disciplined to that. We've seen a lot of tightness in the schedules and to build around that capital budget from these guys. There's been some private operators that have come back and increased activity. As we look into 2027, we see 2027 as being a nice step up. We're at the very beginning of RFP season. It's already started, it's been brought forward. One of the benefits of the RFP season starting so much earlier is, you know, I think a lot of these operators want to get in early and lock things down while they can, while they know that they can.

As RFP season progresses, we expect to see it better. You know, really start pushing pricing. And as everybody realizes how much availability there isn't, realize how tight the market is. There's not a lot of spare capacity. And as you move through RFP season, it's going to be pretty interesting to see how this plays out as we guide into 2027. Still early in the process, but we expect with RFP season kicking off early this, that once 2027 budgets are set and we've got better visibility into it, we don't think that we have to wait for 2027 for that environment. It will happen in this second half.

We already see a stronger second half than what we had in the first half. A lot of the pricing that we pushed for earlier in this quarter are going into effect in Q3 and Q4. And we believe that there will be additional opportunities as we move through RFP season. Typically, what you see in a transition in the market like we have today, as we move through '26 into '27, we expect '27 activity to get pulled forward very quickly after the conclusion of RFPs. So it's a pretty interesting time. Pretty excited to see this play out the way that it is. I think we've got a really disciplined peer class that has not gone in on a speculative bet to build out equipment, build out capacity. You know, we think the world of our customers and they're disciplined. So are we. If they increase CapEx, I think the service base will respond, but we will not speculate and build into that.

And just to follow up on your opening remarks, but it sounds like you're going to be very disciplined and not add any fleets on spec. But when would the decision point come in? If rates went up 15% or 20% across your entire fleet from where they are today or are going to be in the third quarter, would that be the right point for a decision point to add more fleets to satisfy demand out there?

I don't believe so. I think an increase of 15% to 20% would accelerate some upgrades, but I don't think that it would really trigger a build cycle. You know, I think more than ever, and I can't speak for my peers, but they appear to have the same behavior and outlook on this, but what we need is certainty and a commitment. And we're not going to go in and chase short-term economics. We need long-term, stable pricing environment so that we can get a total return and full cycle returns. New build economics is not something that you speculate on. This is a very challenging industry. We need reliable, consistent returns and outcomes. And so if we have customers that come in and make the appropriate commitments long term with a true commitment, then I think that really changes everything. It's more so about the stability than it is the economics. Economics obviously have to be there, but we're not going to just go in and build because the spot market is where we want it.

Yes, I think to add to what Matt's saying, I think it's tenor coupled with the market pricing and the economics, right? And that certainty and that longevity is really what we're looking for before we push the button on adding incremental capacity. So it needs to be both. And I think the industry as a whole is in an interesting spot. I mean, you know, there's a lot of technology and you're at this point of diminishing returns, there's no more hours in the day where efficiency is just incredible. And it's not just something that you can brag about or talk about. It's something that's expected and it should be.

The only place to go from here is to focus on better recoveries, better execution, and what can technology bring for good partnerships. And I think that you'll start seeing more of that from not just the operators, but the service companies that they partner with, where you're collaborating on services. Better rates, better production, better execution, and the technology that's available with frac automation and closed loop frac, you know, we're very excited to see the transformation that this industry is about to go through. And I think that that factors into it as well.

We're looking for partners. We'll build it. You know, we'll line it all out. We're not afraid to deploy capital for the right relationships and commitments and for the right returns. But technology is a big part of it too. And I think we're starting to see all of this line up and these conversations. These types of partnerships, that's what we've focused on over the last year or two, and it's really coming into fruition. And we look forward to updating not only our shareholders, but the overall market. This industry is about to break out and change what everybody thinks or expects from it.

I appreciate that color. And as an analyst that covers both Flotek and y'all, I'm going to ask a question you probably don't want to answer, but I'm going to ask it anyway. You know, given the tightness in your financial flexibility and the amount of appreciation in Flotek stock, you've been very smart to hold on to it to date, but would you consider peeling off some shares here to promote your financial flexibility going forward and increase the float on Flotek? Just any thoughts around that?

We can't comment to any particular behavior. I think we manage our portfolio as a portfolio and we're economic animals. But at the same time, that's a phenomenal business. We're so proud of those guys over there. We're excited about their future. We're excited to be a part of it, to be a part of what they're building. And we're excited to be a part of their future for a very long time and continue to support them. I think that there's a lot of synergies, a lot of collaboration between the two organizations that's not going to change.

I had to try anyway. I appreciate the color. I'll turn it back.

Definitely. Thank you.

Thank you. Our next question comes from the line of John Daniel with Daniel Energy Partners. Please proceed with your question.

Ladd, good luck on your next steps. If you find yourself on the street looking for a job, give us a call. First question is about the RFPs. Matt, you alluded to they're coming in early. I'm just curious if you've had the chance to dig into the RFPs and look to see how many are coming from public players? And what are they asking for next year? And is that more than what they're running today?

So with the guys that are starting early, you know, we can only guess why they're starting early. We think that it's just to make sure that they haven't locked down. It's about certainty. And if you're worried about tightness, you don't want to be last. You don't necessarily have to be first, but you can't be last. And I think from here on, it's only going to get tighter and tighter. And so the companies that lead off are going to get, most likely, the best economics. As we progress further into RFPs, we'll be able to give you better color on additional activity. But I think this early on, the main indicator is just how early it is.

Okay, fair enough. I'll bug you next quarter on it then. Two more questions for me. What is against the fence today? And if you made the decision to reactivate, I understand there's a lot of things that have to fall into place, but if you made the decision to reactivate, how much could you bring back in the next three to six months?

Man, that's... I'll answer that question like this. From a fuel efficiency standpoint, everything that's available in the market is deployed. All next generation equipment, all fuel efficient equipment is currently deployed. Now, what we've seen across the landscape from a lot of our peers is that a lot of the diesel equipment has either been completely retired, or were sold into foreign markets. We've been patient and we've retained some capacity there and have these for upgrade candidates or if it really tightens up, then, you know, we'd likely deploy some of those as is as diesel. But for the most part, we're sitting tight. We're fully deployed on what we think that the market is looking for.

And if it really came down to it, there is some capacity that we can bring back. We just, you know, we don't want to push. It's not just how much does it cost to put a fleet out. Our position on it is, what kind of supply chain do we need to support it? Do we need to carry the inventory? Do I need to expand inventory? Do I need to hire people? I'd rather stick right where we're at, establish efficiencies, pursue further projects, you know, fully execute on our disciplined approach to cost and fully realize that. I think it favors the market that we're leading into very, very well.

But we want to see more from the operators before we make a call and start activating fleets. And we can bring fuel efficiency out there. I think in some areas, after you include the cost of the fueler and the dyed diesel itself, that many of these areas dyed diesel is over $5. I mean, it's, you know, in some instances, compared to January, diesel cost more than the horsepower did. Today, if you were buying dyed diesel today, it would cost more than the frac fleet did. And so I think that tells you a lot about the bifurcation and the assets available to the market and why so many diesel fleets were sold into foreign markets.

But look, we get the economics are incredible for fuel efficient fleets. We're happy to upgrade. You know, there's all gas fleets, there's electric fleets, there's dual fuel fleets. And when you look at them and the displacement that you see for diesel, service companies are able to get a very respectable return, increase in revenue, and the operator ends up with a favorable cost structure too, that would be far superior to horsepower rates in January plus today's diesel rates.

Fair enough. My final one, Matt, and then I'll turn it over. I'm sorry to be a phone hog here, but I think in response to Don's question, you said that an extra 15% to 20% in terms of price would accelerate upgrades. Like do you consider a reactivation and upgrade? Are you referring to an existing fleet that's working with 15%, 20%, you would upgrade that? Just if you could clarify.

Yes, it'd be a combination of the two. You know, we see a 10% to 15% increase in pricing, I think that we'd be willing to activate fleets, depending on the commitment that comes with it, we'd be willing to do an upgrade. I'll just say too, John, I mean, from where pricing was to where we are today, you know, we're up in that ballpark.

Year to date and in our prepared remarks you saw we have a routine upgrade program that we prosecute almost irrespective of market cycles. We have accelerated that to some degree, just on the upgrade side, not on the new build, to be clear.

Yes. I mean, I guess the debate in the final is more of a comment, not a question is, I think Don's on top of this and I think we're all looking at the market. We see the rig count, call it up 60% from the April low to by the end of this year. And it would seem that you're probably going to see a bit more of an increase next year, all else being equal. And clearly there's going to be a call for more capacity. At the same time, the leaders in the industry are all being very disciplined now in terms of what they want to reactivate until pricing goes higher, and just seems like we are at that intersection right now where things can change and reflect pretty hard. And so I think, you know, I guess we just have to step back and wait and see how you guys and how the industry handles it. But it feels encouraging.

Well, one thing I would highlight, just if you looked at the Permian, for example, the realized price per barrel in the Permian, it's not just oil, it's Waha. You know, at some points, Waha was negative six, you know, negative seven in January and February. Right. And there's been an additional pipeline capacity come on here recently. There's another 2.5 Bcf pipeline that's being commissioned right now. And now we're sitting in an environment where Waha is actually positive and, you know, knock on wood, but I think when you look at that, the realized price per barrel in January and February was $31, $32. And for a lot of operators, the [ break-even was $30 ].

And, you know, that's what the 2026 budgets were set on. Now you look at it, you know, we're mid-$40s on a realized price per barrel. And believe it or not, the majority of that came from Waha. The majority of that increase came from gas. So now we're moving into 2027 RFPs and instead of the net margin on a realized barrel being $1 or $2, it's $15. Right. I think that says a lot about what we're looking at. And maybe you continue to see discipline with a lot of the larger publics, but those are real economics that bring people out of the woodwork, brings things forward. It changes the economics on some of these different benches.

And it brings the private side back as well. But we're excited for this spot. Some of it feels a little bit like January and February of '22. But we've seen price improvement, better schedules, better calendars, better partnerships with our customers. But I think as we move through our season and get closer to '27, I think there will be a very quick realization that there's nothing left on the sidelines.

Right. I agree. Okay. Well, thanks for including me, guys. Good luck, Ladd.

Thank you. [Operator Instructions] Our next question comes from the line of Daniel Kutz with Morgan Stanley. Please proceed with your question.

Good morning, and congrats, Matt. So I wanted to see if we could get any more specifics on the outlook for the next quarter and the second half of this year? I guess maybe you could just piecing together some of the components of the outlook for the balance this year that on the EBITDA line, do you think that the third quarter can be up or flat or closer to where consensus is in the mid-high 70s on a consolidated basis for the third quarter? You guys said that you see proppant about flat, stimulation services up. And then Flotek after a pretty massive quarter, updated their guidance range for the year, but the updated guidance range would imply about a $5 million step down in the third quarter, I guess, in the second half on a quarterly basis versus the big number they put up in the third quarter. So what I'm driving at is do you think that the stimulation services business can make up for maybe a bit less Flotek contribution and more than also and maybe get up closer to consensus. But yes, just wondering if you could help us piece together some of the outlook components for help us think about consolidated EBITDA in the third quarter. Thanks.

Yes, I'll say a few comments and then hand it off to Austin. A lot of the price increases that we went through, you know, we've spoken a little bit about, a lot of them didn't go fully into effect until the beginning of July. And so we see price improvement fully reflected in Q3 and some further improvements as we move through the balance of this year. You know, I think we're, we don't want to over-promise, but if there's anything from a surprise stand side, then it would be, you know, it's more likely to surprise to the upside than anything else with what I can say about Flotek. That team is phenomenal. They continue to execute really well. Historically, they've been relatively conservative on their guidance. I think you would agree, looking at how they guide and how they deliver results. I wouldn't change a thing over there about how they execute. But you know, I'm excited to see what kind of surprises they can bring for everybody. And I think their behavior supports continued improvements and growth above the guidance that they provide. But with that, Austin.

Yes, Dan, I don't have much to add. I think that's a fair kind of assessment of where we sit. I think our prepared comments really cover how we see the segments taken out from a stimulation perspective as well as on the proppant side on sand. And then I think Matt's comments really cover Flotek. So not much to add there. I think it's very consistent with our messaging and the prepared remarks. Thank you.

Okay, great. Yes, I mean, so I guess kind of maybe the takeaway is that, like, the mid-high 70s consensus number seems... Maybe just one on free cash. So, you know, year-to-date, you guys have had, I think, about a $40 million free cash outflow. You didn't change, you reiterated the CapEx guidance range for the full year based on the amount that's been spent so far, that kind of implies a little bit less CapEx in the second half. At the midpoint, so you have that, you have, you know, just kind of improving operational results. So I guess, do you think that make back some of the $40 million free cash use in the second half? Do you think that the full year could be closer to break even? I think in consensus it's like a $10 million use for the full year. But, yes, just anything you can [ share thoughts on free cash ] for this year for the balance of the year. Thanks.

Yes, Dan, no, great question. I think as we mentioned, we're going to pull forward some upgrades. So we reiterated the CapEx guidance range expect to fall within that. Probably a little bit higher than the midpoint right now based on what we know today. I think with respect to the free cash flow profile moving forward, so number one, like Matt mentioned, we're not anticipating adding any incremental fleets. And when we add fleets, that's usually the biggest driver of working capital drag when you think through the investment that we have to make in order to put a new fleet out from a structural perspective.

I think, too, as we continue to realize that the cash and expense savings through the P&L, but also the cash flow statement, that that'll help drive a higher fall through from EBITDA all the way to operating cash flow and then free cash flow. So I think as we move forward through the balance of the year, the impact of the cash savings coupled with the fact that we're not adding any incremental fleet, at least that's the plan today, should enable us to have a higher fall through on our free cash flow line.

Great. All really helpful. Thank you both. Turn it back.

Thank you. And we have reached the end of the question and answer session and therefore I would like to turn the floor back to Matt Wilks for closing remarks.

Definitely. Thank you. I just want to say a special thank you for Ladd. What an incredible partner. It's been, you know, I've worked with him in a lot of different businesses. And I think that ProFrac is a really special company and a special place, special business. I think that the partnership between Ladd and myself has only grown and continues to get stronger and stronger. And I'm just so proud of him, proud of the team, I'm proud of the opportunities that he has available to him, and I'm especially excited that he's joining the board with me.

But I take it as a huge vote of confidence that he's comfortable to leave this responsibility to me. I know that this wouldn't be possible if I didn't have such an amazing team around me. And we truly do have the best people in the industry that works here at ProFrac Holdings. And look forward to the coming days. We're very excited about the market that we're in. We've got incredible stakeholders from customers to the vendors to the great people here at ProFrac. But I look forward to next quarter. And, you know, I excited to deliver phenomenal results and I think we're going to have some really, really good days going forward. And perhaps we may even bring our hold music back. Anyways, thank you.

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Greetings, and welcome to the ProFrac Holding Corp. First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Michael Messina, Senior Vice President of Finance. Thank you, sir. You may begin.

Thank you, operator. Good morning, everyone. We appreciate you joining us for ProFrac Holding Corp.'s conference call and webcast to review our results for the first quarter ended March 31, 2026.

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 first quarter of 2026 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 release. Please note that the information reported on this call speaks only as of today, May 7, 2026. You are advised that any time-sensitive information may no longer be accurate as of the time of any 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 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.

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 Filings tab to better 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 earnings press release, which can be found on the company's website.

Now, over to Mr. Matt Wilks, Executive Chairman.

Thanks, Michael, and good morning, everyone. I'll begin with some brief remarks on our overall performance, the broader market environment and the progress of our strategic priorities. Ladd will then take you through our business results in more detail, followed by Austin, who will walk through the financials.

We're pleased to report that our first quarter results exceeded our expectations that we discussed in March. Our exceptional operational performance as we progress through the final month of the period drove outperformance for Q1 relative to some weather-driven challenges we faced to start the year. Specifically, as we discussed on our Q4 call, harsh winter conditions across much of our operating areas created some operational disruptions that resulted in approximately $9 million of adjusted EBITDA impact.

More importantly, market dynamics shifted meaningfully beginning in late February and early March with the onset of the Mid East conflict. Initially, activity accelerated through the end of Q1, characterized by calendar tightening and a reduction in white space. More recently, we've begun to see work added to the calendar that was not scheduled prior to the Iranian conflict.

Further, we're proud to note that our stimulation services team delivered record efficiency levels in March with operational momentum carrying into the second quarter. As a near-term solution to oil supplies remaining elusive, exacerbating a material increase in oil prices, operator sentiment has continued to improve. Against the positive market trajectory, we are witnessing an open window for more favorable pricing dynamics. We are aware that pricing discussions are happening across the energy value chain, and our customers are highly engaged.

We have taken a measured deliberate approach focused on partnering with operators that will collaborate with us to generate appropriate returns through the cycle. We have successfully implemented price increases for the majority of our active fleet. These increases layer in throughout the latter half of the second quarter and into the back half of the year. Based on these factors, we expect Q2 to trend higher sequentially. Ladd will provide more color in a few minutes.

Stepping back to the broader market environment, what we're experiencing at the company level reflects a larger set of dynamics we believe are still in the early innings of North American energy services. We believe the geopolitical developments that emerged in late February have fundamentally altered the global energy security of supply calculus. Beyond the immediate disruption to tanker traffic via the closure of the Strait of Hormuz, what's becoming increasingly apparent is the scale of damage to critical Persian Gulf infrastructure.

The processing facilities, export terminals and distribution networks that were impacted represents decades of engineering and capital investment. Reconstruction timelines are becoming clearer, and they could be measured in years, not quarters. This isn't a transient supply shock. We believe it is a shift in available global capacity that will take considerable time to resolve.

Further, this supply constraint is coinciding with a policy environment in Washington that increasingly appears to be pivoting decisively toward domestic energy security and infrastructure development. While it's early to predict specific legislative outcomes, the direction is clear, and it reinforces the case for a sustained call on North American production activity. Energy security has also become a more prevalent factor globally.

As importers revise their strategies regarding consistent, reliable access to hydrocarbons at scale, we believe these dynamics provide increased structural tailwinds to the North American energy industry as the lowest risk producer of crude oil and LNG. Overlaying these macro developments is a North American supply-demand picture that was already tightening. The production gap we flagged for several quarters has only widened with operators running behind the activity curve required to offset natural decline.

Meanwhile, on the gas side, the convergence of expanding LNG export capacity with accelerating power demand from data centers and industrial electrification is creating increased medium- and long-term demand. On the service side, the available capacity supply response has been notably restrained. Years of capital discipline has limited new equipment from entering the market, while the natural attrition of aging fleets continues to reduce available capacity. The result is a tightening supply-demand balance for high specification, high-efficiency service capacity, coinciding with an inflection in operator activity.

Our record efficiency performance in March reflects this evolution as we delivered a company record measured by pump hours per fleet. Our vertical integration model, dual fuel and electric fleet capabilities and asset management platform position us to continue to enhance service quality and efficiency. We're focused on delivering value where operator demand is strongest, maintaining our disciplined approach to fleet deployment and leveraging the technology differentiation that Ladd will discuss in more detail.

I'd like to spend some time discussing our approach to asset deployment. Of note, irrespective of market cycles, we execute a routine program upgrading diesel to dual fuel or natural gas capable configurations. In the current market environment, as the call on equipment continues to increase, we have fielded a number of inbounds from operators seeking incremental assets and crews. In order to deploy additional assets, we would need to accelerate our upgrade program. And to do so, we have certain requirements that must be met. We will remain disciplined in our approach to capital allocation and fleet deployment.

Importantly, our vertically integrated model and asset management capabilities uniquely enable us to respond rapidly to evolving market conditions. As we discuss future activity with customers, the dialogue remains constructive. Safe to say, there are numerous factors in play that bode well, not only for an improved Q2, but an improved second half of the year and potentially beyond. While we're encouraged by the macro backdrop and the tightening we're seeing in the market, what ultimately positions us to capitalize on these dynamics is the work we've been doing internally to strengthen our cost structure and improve our operational efficiency.

On our last call in March, we outlined our business optimization program, and I am pleased to report significant progress towards our goal. On a year-over-year basis and including our capital expenditure reduction in the fourth quarter of 2025, we've achieved the majority of our $100 million annualized savings target. Our labor-related cost reductions have been fully implemented and are running at an annualized savings rate at or above the midpoint of our $35 million to $45 million target range.

On non-labor operating expenses, SG&A reductions have been implemented. Additionally, we continue to make progress on repair and maintenance and asset level operating expense reductions. While some of our projects remain in earlier stages of implementation, they should accelerate as we move through the year. We continue to expect to achieve the full $30 million to $40 million range as these initiatives mature through the year.

On capital expenditure efficiency, we have already achieved at a minimum and including the reduction in the fourth quarter of 2025, the high end of our targeted range of $20 million to $30 million. One element worth highlighting is our transition to internally designed, developed and commercialized e-blenders. Ladd will elaborate on this in his remarks. Taken together, these actions meaningfully improve our cost structure and position ProFrac to generate stronger returns through the cycle.

Our internal execution on cost and capital efficiency is what keeps us competitive through the cycle. But competing effectively over the long term also requires technology that creates value that our customers cannot find elsewhere. And that brings me to Machina.

On our last call, we introduced Machina in considerable detail as a unified completion optimization platform, combining ProPilot 2.0 surface automation with Seismos subsurface intelligence. In summary, Machina is ProFrac's integrated well optimization suite that brings pre-stage design, field execution, post-stage diagnostics and historical analysis into a cutting-edge, real-time unified feedback control framework that actively intervened to increase perforation performance by up to 33%.

What I want to share is where things stand and the dimension of opportunity that has come into sharper focus as we have been in front of customers. The headline is that we are in active price discovery on the commercial model. Customer feedback from testing stage deployments has been encouraging, and that feedback is informing us of how we think about structuring the value share. We will have more to say as this process matures.

What has become increasingly clear through those customer conversations is that Machina's most compelling application may be in unlocking acreage that operators have effectively set aside. A portion of stranded inventory may be uneconomic due to complications in frac design impacted by existing adjacent infrastructure. Offset wells, wastewater infrastructure and legacy downhole completions can collectively create constraints that may force operators to conclude that fewer locations are economic to produce. Machina may address this issue directly. Ladd will explain what that looks like on location, but the strategic point is this. We believe this platform has the potential to bring previously stranded inventory back into play for our customers.

To conclude my opening comments, we delivered a strong Q1, exceeding our expectations. Despite a weather-impacted start, the business performed well with increased completions momentum through the end of the quarter. Our cost optimization program continues to advance. We have achieved the majority of our $100 million run rate target. The macro backdrop is working in our favor. Energy security has moved to the front of the conversation, and that has direct and tangible implications for domestic completions activity and the operators we serve.

Machina, our complete well optimization suite is gaining traction in the market with more customers inquiring about its closed-loop well optimization capabilities. As a continuous improvement engine, Machina may potentially offer operators the ability to economically complete stranded locations. And finally, Q2 is shaping up to be a meaningful step forward. Some operators are pulling work forward, helping to eliminate white space and frac calendars. The market has tightened, and we see it tightening more as the year unfolds. With natural gas burning equipment nearly sold out, we are in active discussions with customers and have achieved price increases on the majority of our fleets. Discussions with operators remain active, and we will remain disciplined on fleet deployments.

Let me now turn it over to Ladd, who will get into the operational details.

Thank you, and good morning, everyone. Picking up from Matt, I'll begin with a deeper look at our stimulation services results. We maintained our fleet count in the low 20s during the first quarter, consistent with the disciplined approach we've held throughout this market cycle. Pricing was generally stable sequentially.

In March, we delivered record efficiency performance with average pumping hours per active fleet exceeding 600 hours. I'd like to commend one fleet in particular that recorded an exceptional 682 pumping hours in the Eagle Ford in March, working for a super major on a dedicated contract. We have sustained efficiency levels through April and into May. On the activity front, we're seeing operators add to their previously scheduled work while also securing availability on the calendar later in the year. These dynamics reflect the tighter equipment market, as Matt alluded to earlier.

We expect the tightening completions landscape to drive a more balanced pricing structure that will flow through to the bottom line. However, it is worth noting that we are also monitoring some emerging cost pressures. Pricing creep in chemicals, diesel and diesel surcharges on product delivery and certain specialty materials where feedstock is exposed to the current macro environment is starting to materialize. Steel costs are something we're watching as well. Importantly, our customers and vendors see the same dynamics and understand them. That shared awareness is part of what is making our pricing conversations constructive.

Cost pressures are not a surprise to anyone at the table. We are applying the same discipline to fleet deployment that we've spoken about for some time now and are not chasing spot work. Our strategy of maintaining an active fleet count in the mid- to lower 20s positions us well to capitalize on improving market conditions. Although we are in an active dialogue to potentially increase fleet deployments, as Matt previously noted, we will remain disciplined in our approach.

Before I continue on to proppant, I want to expand on Matt's point about the benefits we're seeing from our electric or e-blenders. First and foremost, our internally designed and manufactured electric blenders are completely modular, enabling faster repairs and reducing the need for redundancy. While some parts and lead time delays may push full deployment of the remaining e-blenders into early 2027, the capital efficiency benefits are already materializing on the units we deployed in late 2025. And we expect meaningful second order savings from reduced repair and maintenance expenses as the full fleet is deployed and legacy units are retired.

Moving to proppant production. The first quarter presented some challenges for this segment, as we noted on the March call. Beyond the winter storm experienced in the quarter, we experienced some operational issues that affected production levels. While completion activity increased, particularly in March, these headwinds resulted in lower sequential Q1 volumes versus the strong performance we delivered in the fourth quarter. Operational challenges and unplanned downtime have negatively impacted utilization and sales into the second quarter. As a result, we expect volumes to be down from the first quarter.

We're focused on returning to the execution levels that drove our strong fourth quarter results, namely, we are optimizing mine investments in both South and East Texas to increase utilization and throughput. The operational leverage in this business remains the key driver. When we can maximize production efficiency and maintain high uptime, profitability follows.

Beyond the segment results, I want to pick up on Machina, where Matt left off and touch on the acreage opportunity he described. When an operator looks at completing a well in a complex subsurface environment, that is one with nearby offset wells, wastewater disposal infrastructure, or legacy completions in close proximity, they face a practical dilemma. The frac design that could optimize production from that wellbore may carry increased execution risk.

In some cases, the well sits as a DUC or is deferred. What our platform potentially enables is the ability to pursue a more optimized design in these environments with real-time subsurface intelligence guiding the execution and closed-loop control, reducing the exposure to unintended downhole consequences. Ultimately, Machina may shift the economic calculus on certain uneconomic locations and open up a broader swath of developable inventory.

From a competitive standpoint, I will simply note that the ability to deliver this capability without requiring upfront infrastructure investment in adjacent or offset wellbores is a meaningful practical differentiator. Approaches that depend on fiber installation and offset wells could cost up to $1 million to $2 million. We are working through price discovery with customers on how to appropriately capture the value Machina creates. That process is ongoing, and we look forward to providing more color as it develops.

With that, let me hand it over to Austin to walk through the numbers.

Thank you, Ladd. In the first quarter, revenues were $450 million, up slightly from $437 million in the fourth quarter of 2025. We generated $54 million of adjusted EBITDA with an adjusted EBITDA margin of 11.9% compared with $61 million in the fourth quarter or 14% of revenue. The impact of the winter weather storm resulted in an estimated $9.3 million reduction to consolidated adjusted EBITDA. Pro forma adjusted EBITDA margin would have been approximately 13.6%, in line with Q4 2025 and an improvement of approximately 350 basis points versus Q3 2025. Free cash flow was negative $25 million in the first quarter versus $14 million in the fourth quarter of 2025.

Turning to our segments. Stimulation Services revenues were $407 million in the first quarter, improved from $384 million in the fourth quarter of 2025. Adjusted EBITDA in Q1 was $32 million, in line with the $33 million we reported in Q4 with margins of 7.8% compared to 8.7% in Q4. As noted earlier, harsh weather conditions impacted us in the first several weeks of the year and were an estimated $7.8 million headwind to Stim Services adjusted EBITDA. Pro forma for the weather impact, segment margins were slightly improved from the fourth quarter as well as an increase of approximately 370 basis points versus Q3 2025.

Our Proppant Production segment generated $120 million of revenue in the first quarter, a touch above the $115 million of revenue we reported in the fourth quarter of '25. Approximately 28% of volumes were sold to third-party customers during the first quarter versus 39% in Q4. Adjusted EBITDA for the Proppant Production segment was $7 million for the first quarter versus $16 million in Q4. On a margin basis, adjusted EBITDA margins were 5.4% in the quarter versus 13.9% in Q4 2025. Winter weather had an approximately $1.5 million impact on adjusted EBITDA. In addition to weather, lower throughput and sales volumes and increase in tons procured and sold through third-party mines impacted results.

Our Manufacturing segment generated first quarter revenues of $48 million versus $43 million in the fourth quarter. Approximately 14% of segment revenues were generated from third-party sales compared to approximately 18% in Q4. Adjusted EBITDA for the Manufacturing segment was $7 million, up from $4 million in Q4. Flotek generated first quarter revenues of $72 million versus $43 million in the fourth quarter. Approximately 25% of segment revenues were generated from third-party sales compared to approximately 26% in Q4. Adjusted EBITDA for Flotek was $11 million, up from $10 million in Q4.

Selling, general and administrative expenses were $44 million in the first quarter compared to $43 million in the fourth quarter.

We are reaping the early benefits of our savings initiatives. As Matt alluded to, we have achieved the majority of the savings on a year-over-year basis and including the reduction in capital expenditures in the fourth quarter of 2025. We anticipate realizing the remainder of the savings as we progress through the year.

Turning to the cash flow statement. Cash capital expenditures of $41 million in the first quarter were up from $37 million in the fourth quarter of 2025. Consistent with the outlook we issued on our March call, we expect total capital expenditures in 2026, including Flotek spend to be in the range of $155 million to $185 million. Excluding Flotek, we expect our CapEx to be in the range of $145 million to $175 million.

As Matt highlighted, we have strict criteria that must be met first before we will take action or commit ourselves to accelerating our fleet upgrade program. In addition to meaningful price increases, sufficient contract duration is also necessary. We are quite pleased with how constructive our customers have approached our ongoing and dynamic dialogue on these fronts.

Turning to cash. Total cash and cash equivalents as of March 31, 2026, were approximately $34 million, including approximately $6 million attributable to Flotek. Total liquidity at quarter end was approximately $108 million, including $80 million available under the ABL. Borrowings under the ABL credit facility ended the quarter at $116 million, an increase from $69 million at year-end.

At quarter end, we had approximately $1.09 billion of debt outstanding with the majority not due until 2029. Our approach to the balance sheet remains the same, disciplined, opportunistic and focused on maintaining the flexibility to act as market conditions evolve.

As we noted on our last call, we completed 2 financing transactions in the weeks following year-end. A $25 million additional issuance of 2029 senior notes to Beal Bank in January and a 6-month extension on our senior secured revolving credit facility, extending it to September 2027. We will continue to evaluate opportunities to further strengthen our liquidity and capital structure.

That concludes our prepared remarks. Operator, please open up the line for Q&A.

[Operator Instructions] Our first question comes from the line of Dan Kutz with Morgan Stanley.

So I just wanted to square a couple of comments on pricing. Just with the -- I think in the press release and in the prepared remarks, there were a few times that kind of balanced pricing was mentioned or operator dialogue indicating balanced pricing, which I kind of interpret as like you guys had flagged that you've seen pricing headwinds and interpret balanced pricing as kind of more flattish. But then I think there were a few points where you mentioned increasing pricing across part or majority of the fleet. So I just wanted to -- I was hoping you could help us square those 2 comments. Maybe it has to do with different timelines or different types of assets in the fleet. But yes, if you could clarify that, that would be really helpful.

Yes, that's different timelines. So as you look at Q4 to Q1 sequentially, it was stable. But as we transition into Q2 and into the rest of the year, we've got active dialogue with customers on pricing improvement. Much of this we've already secured. So you'll see some of the pricing show up in Q2 and completely show up in the back half of the year. But these are material price increases. And I think it's not just the commodity environment and the Iran war, but it's mostly because of how tight the market is on available horsepower.

Great. Yes, that all makes sense. That's helpful. And then maybe just looking at the second quarter, I appreciate that there's a lot of puts and takes, but it seems like there's a lot more that's a tailwind sequentially. So you guys -- you flagged cost headwinds, but you have the consolidated, I think it was $9 million weather impact. You have price improvements. You flagged the frac calendar tightening, and that's even versus, I think you said March was kind of a record efficiency period. And then I guess, lastly, you have the full run rate cost savings. So like anything you could help us with a bit more specifically about how you're thinking about the second quarter on the top line or on the profitability EBITDA line?

Yes. I'll let Austin jump in on some of this. But essentially, in Q3, we launched our cost savings initiatives, which have been extremely successful, most of which we fully realized to this point, but we think that there's more to gain there, especially on the R&M side and on the maintenance CapEx side, just from optimizing our procedures, our control of assets through asset management. And then by implementing automated resources for the automated controls on our equipment, we're finding incredible benefits across our entire fleet on how our fleet operates. And many things that we thought were ordinary course failures, we're finding that are now preventable failures from just doing a software update.

So we're pretty excited about what our frac automation is doing for our cost structure and what it's teaching us about our equipment and what we can control. So we expect to see further savings from there. And then when you look at the -- we had some -- a slow start to the year. Some of it was schedule from customers, but a lot of it was the weather delays. But what that did is it compressed our schedule in the back half of Q1 and into Q2 as well as the Iranian war, bringing spot work forward, bringing DUCs forward, really tightened up and eliminated white space in our calendar, combined with a real move from operators on planning activity going into the second half. That increase in activity has tightened the market up to a point where there's limited availability of available horsepower and has put us in a good spot to have conversations with our customers about pricing.

And not just from a supply and demand standpoint, but also from a fuel efficiency standpoint. Diesel prices have gone up tremendously and the demand for fuel-efficient fleets has increased. With that, we've been able to have very constructive collaborative conversations with our customers where we talk about fuel savings, and we can deliver them a friendlier cost structure for their budget. while also getting an increase for ProFrac. So it's been a really constructive dialogue where we allowed us to focus on our partnership and preserve and reinforce the strong relationships that we have with each customer.

Yes. And I think, Dan, when we look at the cost and cash savings initiatives, really, if you think about the $100 million, we're about 65% to 70% of that has already shown up going back to Q4 and then Q1 this year, right? And that's without a full year impact of those initiatives being implemented. In addition to that, and both Matt and Ladd touched on this, we're investing more so in the back half of the year in our e-blender fleet and program. And there was a little bit of a delay to that program just given some supply chain issues on some parts and pieces and some long lead time items. But once those start to feather in, we anticipate more savings, both on the CapEx side, but also ultimately on the R&M side as well. So when you take those together, I think we haven't updated guidance beyond the $100 million at the midpoint. But I do think as we move through the year and get those fully implemented that we'll see some upside to that total number.

With respect to Q2, echo all of Matt's comments. I would say with respect to some of the increases, they feather in throughout the quarter and then become more pronounced as we move into the back half of the year. In addition to that, where we're seeing a lot of demand and activity on the completion side unfold in real time. I think we've still got some work to do on Alpine, just given some of the operational issues and some of the unplanned downtime that we face, not just in Q1, but in early Q2 as well. So you've got a little bit of offset there. But net-net, we will be up in Q2 versus Q1.

One thing I'd say about the e-blenders as well is not only is it better for our cost structure and it saves us money on CapEx. But when you look at the efficiencies that it gains, we've seen about a 98% reduction in NPT associated with blenders on -- when utilizing these e-blenders. So they're incredibly reliable. When they do have issues, you can address them immediately on location and you don't have to send it back to a shop to get a rebuild. So it's far superior to what's been available historically on the market.

Got it. Do you think you can be up more than the $9 million weather impact in 2Q versus 1Q sequentially on the EBITDA line?

Yes, I think that's safe to say. Yes.

Our next question comes from the line of Patrick Ouellette with Stifel.

It's Pat on for Stephen Gengaro. I know you touched on pricing in the opening remarks and from Dan's question. But I was wondering if you can give any color about where current pricing sits versus maybe like the last few years? And any way to quantify what you expect over the next few quarters?

Yes. I'd say from the peak in '22 compared to where we are now, we're probably at 55% to 60% of where pricing was in '22. And you would need essentially an 80% or 90% increase to get back to that level. I don't know if we'll ever get back to that point, but you also have a much more efficient industry as well. So we can -- the number of pump hours that you get per fleet, the number of hours that you can put up on a daily basis is substantially higher than what it was in 2022. And so we can do a lot more with a lot less. But with that being said, we've got a long way to go for price improvement. Our #1 goal is that we generate positive net income and that we get there as quickly as possible without stressing our partnerships that we've worked so hard to establish. And I think that's a reasonable goal that can be accomplished within the next couple of quarters.

Okay. And then just a quick one. Could you just talk about frac sand pricing and any way to think about pricing through the year-end?

Yes. The sand market has been tightening up. So in South Texas, it's extremely tight. East Texas, it's improving there as well. West Texas has started climbing also. I think all the way across the board, sand has become a really tight commodity and there's, without a doubt, pricing improvement. I won't get into the specifics because each one of these regions are unique and have their own drivers. But I'd say with no exception, every market is quickly improving, not just on price but in volume.

Right. Appreciate the uniqueness of the regions.

[Operator Instructions] Our next question comes from the line of [ Bill Austin ] with Daniel Energy.

So just thinking about this, as you guys evaluate inquiries for kind of incremental frac spreads, can you help us frame the mix between public and private operators? Has that kind of composition shifted meaningfully?

Yes. I mean we've seen a lot of new activity coming on from private operators. Without a doubt, there's a lot of spot work out there that's come out of the woodwork. We're even seeing some private operators bring on full dedicated programs, which is what we focus our commercial efforts on. We talk to everybody. We work with everybody regardless of the size of their program. But our ability to get in and cover spot work is really associated with the core of our business on whether or not we have white space or not. We're not going to activate a fleet so that we can bring together a lot of spot pads.

And so we focus on our core committed, dedicated, reliable and consistent schedules. And what we run into from our high efficiencies is that sometimes we outrun people's programs and we end up with a few gaps in the calendar. That's where the spot work is so valuable for us. It allows us to squeeze those guys in whenever we outrun our steady customers' schedules. And so you need a healthy mix of the 2. What we're seeing right now is that there is a disproportionate number of spot work that has come to market that's all in demand all at the same time. And it's quickly transitioning into committed programs and rig activations.

And so we like the way the market is framing up. We're still in the early innings. And -- but for us to get out and start activating fleets and committing capital to tailoring this equipment for the customers' unique needs, we need to see a stronger signal, and we need to see some commitment from the customer to help in those efforts. We don't want to deploy capital on spec. We're not going to. We're remaining disciplined. Our core focus is to make sure that we maintain control of our cost and our disciplined approach to operations. And with that, I think we end up with plenty of opportunities to address every one of our customers' needs.

But I think when you look at pricing and where it's going and how quickly it's readjusting, I think that -- I think this is a win-win scenario for our customers as well as our bottom line and our ability to address those needs quickly. The price is coming up, but we're not going to chase and we're not speculating on where it's going. But we are ready. We've got high-quality assets that are ready to go. And with the right signal, we'll respond accordingly. But that signal isn't coming from our own macro analysis or anything like that. It's coming direct from our customers who are committed to their programs, and there should be no ambiguity related to how active they want to be. But this "drill, baby, drill", yes, we think it's pretty close, but that doesn't factor into any of the guidance that we've provided.

Great. That was kind of where I was going to follow up on the pricing side, how it's been driving, but you kind of hit it in that answer. I'll turn it back over.

Yes. I think just to close it off, I think getting -- I think in very short order this year, we'll see positive net income. I think everything is there for us to deliver that. And it's just working with our customers to make sure that they're getting what they need and that our relationships are strong there and that I think this is the perfect environment to see the service industry and the economic outlay for the service industry restored and to do it at a time when our customers are in a good spot as well.

We have no further questions at this time. I would now like to turn the floor back over to Mr. Matt Wilks for closing comments.

Thanks, everybody, for joining our call. We look forward to the next one and very excited about the positive results that we're seeing in ProFrac and especially excited about the coming quarters. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Greetings, and welcome to the ProFrac Holding Corp. Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Michael Messina, SVP of Finance. Thank you. You may begin.

Thank you, operator. Good morning, everyone. We appreciate you joining us for ProFrac Holding Corp. conference call and webcast to review our results of the fourth quarter and year ended December 31, 2025.

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 fourth quarter and full year 2025 before opening up the call to your questions. A replay of today's call will be made available via webcast on the company's website at pfholdingscorp.com. More information on how to access the replay is included in the company's earnings release.

Please note that the information reported on this call speaks only as of today, Thursday, March 12, 2026. You are advised that any time-sensitive information may no longer be accurate as of the time of any 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 Filings tab to better 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 earnings press release, which can be found on the company's website.

With that, let me hand the call over to ProFrac Executive Chairman, Mr. Matt Wilks.

Thank you, Michael. I'll kick off with some high-level remarks about our recent performance, market outlook and strategic initiatives. Ladd will expand on the performance of our businesses. And finally, Austin will discuss our financial performance.

Our results in the fourth quarter improved from Q3 with total adjusted EBITDA increasing 49% on an improvement across our two largest segments, Stimulation Services and Proppant Production. This performance was driven by better-than-anticipated activity levels, strong operational execution with optimized uptime and the early benefits of our cost and capital management initiatives. Notably, our Proppant Production segment delivered exceptional results, benefiting from increased volumes and improved logistics efficiency that helped us maintain strong margins. Ladd will elaborate on this in a few minutes.

Looking at 2025 as a whole, the year presented a challenging backdrop for the completions industry. Tariff-driven economic uncertainty and OPEC's decision to increase supply in early April rattled commodity prices and prompted widespread operator reassessment of near-term activity. Throughout the summer and early fall, operators remained cautious as they balanced hedge books, return commitments and commodity exposure against continued commodity volatility and broader economic and geopolitical uncertainty. Against this backdrop, the market ebbed and flowed at relatively subdued activity levels.

What enabled us to navigate 2025 effectively and emerge well positioned for 2026 was the fundamental strength of our business model. Throughout the year, our vertical integration and asset management platform were instrumental, providing the operational flexibility and cost advantages that differentiate our performance during difficult market conditions. However, this isn't just about weathering downturns. It's about having the structural advantages that allow us to compete more effectively across cycles.

The recent conflict in the Middle East resulting in disruptions to tanker flows to the Strait of Hormuz, in addition to the damage to Gulf energy infrastructure are likely to continue to not only have a meaningful impact on both near term, but also potentially on medium-term physical supply and demand balances. The severity and duration of these factors remains fluid. However, if disruptions prove lasting, the path to sustainably higher oil prices may crystallize. The conflict in the Middle East is playing out against the backdrop where the setup in North America for onshore activity remains compelling. As we've noted for several quarters, activity has been running below levels needed to sustain flat shale production, and we expect that gap to close as operators accelerate activity to combat natural decline.

On the gas side, expanding LNG capacity and rising power demand continue to support a favorable outlook. Layered on top of that, we believe capital discipline across the hydraulic fracturing industry, combined with ongoing equipment attrition and restrained new additions, sets the stage for supply-demand tightening as activity picks up. Any sustained disruption to Arabian Gulf supply could be the catalyst that pulls the time line forward. When that acceleration comes, we believe ProFrac is well positioned to benefit. Some of the same attributes mentioned earlier, including our vertical integration and how we manage our asset base as well as our position in dual fuel and electric technologies are what keeps us squarely where operator demand is highest and position us to move decisively as the cycle turns.

Turning to the first quarter for a few moments. We experienced a significant weather impact in January that created near-term operational challenges. Winter storms affected our operating regions during a period when operators were also taking a measured approach to activity amid broader macro uncertainty. However, momentum has been building as we've moved through the quarter, which has been encouraging. Our calendar has tightened, activity levels have improved. And with oil prices recovering since the start of the year, operator sentiment has strengthened.

Key to being well positioned for the dynamics we have seen for several quarters is the work we have done internally to strengthen our cost structure. On our November call, we introduced a business optimization plan targeting annualized savings of approximately $100 million at the midpoint by the end of the second quarter of 2026. This consists of $35 million to $45 million in labor-related COGS and SG&A reductions, $30 million to $40 million in nonlabor operating expenses and $20 million to $30 million in capital expenditure efficiency. We are pleased to report strong progress across all three components of this program. On capital expenditure efficiency, we have already achieved at a minimum, the midpoint of our targeted range and expect to be at the higher end of the $20 million to $30 million target. The early benefits of these capital savings were visible in our fourth quarter results, where we delivered a significant beat on net capital expenditures in frac. Austin will provide more detail on what this progress means for our 2026 capital expenditure outlook in a few moments.

On labor-related savings, we have fully implemented the cost reduction measures such that we are currently running at an annualized savings rate that positions us at or above the midpoint of our $35 million to $45 million target range. For nonlabor operating expenses, we've achieved approximately 1/3 of the targeted savings on an annualized basis, primarily from fully implemented SG&A reductions. The larger component of this category related to repair and maintenance and asset level operating expenses remains in earlier stages of implementation and should accelerate as we move through the year. We continue to expect to achieve the full $30 million to $40 million range as these initiatives mature through the second quarter. Taken together, we believe these actions meaningfully improve our cost structure and position ProFrac to generate stronger returns as market conditions improve.

Alongside those efforts, technology differentiation remains a key focus. Let me take a few minutes to walk through our latest technology initiatives, which I believe represent a meaningful and underappreciated part of the ProFrac value proposition. When we announced our strategic partnership with Seismos back in August, we talked about bringing closed-loop fracturing to the industry, combining ProPilot surface automation with Seismos' subsurface intelligence to enable real-time optimization during active pumping. The partnership has been performing as we envisioned, and we believe recent field trials have validated the approach. But as we deployed this technology and collaborated with our customers, it became clear the closed-loop control was just one piece of a larger opportunity.

Today, I want to discuss Machina, our complete well optimization suite. that we believe takes everything we've built with Seismos and ProPilot and extends it into a unified platform that spans the entire completion life cycle. Machina integrates treatment design, real-time measurement, mid-stage intervention, frac hit detection, live pad level tracking, historical analytics, supply chain optimization and water quality analysis into a single continuous architecture. Central to Machina's architecture is a new generation of AI engineering agents that we think of as digital employees embedded directly into the workflow. These agents monitor, interpret and act continuously across the completion life cycle.

Challenges that historically required physical intervention, mechanical testing or group force diagnostic runs can now be identified and resolved through a software update. What makes Machina particularly powerful is how it builds on ProPilot 2.0's foundation. ProPilot serves as both a cost optimization tool and an execution precision enabler designed to reduce labor requirements and maintenance expenses while delivering the coordinated pump control and millisecond level response time that makes closed-loop fracturing possible. Without ProPilot's execution, stability and predictive maintenance capabilities, we couldn't achieve the rapid repeatable actuation that knocking up requires to translate subsurface intelligence into immediate operational adjustments. Design assumptions now flow directly into execution monitoring. Intervention decisions designed by our customer are interpreted algorithmically and executed immediately through ProPilot.

Subsurface response is validated in real time, and all of that learning feeds back into future design optimization. We believe that this is not only about making one stage better, it's about creating a continuous improvement engine that potentially improves perforations in every stage, every pad and every program. Ladd will walk through how this works operationally and what we've experienced to date.

In summary, we closed 2025 with momentum. Q4 EBITDA was up 49% sequentially, demonstrating the strength of the business model and cost initiatives and positioning us to capitalize when the market inflects. Weather headwinds early in the quarter have given way to strengthening fundamentals. While Q1 began with operational challenges, our calendar has tightened with activity accelerating. Our $100 million cost optimization program is ahead of schedule. Labor savings have been fully implemented. CapEx efficiency is tracking to the high end of targets and nonlabor reductions are progressing. Machina represents the next evolution in completion technology. By unifying ProPilot surface automation with subsurface intelligence into a complete optimization platform. We're not just improving individual stages. We're building a continuous improvement engine.

With that, I'll turn it over to Ladd, who will provide more detail on our segment performance.

Thanks, Matt, and good morning, all. Building on what Matt covered, let's start with Stimulation Services. As we mentioned on our November call, we were encouraged by signs of stability in the first several weeks of Q4. As noted, deferred September activity returned to the calendar in October, and we successfully kicked off a multi-fleet contract with a large operator early in the quarter. Activity was much more consistent in Q4 relative to our expectations. On fleet utilization and pricing, we maintained a consistent fleet count in the low 20s throughout the fourth quarter and into Q1. More importantly, we saw improved utilization and operational efficiency across our active fleets and pricing remained relatively stable quarter-over-quarter.

What I'd emphasize is the meaningful impact our cost and capital savings initiatives had on our margin performance in the fourth quarter. We began to see the early benefits of these programs flow through our results, which was a key driver of our strong adjusted EBITDA performance and contributed significantly to our ability to deliver improved margins. As Matt referenced, January presented weather-related headwinds that impacted operations across both our stimulation and proppant businesses. The winter conditions created operational disruptions that we estimate have resulted in approximately $8 million to $12 million of adjusted EBITDA impact in the quarter, more heavily weighted towards stimulation services. That said, since weather conditions improved, our calendar has tightened and activity has picked up. While we expect Q1 results will be softer than our strong fourth quarter performance, primarily due to the January disruption, the operational momentum we're experiencing positions us well heading into the second quarter.

Now turning to Proppant Services. Matt referenced the strength of Alpine Silica's performance in the fourth quarter. After some challenges in Q3, revenues in the segment stepped up approximately 50% and segment adjusted EBITDA doubled in Q4. We delivered strong operational execution throughout the period with volumes reaching over 2 million tonnes. Q4 benefited from solid demand across our key markets, coupled with exceptional operational performance and high uptime, we were able to maximize our production efficiency and cost absorption. From a geographic perspective, West Texas remained a significant contributor to our overall mix, along with continued gains in South Texas.

Our cost control initiatives, especially on the logistics side, were a key driver of our ability to maintain strong margins and drive improved profitability in the quarter. In Q1, we expect volumes to be down quarter-over-quarter. Weather disruptions in January, combined with some operational challenges that impacted production levels created headwinds after the strong execution we saw in Q4. Customer demand remains solid and as conditions normalize, we're focused on returning to the operational performance that drove our fourth quarter results. Looking ahead, we continue to see momentum building in the Haynesville, where we've secured significant customer wins on both the frac and sand side. We expect activity in this basin to continue increasing as we move through 2026, further diversifying our revenue base.

Now let me circle back to the technology discussion Matt introduced and get specific about what Machina does on location. Closed-loop module remains our core real-time optimization capability using acoustic friction analysis to detect perforation efficiency issues and prescribe immediate interventions that ProPilot executes with millisecond level response. Machina is designed to extend this by integrating a broad operational context into a unified decision engine. Treatment design flows directly into execution monitoring. Intervention decisions are made algorithmically and executed immediately through ProPilot's precision control. Subsurface response is validated in real time and all of that learning feeds back into future design optimization. This integration of frac hit indicators, water quality data, supply chain optimization and fleet health monitoring can create a continuous improvement engine. We believe field results demonstrate the impact. Closed-loop intervention reduced cumulative perforation efficiency degradation by 33% compared to untreated stages. More importantly, every stage adds to our historical database, potentially improving design refinement across entire programs.

With that overview of our operational performance and technology progress, I'll turn it over to Austin to walk through our financial results in detail.

Thanks, Ladd. In the fourth quarter, revenues were $437 million compared with $403 million in the third quarter. We generated $61 million of adjusted EBITDA with an adjusted EBITDA margin of 14% compared with $41 million in the third quarter or 10% of revenue. For the full year 2025, revenues were $1.94 billion with an adjusted EBITDA of $310 million and an adjusted EBITDA margin of 16%. Free cash flow was $14 million in the fourth quarter versus negative $29 million in the third quarter. For the full year 2025, free cash flow was $25 million. As Matt outlined, we have been executing on our business optimization program targeting $85 million to $115 million of annualized savings and have made strong progress. Within the fourth quarter specifically, we estimate the combined cash impact of labor, nonlabor and capital expenditure savings was approximately $45 million, with labor savings accounting for roughly $10 million, nonlabor approximately $10 million and the remaining $25 million from CapEx savings. Of note, labor and nonlabor savings were executed throughout the quarter. As a result, our progress on these initiatives does not reflect the full potential quarterly impact.

Turning to our segments. Stimulation Services revenues were $384 million in the fourth quarter and improved from $343 million in the third quarter. Adjusted EBITDA in Q4 was $33 million, above the $20 million we reported in Q3, with margins increasing to 8.7% versus 5.7% in Q3. The improvement was driven by our more consistent activity levels, better fleet utilization and early benefits from our cost savings initiatives. For the full year 2025, Stimulation Services revenues were $1.68 billion with adjusted EBITDA of $209 million and an adjusted EBITDA margin of 12.4%.

Our Proppant Production segment generated $115 million of revenue in the fourth quarter, materially higher than the $76 million of revenue we reported in the third quarter. Approximately 43% of volumes were sold to third-party customers during the fourth quarter versus 39% in Q3. Adjusted EBITDA for the Proppant Production segment was $16 million for the fourth quarter, which was 2x the $8 million we delivered in Q3. On a margin basis, EBITDA margins increased to 14% in the fourth quarter versus 10.5% in Q3. Strong segment performance reflected approximately 2 million tonnes of volume, high equipment uptime and effective logistics optimization, particularly in West Texas and South Texas markets, as Ladd touched on. For full year 2025, proppant production revenues were $336 million with adjusted EBITDA of $57 million and an adjusted EBITDA margin of 17%.

Our Manufacturing segment generated fourth quarter revenues of $43 million versus $48 million in the third quarter. Approximately 18% of segment revenues were generated from third-party sales, consistent with Q3. Adjusted EBITDA for the Manufacturing segment was $4 million, in line with Q3. For full year 2025, Manufacturing segment revenues were $212 million with adjusted EBITDA of $19 million and an adjusted EBITDA margin of 8.7%. Selling, general and administrative expenses were $43 million in the fourth quarter, in line with the third quarter. We expect to see continued improvement in SG&A as we execute on our cost savings initiatives, as Matt discussed.

Turning to the cash flow statement. Cash capital expenditures of $37 million in the fourth quarter was down slightly from $38 million in the third quarter. For the full year 2025, CapEx totaled $170 million, a material improvement from 2024's $255 million in CapEx. As Matt discussed earlier, the progress we've made on capital expenditure efficiency has been one of the most encouraging outcomes of our business optimization program. The discipline and execution our teams demonstrated in 2025 gives us confidence in our ability to continue to execute as we move through 2026.

To that end, we expect total capital expenditures in 2026, including Flotek spend to be in the range of $155 million to $185 million. Excluding Flotek, we expect our CapEx to be in the range of $145 million to $175 million, split between maintenance-related and growth-oriented investments. This guidance reflects our continued commitment to capital discipline while ensuring we maintain our competitive positioning, equipment reliability standards and the flexibility to capitalize on market opportunities as conditions improve.

Turning to cash. Total cash and cash equivalents as of December 31, 2025, were approximately $23 million, including approximately $6 million attributable to Flotek. Total liquidity at year-end 2025 was approximately $152 million, including $135 million available under the ABL. Borrowings under the ABL credit facility ended the year at $69 million, a $91 million reduction from September 30. At year-end, we had approximately $1.05 billion of principal debt outstanding with the majority not due until 2029. We repaid approximately $136 million of long-term debt in 2025. As background, recall that in June, we executed a series of transactions to provide incremental liquidity through 2025, including an initial $20 million issuance of additional 2029 senior notes and commitments for additional tranches at our discretion. We completed the remaining $40 million of that program in December. As discussed on our November earnings call, we also monetized the $40 million Flotek seller note early in the quarter, selling it to a Wilks affiliate at par. Lastly, in Q4, we amended the Alpine term loan to reduce quarterly amortization payments from $15 million to $7.5 million for the first two quarters of 2026 and deferred leverage ratio testing by one year to March 2028. Subsequent to year-end, we closed on an additional $25 million issuance of 2029 senior notes to Beal Bank in January, building on the senior notes program we completed in December and further strengthening our liquidity heading into 2026. In addition, earlier this month, we extended the maturity of our senior unsecured revolving credit facility by 6 months to September 2027, providing further flexibility in our capital structure. The facility now has a capacity of $275 million. As we look ahead, we remain disciplined and opportunistic in how we manage our balance sheet, and we will continue to evaluate ways to further strengthen our liquidity and financial flexibility as market conditions evolve.

That concludes our prepared comments. Operator, let's open up to Q&A.

[Operator Instructions] And your first question comes from John Daniel with Daniel Energy Partners.

Matt, Ladd, I was hoping if you could provide a little bit more color on the new technology. Just how does it -- is it software that gets installed in the data van? Like how does it get rolled out? And what will be the sales cycle in terms of educating customers what it can do? And how long -- what's an expectation for that education process?

Definitely. So it's installed on every fleet, and it's -- ProPilot is our frac automation. It's on every single fleet. It's in the data van. And then Machina is the customer-facing software for well optimization. It allows us -- it allows the customer to pull in real-time data from offsetting wells as well as data from the same well, same stage and to write rules on how the equipment should respond to that data. So we're extremely excited about this. When you -- a great way to think about it is what we're seeing across the entire industry is that operators are only getting about 2/3 of the perfs open on each well. So if there's 15,000 perfs, they're only getting about 10,000 of them actually open. And so our technology allows us to go in, recognize that in real time, respond to it and initiate what we call interventions to increase the number of open perfs.

We can't improve the resource. We can't change the rock, but we can open more perfs. And so we've been able to see where we can open as much as 1,500 extra perfs on a well where your D&C cost is $12 million and you're only getting 10,000 perfs open, you're spending $1,200 per open perf. So if we can open an extra 1,500 or 2,000 perfs, that's creating anywhere from $1.8 million to $2.4 million of D&C cost that would have otherwise been left behind on each well.

Okay. I'm curious, and if you said this in the release, I apologize for missing it, but when you've tested this with your customers, what did they share with you what the production uplift might have been through the technology?

It's too early to tell, and it's a slippery flip for us to get into promising well results or an increase in production. Ultimately, it comes to whether or not these perfs are open or closed. If that perf is closed, we're not getting hydrocarbons out of it. But if I can open these additional perfs, that's a better way for us to measure our success. And it also has a quicker time cycle.

For us to see the enough production and work with an operator to get enough data, we'd be looking at just one well anywhere from six to nine months before we really get the appropriate feedback. But -- and then we get into the complicated process of trying to establish how much of that production, what were the changes, what other items were going on at the same time and what's directly attributable to our technology. But just keeping it simple and focusing on whether or not these perfs are open is the best unit of measure and way to establish progress.

Okay. And then I guess one final one and not looking for a specific number here, Matt, but Q1 down relative to Q4, but just given the costs that you're pulling out and sort of the run rate right now in March, I'm assuming Q2 probably better than Q4. Is that -- would be that big feel?

That's a fair assumption.

Your next question comes from Saurabh Pant with Bank of America.

Matt, I know you alluded to some of this in your prepared remarks, but what's going on in the Middle East on the margin. I'm assuming it does help the U.S. land market a little bit. And I know you were talking about improving operator sentiment, Matt, can you talk to -- are you getting more phone calls? Are there more discussions? I know it's too early for anything to show up on the ground. But are you having more discussions?

And just along those lines, theoretically, if there's a call on equipment, I know you said you have low 20 frac fleets out there. How easily can you bring more fleets out? And how should we think about any potential CapEx that you would need to spend on bringing fleets out?

Yes. It's an exercise that we continue to run through. I think things are happening pretty fast over in the Middle East, and it's -- what we're looking at is how much of this disruption is temporary from just the straight being closed compared to structural supply and demand imbalances on a go-forward basis from these attacks on infrastructure. Then there's also the possibility of artificial demand as national security interest for each state is reassessed and likely to see some increased reserves on a go-forward basis that should be very, very constructive for the supply and demand balance.

As far as the onshore market here, we are fielding a lot of calls. There is a lot of conversations going on. So far, most of it is centered around DUCs being pulled forward as well as just more robust dense calendars associated with existing activity. It's too early to tell whether this is going to result in a material increase in rig count, but we're watching it very close, and it's interesting to see how our customers are responding and behaving in real time. So, hopefully, we'll have more to talk about in the near future.

Probably the biggest impact regardless of a call on more horsepower and activity, diesel prices have shot through the roof. And so in some instances, the daily quote has essentially doubled from where it was just a few weeks ago. And that's creating a lot of opportunities for us to be better partners with our customers. Where we see customers that typically run all diesel fleets, the diesel -- the fuel bill is now more expensive than horsepower. And it creates a premium for your fuel-efficient fleet.

So when you look at dual fuel, where you can eliminate as much as 70% of your diesel cost or an electric fleet where you can eliminate 100% of it, it's more important now than ever where we can see margin expansion while also saving our customer money and insulating or hedging -- giving them a physical hedge against an unanticipated or expected rise in fuel costs.

Right. No, that makes a ton of sense, Matt. That's super interesting. And then Austin, I have one for you. You talked about this in your remarks about how you strengthened your balance sheet, increasing liquidity, including -- we saw earlier this week some of the amendments you made to your credit facility. But as we look forward, Austin, right, in terms of just opportunities to deleverage outside of just organic free cash flow, maybe just talk to a little bit on what you are thinking, how you're evaluating the balance sheet, the deleveraging opportunity and what you maybe want to do from this point onwards?

Yes. Thanks, Saurabh. With respect to our balance sheet, so I think you can tell that we actively manage that, right? And we're constantly looking at a number of opportunities and strategies to optimize what the leverage profile looks like, what the liquidity profile looks like and then balance that against capital allocation opportunities that we have internally.

So, as we look forward, I think we'll continue to actively manage it, and we'll continue to focus on making sure that we've got liquidity not only to run the base business, but also as opportunistic investments come around. And as we think about the flexibility to be able to respond to this market and also to be able to make investments in some of our other subsidiaries.

Your next question comes from Dan Kutz with Morgan Stanley.

Congrats on the quarter.

Dan Kutz, go ahead with your question.

I'm sorry, can you repeat that question?

Dan Kutz, your line is open. We'll move on to next question. Dan Kutz, press star one again to queue up.

And your next question comes from Patrick Ouellette with Stifel.

It's Pat Ouellette on for Stephen Gengaro. So you highlighted the 1Q '26 results to soften sequentially in the pressure pumping segment. And I know the weather in January plays into that. But you also talked about the frac calendar tightening since then. So I was just wondering if you could give some color on maybe a run rate basis on where you see the segment exiting 1Q compared to 4Q?

Yes. I think our exit in Q1 is going to be in line to slightly better than what we saw in Q4. And it's just that disruption early in the quarter. You don't get those hours back. You don't get those days back. But it did compress the balance of Q1 and has given us a really tight schedule to run and benefit from higher utilization.

Okay. And you talked about the $8 million to $12 million impact to EBITDA from the weather disruptions. Is this sort of like lost EBITDA or just pushed out to the right and recoverable?

Yes, I would view it as pushed out to the right and recoverable. Certainly, it will be lost in Q1, right, to Matt's point. I mean we can't get those days back, right? But as we think about the calendar tightening even further as we move through the quarter and also into Q2, I think ultimately, we will be able to earn that back. It's just not all going to come back in February and March.

All right. And then if I could just squeeze in one more. If you could just talk a little bit about the guide for the profit segment, it seems like demand is relatively flat quarter-over-quarter into 1Q. Could you maybe touch on the operational challenges you highlighted? Are those sort of weather related? And then you sort of talked about maybe some strength into 2Q. Is this driven by maybe like better operational efficiency? Or is that demand driven?

It's a little bit of both. So the disruption early in the quarter impacts your sand mines disproportionately because your wash plants, your working inventory, those freezing temps, a lot of these facilities weren't -- they're in areas where you're not used to dealing with this kind of a weather impact. So it's pretty disruptive whenever you get a weather event like this. And it impacts your sand mines a little bit more than it does your frac fleets.

With that being said, the operational efficiencies and the quality of our backlog, we've got everything that we can make, we've got sold. And so now it's just an exercise and execution. And we're starting to see the best performance out of these assets and believe that there's a lot more opportunity and continuing to see that best demonstrated performance climb.

Your next question comes from Dan Kutz with Morgan Stanley.

Congrats on the quarter. Sorry about that. I think my headset cut out. So you guys had flagged that you think we're running below production maintenance activity levels in the U.S. currently. Just wondering if you have any guess or any sense for how much higher completions activity would have to be at more of a maintenance level run rate?

Yes. We I think it's easier to look at it from a completed lateral feet per month. And it's -- depending on the quality of the inventory, you're looking at anywhere from 0.5 million feet to 1 million feet a month that is below sustainable levels.

Great. That's helpful. And then -- so it sounds like you guys had flagged recently that in tandem with this -- with the cost-out initiatives, you're kind of managing the deployed fleet count to a more range-bound level that leaves some spare capacity on the side. Just wondering if you could talk through what that horsepower, what the plans are for that? Is it going towards bigger fleets towards continuous frac, maybe used to minimize maintenance costs or maybe some of that just kind of gets attrits and gets retired. But yes, just wondering how the spare capacity that you guys have is being utilized or what the plans for that are?

Definitely, that's a great question. The way that we're looking at things right now is as tempting and interesting the environment that we have is, we're going to remain disciplined and keep our fleet count where it's at, unless we see a true call on assets and activity. I think things are too up in the air right now. We're seeing the calendars fill up. We're seeing DUCs being pulled forward. But once we see this inflection point where there's a true call on activity of increasing rigs and the demand for frac fleets commissioning full dedicated spreads rather than a few wells here and there pulling DUCs forward.

Once we see a motivated push to deploy CapEx from operators, we'll respond appropriately at that time. And we do have spare capacity. It's just -- is this where we're going to put our priorities and focus our capital allocation. And at this time, we just -- that's -- we're going to stick to our plan, stay disciplined and look for opportunities to create value for our customers.

And again, again, I'll highlight without a call on activity, just the shakeup in the fuel market is -- it's a huge risk for our customers. And with the number of fuel-efficient assets that we have, I think we're in a great position to be a great partner with them to help them save money, derisk their capital allocation and also to do it while seeing margin expansion on our side. We can help them save a lot of money on fuel. And we've been in a low diesel price environment that's really muted the value of these fuel-efficient fleets. But now that you're seeing diesel rise up as quickly and abruptly as it has, it's created a really interesting environment for us to improve our relationships with our customers and get paid handsomely for it.

Thank you ladies and gentlemen, there are no further questions at this time. So I'll hand the floor back over to Matt Wilks for closing remarks.

It's good to wrap up 2025. We're excited about 2026. We're managing our business in a very disciplined and thoughtful way. We appreciate everybody's time and look forward to connecting on our Q1 call. Thank you.

Thank you. This concludes today's call. All parties may disconnect. Have a good day.

Greetings, and welcome to the ProFrac Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Michael Messina, Vice President 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 third quarter ended September 30, 2025.

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 a high-level commentary on the operational and financial highlights of the quarter before opening up the call to your questions. A replay of today's call will be made 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 release. Please note that information reported on this call speaks only as of today, November 10, 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 Filings 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 at sec.gov and 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 kick things off with some brief comments, then hand it to Lad to dive into segment performance and Austin will follow with our third quarter financials. Q3 began with the modest market improvements we highlighted during our August earnings call, where we noted that conditions had stabilized compared to our Q2 exit levels, with some crews returning to work mid-quarter. During August, we experienced a sequential improvement in both activity levels and pump hours as customer programs continue to materialize. However, September witnessed a sharp deterioration as customers implemented program deferrals resulting in increased calendar white space. This volatility reflects the broader challenges facing the U.S. onshore completions market where operators continue to exhibit cautious capital deployment.

In response to market conditions, we have recently taken meaningful steps to adjust our strategy to build a sustainable, resilient business model poised to perform through the cycle. We are prioritizing dedicated fleets paired with operators conducting more robust, less volatile programs. Moreover, we are optimizing our cost structure with a focus on operational and capital efficiency. In addition to a renewed focus on efficiency, the company has identified initial COGS, SG&A and capital expenditure savings of $100 million at the midpoint on an annualized basis by the end of the second quarter 2026. The savings are comprised of $35 million to $45 million, driven by both COGS and SG&A labor reductions that have already been implemented an additional $30 million to $40 million identified across nonlabor items. In addition to $20 million to $30 million of reduced CapEx primarily driven by optimizing the utilization of active assets. The company believes that this is the first step in its business optimization plan. and that additional savings are possible.

Turning briefly to Q4. We have not experienced further calendar deterioration with improved activity in October versus our Q3 exit, in fact, we saw certain programs that had been deferred from September, returned to the calendar in addition to deploying assets under a new contract with a large operator. Although we typically witnessed Q4 seasonality we are proactively implementing measures to mitigate the impact.

Zooming out, we believe maintenance drilling and completion activity is below necessary levels to sustain flat shale production in U.S. land. Consequently, assuming the macroeconomic backdrop is supportive, we expect global supply imbalances to normalize in 2026 as operators will need to gradually accelerate completion activity to overcome natural production decline. The natural gas sector's outlook remains favorable, driven by expanding LNG export capacity and rising power demand. Both factors that should support improved completion fundamentals in 2026.

As such, we continue to believe that hydraulic fracturing market dynamics create a compelling setup for the future with industry-wide sustained capital discipline, increased equipment attrition and more disciplined new equipment additions, we see the potential for meaningful supply-demand tightening should drilling and completion activity accelerate. I'd like to thank our employees for their continued hard work and focus as we position the company for success through the cycle.

Against current market conditions, we are controlling what we can control by executing a comprehensive cost management strategy that positions ProFrac for both near-term operational flexibility and long-term value creation. In October, we completed a thorough review of our labor costs across COGS and SG&A and executed a headcount reduction. We believe this initiative rightsizes our business for near- and medium-term demand and estimate $35 million to $45 million of annualized savings.

Additionally, we have identified $30 million to $40 million of nonlabor expenses with a streamlined focus on nonlabor operating expenses. We're improving the cost profile of our fleet with stricter enforcement of our centralized control of equipment through our asset management program, which will reduce maintenance performed at districts. Additionally, we are optimizing the mix of equipment assigned to each fleet to further limit nonproductive time, mitigating interruptions to field operations. We are confident that these actions will also improve the efficiency and effectiveness of our maintenance capital expenditures where we have identified $20 million to $30 million of additional cash savings.

In August, we completed an equity offering that netted us nearly $80 million in proceeds. We deployed a portion of these funds to pay down the ABL and for general corporate purposes, including working capital. We are also being thoughtful and deliberate in how we use the levers at our disposal from the innovative transaction we entered into with Flotek in April. As a reminder, this strategic partnership involves the sale leaseback of our mobile power generation solutions for $105 million in total consideration, structured to provide both immediate liquidity and long-term value participation. The transaction gave us approximately 60% of the pro forma fully diluted equity ownership of Flotek Industries, positioning us to benefit from what we estimate to be a $3 billion to $6 billion market opportunity for gas conditioning solutions across diverse end markets, including data infrastructure, petrochemical facilities, upstream energy and broader natural gas utilization sectors.

Now we're strategically utilizing the financial flexibility this partnership provides. Specifically, on Friday, November 7, we completed the sale of the $40 million seller note that forms part of the original consideration structure. As we noted when announcing the original transaction, the deal represented an evolutionary step forward in our business relationship with Flotek. And these current actions allow us to realize value from the strategic partnership while maintaining our collaborative relationship and ongoing lease arrangements.

We remain very excited about our continued exposure to the gas conditioning and power generation markets through our Flotek ownership. Beyond Flotek, we are also planning to proceed with our previously announced senior secured notes program, which we established in the second quarter as part of our strategic liquidity enhancement initiative. As a reminder, in June, we successfully executed a series of transactions expected to provide approximately $60 million in incremental liquidity through 2025, including an initial $20 million issuance of additional 2029 senior notes completed in Q2 and commitments for two additional $20 million tranches at our discretion. We deferred the September tranche to December and now anticipate closing the remaining $40 million in December.

Lastly, we are currently pursuing up to an additional $40 million of capital in the form of new notes. In total, the completed and planned capital raises could provide as much as $200 million in cash. While market conditions remain volatile, we believe these proactive measures, coupled with our cost savings initiatives demonstrate our commitment to maintaining financial flexibility and building a resilient platform.

Looking ahead, we maintain incremental flexibility to access additional sources of capital in response to evolving market conditions. However, I want to be clear that as we execute our business optimization and cost management initiatives, I believe that the potential need for additional capital will diminish or become unnecessary.

Beyond these financial initiatives, it's important to highlight that our vertically integrated platform and technology leadership continue setting ProFrac apart, controllable factors that strengthen our competitive position regardless of market conditions. Our vertically integrated platform remains a fundamental advantage, combining sophisticated asset management with in-house manufacturing capabilities that deliver both strategic flexibility and cost benefits. These unique attributes position us to capitalize on market recovery, while maintaining our strong position in dual fuel and electric fracturing capabilities, technologies that garner the highest demand.

Our technology leadership through ProPilot 2.0 and our strategic partnership with Seismos, announced during the quarter continues to deliver measurable outcomes during this challenging environment. ProPilot 2.0 is providing its value as a cost optimization tool. For example, realizing fuel economy improvements as high as 26%. Our Seismos collaboration introduces closed loop fracturing capabilities that represent the next evolution in completion solutions. Ladd will provide more detail on how these technological differentiators are driving improvements across our operations.

In Q3, we generated revenues of $403 million adjusted EBITDA of $41 million and free cash flow of negative $29 million. This compares with revenues of $502 million, adjusted EBITDA of $79 million and free cash flow of $54 million in Q2. These results reflects the volatile market we experienced during the quarter.

In summary, we are adjusting our strategy to build a sustainable, resilient business model poised to perform through the cycle. We are prioritizing dedicated fleets paired with operators conducting more robust, less volatile programs, resulting in higher efficiency and improved control over our operations. Our proactive execution of a comprehensive cost and capital management strategy positions ProFrac for both near-term operational flexibility and long-term value creation with $100 million of structural cash savings identified across operating and capital expenditures. We have raised or plan to raise up to approximately $200 million of incremental capital. Raised nearly $80 million of net proceeds related to the equity offering in August, executed on the sale of the $40 million Flotek seller note sale at par to a Wilks affiliate. Plan to issue the remaining $40 million balance of the $60 million total commitment of senior secured notes to CSG and Wilks affiliates, pursuing capital in the form of incremental debt targeting up to $40 million.

Upon full realization of our cost management initiatives, we believe we have built a full cycle model, reducing or eliminating the need for further capital raises. We maintain selective fleet utilization and customer focus driving higher efficiency and improved asset allocation. And finally, we remain confident that market dynamics may create a compelling setup for the future, including maintenance drilling and completion activity is below necessary levels to sustain flat shale production in U.S. land. Natural gas sectors outlook remains favorable, driven by expanding LNG export capacity and rising power demand. In hydraulic fracturing, sustained capital discipline, natural attrition and limited new equipment additions could result in supply-demand tightening. When fully realized, our cost and capital management measures should deliver much of what we would hope for from a market recovery. Now I'll hand the call over to Ladd.

Thank you, Matt, and good morning, everyone. I'll provide more granular detail on several things Matt touched on, starting with our operational performance during the quarter. But first, I'd like to join Matt in thanking our employees, their dedication and teamwork are what keep us moving forward. In Stim Services, we experienced the market dynamics Matt described with Q3 presenting a tale of very different periods that drove operational challenges. As Matt noted, we entered Q3 with the modest market improvements we highlighted during our August earnings call. July has represented what we believe to be the trough period. August built on this foundation, delivering solid sequential improvement in both activity levels that some operators resume executing on their completion schedules.

We saw increases in activities that reinforce our view that market conditions were stabilizing. However, September presented us with some surprising headwinds. What has appeared to be strengthening calendar coming into the month deteriorated as customers implemented project delays and deferrals. What made September acutely difficult was the nature of the activity disruption. Unlike a gradual decline that allows for systematic cost adjustments, we experienced several head fakes, programs that were delayed with minimal notice, this created substantial operational inefficiencies as we carried semi-variable costs.

The pricing environment during the quarter reflected more customer and geographic mix and broader market pressures with revenue per pump hour declining temporarily into the end of Q3. Combined with activity volatility, this created a meaningful margin compression in the quarter. From a fleet deployment perspective, we maintained our selective approach with an average fleet count in the 20s, though effective utilization was impacted by white space issues just mentioned, especially in September.

Looking ahead to Q4, we're encouraged by signs of stabilization we observed in October with some of the activity that was deferred in September returning to the calendar. Additionally, we executed on a contract for multiple fleets with a large operator that kicked off in early October.

In parallel, we have continued to evaluate and implement operational adjustments across certain fields and administrative functions to optimize our cost structure.

Turning to our profit production segment. Alpine Silica delivered somewhat resilient performance despite the market conditions affecting our Stimulation Services business. Q3 revenues for Alpine remained essentially flat compared to Q2, with volumes relatively stable during the quarter. This demonstrates the value of our diversified customer base and our ability to serve third-party customers beyond our internal operations. However, we did experience margin compression during the quarter. primarily a result of a shift in volumes from South Texas to the highly competitive West Texas market.

Looking ahead, we maintained a strong market position in the Haynesville region, where we anticipate eventual increased natural gas activity will drive improved performance. Further, our throughput improvement initiatives in South Texas continued progressing establishing us well to capitalize on Eagle Ford demand. West Texas has seen improved volumes and demand, although pricing remains competitive.

In Q4, we anticipate an improvement in results, though we remain cautious given current market conditions. Turning now to capital allocation. Based on the deterioration in market conditions we experienced in late Q3, we're again demonstrating the flexibility provided by our comprehensive asset management program. We now expect capital expenditures to be $160 million to $190 million for 2025, representing an approximately $25 million reduction at the midpoint from our previous guidance of $175 million to $225 million.

This reduction reflects both the reality of current activity levels and our commitment to maintaining financial discipline. Our asset management platform enables these reductions while ensuring we maintain our competitive positioning and equipment reliability standards. This flexible approach to capital deployment. Our ability to scale spending up or down based on market conditions while preserving our technological advantages continues being a key differentiator in managing through volatile market cycles.

Now I want to expand on the operational and technological differentiators that Matt mentioned. These are the detailed execution elements that truly set us apart. Our asset management program continues generating strong results with our integrated approach to fleet deployment and maintenance optimization proving incredibly valuable. Equipment reliability and performance metrics remain at elevated levels despite increased operational demand directly attributable to the quality of our people, coupled with proprietary automation systems.

Our manufacturing platform provides substantial cost advantages across fleet construction, legacy equipment upgrades and asset standardization, all at cost below the third-party alternative. This internal capability ensures quality control and deployment flexibility while maintaining our competitive moat. Technology leadership drives sustainable competitive advantages through assets such as our ProPilot automation platform.

ProPilot 2.0 is proving its value as a cost us optimization tools, delivering reductions in labor requirements and maintenance expenses through intelligent automation. The platform's predicted taxability optimize maintenance intervals and enable more efficient preventative maintenance. We're also excited about our strategic partnership with Seismos, announced in August. Which introduces closed-loop fracturing capabilities across all major U.S. basins. This collaboration represents the next evolution of our technology leadership, combining Pro Pilot's proven surface automation with Seismos, advanced subsurface intelligence to deliver unprecedented operational control and performance optimization.

The partnership offers two deployment models supervised mode enables real-time decision-making through continuous subsurface data streams, allowing engineers to optimize stage design and fluid placement while operations are active. While unsupervised mode provides fully automated execution based on predefined parameters, reducing overhead and increasing operational consistency. This technology stay integration is designed to scale across our entire fleet, preparing us to serve super majors and leading independents with measurable performance improvement.

Importantly, Seismos acts as an independent auditor for downhole performance, allowing for dynamic completion design and predefined intervention measures to improve well performance. This partnership reinforces our dedication to bring customers the most advanced fracturing technology available while maintaining our competitive edge through innovation. I will now hand the call over to Austin to cover our financial results in more detail.

Thank you, Ladd. In the third quarter, revenues were $403 million compared to $502 million in the second quarter. We generated $41 million of adjusted EBITDA with an adjusted EBITDA margin of 10% compared to $79 million in the second quarter or 16% of revenue. Free cash flow was negative $29 million in the third quarter versus $54 million in the second quarter. The volatility in activity throughout the quarter created inefficiencies and negatively impacted results.

While the third quarter presented challenges, we've taken decisive actions to build a resilient platform poised to perform through the cycle. As Matt outlined, we have adjusted our strategy to prioritize dedicated fleets paired with customers that provide the more stable programs. In concert, we are implementing comprehensive cost and capital saving initiatives, which we believe will result in $100 million of annualized cash savings by the end of the second quarter of 2026.

In October, we completed a thorough review of our labor costs across COGS and SG&A and executed a headcount reduction. We believe this initiative rightsizes our business to align with our revised commercial and operating strategy.

Ultimately, we estimate $35 million to $45 million of annualized savings. Additionally, we have identified $30 million to $40 million of COGS and SG&A nonlabor expenses with a streamlined focus on nonlabor operating expenses. We are improving the cost profile of our fleet with stricter enforcement of our centralized streamlined control of equipment through our asset management program which will reduce maintenance performed at districts.

Lastly, we are optimizing the mix of equipment assigned to each fleet to further limit nonproductive time, mitigating interruptions to field operations. We are confident that these actions will also improve the efficiency and effectiveness of our maintenance capital expenditures where we have identified $20 million to $30 million of additional cash savings.

Of note, the company believes that this is the first step in its business optimization and that additional savings are possible. We look forward to providing updates on our progress in the future. In addition to cash savings initiatives we have executed on or are targeting capital raises that could generate up to $200 million. Key components include the sale of our $40 million Flotek seller note, which closed last week. Our plan to issue the remaining $40 million of incremental senior secured notes in mid-December. Our active process targeting up to an additional $40 million in incremental debt, $79 million of proceeds from the equity offering in mid-Q3. Additionally, we are actively pursuing other sources of capital in the form of noncollateralized asset sales. Importantly, upon full realization of our cost management initiatives, we believe we will have built a full cycle model, reducing or eliminating the need for further capital raises.

Turning back to our Q3 performance in our segments. Simulation Services revenues declined to $343 million in the third quarter from $432 million in the second quarter, primarily due to a reduced fleet count and increased white space. Adjusted EBITDA fell to $20 million from $51 million in Q2 with margins of 6% versus 12% in the prior quarter. Operational disruptions created by frequent or sudden changes in customer scheduling resulted in unabsorbed costs and compressed our margins. Additionally, this segment incurred shortfall expenses of $9 million related to our supply agreement with Flotek up from the previous quarter.

Our Proppant Production segment generated $76 million of revenues in the third quarter, effectively flat from $78 million in Q2. Approximately 44% of volumes were sold to third-party customers during the third quarter versus 48% in Q2.

Adjusted EBITDA for the Proppant Production segment was $8 million for the third quarter versus $15 million in Q2. and EBITDA margins were 10% in the third quarter versus 19% in Q2. The decline in margins during the quarter reflected customer and geographic mix shifts as well as a slow start to the quarter, resulting in lower operating leverage. Our focus on operational excellence at Alpine, including throughput improvements and quality enhancements as well as our exposure to natural gas regions, including the Haynesville and South Texas, set us up nicely to capture margin expansion when market activity increases.

Our Manufacturing segment generated third quarter revenues of $48 million versus $56 million in Q2. Approximately 82% of segment revenues were generated via intercompany sales compared with 78% in Q2. Segment adjusted EBITDA of $4 million compared with $7 million in Q2. The decline in segment results reflects decreased volumes of products sold to intercompany customers.

Selling, general and administrative expenses were $43 million in the third quarter, improved by 17% from $51 million in Q2. This reduction demonstrates our commitment to managing our overhead structure in line with business activity levels without sacrificing our ability to invest in strategic initiatives. Cash capital expenditures decreased to $38 million in the third quarter from $43 million in the second quarter. We now expect capital expenditures to be $160 million to $190 million for 2025, representing a further reduction from our previous guidance of $175 million to $225 million. This adjustment reflects both activity levels and our commitment to maintaining financial discipline.

Our asset management platform enables these reductions while ensuring we maintain our competitive positioning and equipment reliability standards. Total cash and cash equivalents as of September 30, 2025, were approximately $58 million, including approximately $5 million attributable to Flotek. Total liquidity at quarter end was approximately $95 million, including $41 million available under the ABL.

Borrowings under the ABL credit facility ended the quarter at $160 million, modestly down from $164 million on June 30, demonstrating our continued focus on balance sheet optimization.

As mentioned earlier, we completed an equity raise in August totaling approximately $79 million that enabled us to pay down the ABL line for general corporate purposes, including working capital management. As of September 30, we had approximately $1.1 billion of debt outstanding with the majority not due until 2029. We repaid approximately $32 million of long-term debt in the quarter. As touched on earlier, we deferred issuance of the second $20 million tranche of 2029 senior notes structured in Q2 from September to December. We expect the remaining $40 million to be issued in December.

Wrapping up my section, while the third quarter presented challenges stemming from customer activity adjustments, we've taken decisive actions to position ProFrac to weather the storm. We are optimizing our strategy implementing material cost and capital savings initiatives and building a resilient model that is poised to generate free cash flow through the cycle. That concludes our prepared comments. Operator, please open the line for questions. Thank you.

[Operator Instructions] Our first question is from Stephen Gengaro with Stifel.

Thanks. Good morning, everybody. I think the first question and one of the things we hear a lot about is just the various pressure pumpers and their pricing strategy in the market. And when we hear from some of the bigger players, they complain about some others who are more aggressive on the spot pricing side. How do you approach? And I know you talked a little bit about this in your business optimization discussion, but how do you approach the pricing side? And what do you see in the overall market as far as the way the market is behaving right now?

So it's been relatively consistent. But whenever you look at spot pricing compared to longer programs, they've been pretty in line relative to each other for about the last year. But I think with the availability of equipment and as we look out into 2026, our approach has been to focus more on reliable, consistent programs. And as we continue to fill out our entire schedule and our outlook on 2026, we would expect to see spot work and its pricing to start returning to where it was historically where typically you would see spot pricing higher than committed dedicated work.

Okay. And when you talk about the outlook for the segments and you talk about profitability maybe picking up despite kind of a lower fleet count and softer pricing, how do we reconcile those?

Yes. So we're looking at holding in at the mid-20s and focusing on our cost controls, our processes to make sure that what we've run into in the past is going and adding a bunch of fleets for Q1 and then by April, it rolls over. And so we owe more to our workforce to maintain consistent fleet count. And so given the opportunity to ramp up and increase fleet count, we would rather focus on using the increase in activity to build out a better book and focus on reliable consistent work so that we can maintain our headcount, also maintain our equipment and better condition more reliably for the dedicated customers that we're focusing on.

All of this delivers better revenue, higher revenues per fleet and an overall lower cost structure per fleet.

Okay. So that's sort of the step-up because when you say in Stimulation Services, that activity flattish fleet count, pricing lower, but profitability higher. That's what I was trying to reconcile.

I mean, really. Pricing is relatively flat, but we're seeing some green shoots here and there related to ancillary items and not specifically horsepower rates. But when you look at the additional services that are built around your base horsepower, we're seeing some really positive signs there. And really, it's -- this is utilization game, getting consistent customers with a reliable schedule and being able to benefit from the operating leverage is tremendous.

Our next question is from John Daniel of Daniel Energy Partners.

I might violate protocol and ask a bunch of questions, so I apologize in advance, you can always kick me off. But the dedicated versus spot math, that's interesting. You mentioned mid-20s today active. Would you be willing to share what portion of those are dedicated right now?

Let's see, about 80%.

And it's quickly shifting to where we think we'll be in the high 90s as we roll into 2026.

When you referenced or maybe this lot referenced the head fake, was that on spot work? And is that kind of what prompted this sort of reassessment?

It's mostly on spot, but there were some well issues and things like that, that pushed the schedule back a little bit. But these weren't changes to programs, but it was just a delay to existing programs. So we saw the stuff that pushed in September started up in October.

Okay. And then eventually, spot pricing should, in theory, come back. Would you hazard a guess as to what type of recovery and spot pricing would you want to see where you might sort of revisit the incremental spot mix in your business?

Well, the main thing is that we're just not as interested in chasing. And so I think it would have to be pretty material for us to want to go in and look at activating fleets, as well as taking on more employees to cover temporary work. It's -- a lot of it comes down to how reliable is the spot work and do we have the ability to fill in any white space that comes with it by finding other customers that can fill in those gaps. As far as like exactly what that pricing is, the assumptions you have to make on utilization, it's it would have to be much higher than it is today and we think that we'll see that at some point in 2026. And so we'll revisit this at the appropriate time to see if this is something that makes sense for us to take on the additional operational burden the complexity that it creates for the business and as well as the challenges it creates for your workforce.

Okay. Two more, and I promise to hang up. the cost savings are significant. If we have a steady state environment over the next several quarters, would you then characterize all these cost cuts is permanent, if you will. I mean I know how costs can creep back if the business is ramping, but how would you characterize that?

Now these -- every one of these cuts are sustainable. So we went in and we looked at historical levels where we had Q1 of each year and then also going back in and looking at 2022, what was our headcount, what was our utilization on assets, and how tightly did we manage that? So we went back in and looked at what are the sustainable levels where we know that where our cost structure should be, where should our head count be and making sure that we don't come in and bring these to a level that's unsustainable. We wanted to make sure that we had the right number of people on location that we didn't have extras, but we didn't have too few.

Also, going in and looking at the cycle counts and the efficiency of our maintenance programs on how quickly we turn assets when they do go down, so that we can get them back in line and getting higher utilization rates. And so it's going to a fixed number of fleets and maintaining that level improves our ability to go through and look at every single discipline, every vertical in our business to really refine our cost structure and our processes so that the equipment on location is more reliable. It's in better condition. And if you take care of it on the back side, then when it's at the wellhead, it performs much, much better. And because of the utilization, you get to dilute any associated costs in a much more reliable way.

Okay. And the final one, and I apologize if I'm sitting here to guess it. I don't have on my data, but I want to say it's -- the question is around continuous pumping, Diamondback referenced that on its earnings calls. And I want to say they talked about 30% efficiency gain or something to that end. Can you talk to us about what you're seeing in terms of customer interest and continuous pumping and just elaborate on that trend and what it entails?

It requires a lot more horsepower as you go in and look at how -- you still have to maintain this equipment. You still have to build in maintenance windows. And so you can do that with additional equipment so that you can cycle through banks where at any one time, one of your banks will be in a maintenance period while the other banks continue pumping. So it's -- we've seen some situations where the benefits outweigh the costs. But I think each operator is different, how they lay out their they're well inventory, how they line up the schedules, there's a different solution for each operator. So we've we constructively work with every one of our customers to give them the most efficient program. And it really comes down to making sure we have those appropriate maintenance windows.

Our next question is from Dan Kutz with Morgan Stanley.

I was hoping maybe somewhat similar line of questions to the last two, but just focusing on the Pro Production segment. Just thinking about your outlook, I was hoping maybe we could kind of unpack the comments. So higher volumes and throughput but still some pricing pressure. Is -- are you guys kind of thinking about flat revenues in the fourth quarter for Proppant production? And I guess, specifically on the higher volumes comment, could you kind of unpack where that's coming from? Is it internal or external? Or is it? It would be great if you could just give us figure out a little bit deeper on those comments.

Yes. So on the Proppant Segment, we've been more exposed to the spot environment, more so than what some of our peers have experienced. I think when you look at the spot environment, it's been relatively consistent. Haven't really seen pricing pressures as much within individual markets. Where we saw a reduction in ASP was more so from a mix shift as we had an increase of volumes in West Texas and a dip in volumes in South Texas. When we look at the South Texas and the Haynesville and then also the Haynesville market, pricing is much stronger than what we see in West Texas. And so as we look into Q4, we're seeing an increase in volumes in those areas where we see better pricing. But we also see an improvement going into 2026, where increase in volumes in South Texas as well as in the Haynesville will have a material impact to our ASP and the revenue for our Proppant Segment.

Great. That's helpful. And then just staying with Proppant. So the improved sequential profitability results could you kind of quantify in the fourth quarter, could you help us think through how much of that is the early benefits of this cost-out program? Or I guess, even taking a step back, we appreciate all the color in terms of where the components of the cost out program will kind of hit the P&L and color statement. But maybe could you talk through any kind of breakout of the cost-out initiatives by segment. Yes. So just how much of cost out is driving the 4Q outlook for improved profitability and Proppant Production? And then maybe a little color on the segment breakdown of the cost-out initiatives.

No, it's a great question. We typically don't break out the split between the two, but the majority of it is on the Stimulation Services business. When we look at the Proppant Segment, we've had it running pretty lean for quite a while. But most of the improvement there will come from operating leverage and a substantial increase in utilization, which we're already seeing.

Great. Understood. And maybe if I could just sneak one more in. Could you just talk about where fracs kind of nameplate capacity is on the frac side right now, any kind of attrition you're expecting? And I think that you guys said that the e-frac new build has kind of come to has stopped or paused. But I know that you guys were still doing some Tier 4 DGB upgrades. And yes, just wondering if you could give us a lay on where you're capacity is at now by technology and where you kind of see it trending over the next couple of quarters?

Certainly. So when we look at the premium fleets and essentially fleets that can give the best fuel economy the e-fleets as well as the dual fuel fleets have shown to have the highest demand and have the best opportunities to see the highest utilization. That continues to be the -- it continues to be the case. However, diesel pricing is the cost of diesel is pretty low right now. So the degree of the savings isn't quite what it has been in the past. But -- it's still a huge driver for operators as they look at how much it cost to run a program and what configuration they need on locations. So we continue to see that. We've got very high utilization on our e fleets as well as our dual fuel program and especially as we roll into '26, we're we expect to -- we're already seeing it. We're seeing full uptake of those platforms.

Our next question is from Don Crist with Johnson Rice.

Thanks for letting me Matt, I wanted to get your thoughts on the Haynesville kind of as we go into '26. I mean, obviously, there's a lot of industry chatter on LNG and all the things. And given your position, surrounding that basin. Kind of what are customer conversations from your standpoint around the Haynesville as we kind of move through '26?

There's a great deal of excitement. We're seeing activity increase. We're seeing the number of players, the number of operators starting to round out operators that have been have had slower programs or no program have started bringing activity back and putting plans together. The overall chatter around the gas market is very encouraging as well as. We're just seeing a lot more conversations and a lot more certainty to the programs. And it's good to see, it's good to see. We're pretty encouraged by what we're hearing from operators and how much more sticky their programs look?

And do you think that the timing is kind of earlier or later in the year or kind of a steady ramp-up through the year?

A great start to 2026. Some of that stuff is getting pulled into December. And then as we roll through the year, it's I think what we start the year with will carry on throughout the year with potential option to increase activity. Everybody is watching it real closely to see really how it plays out. But nobody wants to ramp up and grow into a head fake. And so, so far, what everybody is seeing they love it, they want to see more of it. But I think, yes, it's been a tricky commodity in previous years. So everybody is cautiously optimistic.

I appreciate that. And my last question and obviously, through my coverage list, I cover Flotek, I fully appreciate the opportunity set there. But have you considered peeling off a few shares there? Because overall, it may help with the liquidity of Flotek in the end and actually boost the share price. Just any curiosity if you've explored selling any shares just to kind of help both companies out?

Look, we evaluate all of our assets, and we think that Flotek is an incredible company with huge prospects, very excited about their data services business. And look, we a healthy ProFrac is a healthy Flotek. And so we watch that real close. Our caution is if you did look at that, how do you do it in a way where it provides a book in so that we're not perceived as a continued seller.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Matt Wills for any closing comments.

Thank you, everyone. We appreciate your time today. Our vertically integrated platform, advanced asset management capabilities and technology leadership to continue differentiating us competitively. Our recent strategic initiatives and transactions demonstrate our focus on operational discipline, efficiency and building a resilient platform poised for success through the cycle. We look forward to speaking with you again when we report our fourth quarter 2025 results.

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