On November 9, 2023, ProFrac Holding Corp (ACDC, Financial) released its financial and operational results for the third quarter ended September 30, 2023. The company faced several challenges during the quarter, including a significant decline in revenue and a widening net loss. Despite these headwinds, ProFrac managed to generate a substantial amount of free cash flow and reduced its net debt considerably.
Financial Performance Overview
ProFrac Holding Corp (ACDC, Financial) experienced a 19% sequential decrease in consolidated revenues, totaling $574.2 million for the third quarter of 2023. This decline was primarily attributed to a lower average active fleet count and associated material sales compared to the second quarter. The company's net loss for the quarter was $17.9 million, a notable increase from the $4.6 million net loss reported in the second quarter. Basic and diluted loss per Class A common share was $0.21.
Adjusted EBITDA for the quarter was $149.3 million, down 18% from the $182.5 million in the second quarter. Net cash from operating activities stood at $123.6 million for the third quarter, and the company achieved free cash flow of $72.6 million. This financial maneuvering, combined with the issuance of preferred equity, led to a reduction in net debt by approximately $122.9 million.
Operational Adjustments and Future Outlook
ProFrac's Executive Chairman, Matt Wilks, commented on the company's strategic adjustments, stating:
After right-sizing our fleet count and our overall support structure, we believe we have realized the synergies from our acquisitions and positioned the company to capitalize on the operating leverage this business has when we experience incremental customer demand."
Wilks also highlighted the company's focus on securing dedicated agreements for 2024 and the potential of the Proppant Production segment, which is expected to lower mining costs per ton and increase asset utilization.
Segment Performance and Capital Allocation
The Stimulation Services segment generated $489.5 million in revenue, contributing $93.3 million to Adjusted EBITDA. The Proppant Production segment brought in $98.4 million in revenue, with $51.6 million in Adjusted EBITDA. The Manufacturing segment's revenue was $43.8 million, resulting in $1.6 million of Adjusted EBITDA. Other Business Activities, related to Flotek, generated $48.6 million in revenue and $2.8 million in Adjusted EBITDA.
ProFrac's cash capital expenditures for the third quarter totaled $52.6 million, as the company decided to reduce capital expenditures to maintain its target return thresholds. The company now expects to incur approximately $280 - $290 million of capital expenditures in 2023.
Balance Sheet and Liquidity
As of September 30, 2023, ProFrac's total net debt outstanding was $1,055.8 million, a significant reduction from the previous quarter. The company reported total cash and cash equivalents of $25.1 million, with $4.5 million related to Flotek. ProFrac's liquidity, including cash and availability under its asset-based credit facility, was $136.6 million.
ProFrac Holding Corp (ACDC, Financial) is navigating through a challenging period, marked by a decrease in revenue and an increase in net loss. However, the company's strategic initiatives and focus on operational efficiency provide a foundation for potential improvement in the coming year. Investors and stakeholders will be closely monitoring ProFrac's progress as it aims to strengthen its financial position and capitalize on market opportunities in 2024.
For more detailed information on ProFrac Holding Corp (ACDC, Financial)'s financial results, please visit GuruFocus.com.
Explore the complete 8-K earnings release (here) from ProFrac Holding Corp for further details.
