Welcome to the ProFrac Holding Corp. Second Quarter Earnings Conference Call. My apologies. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Rick Black. Thank you. You may begin.

Thank you, operator and good morning, everyone. We appreciate you joining us for ProFrac Holding Corp.'s conference call and webcast to review second quarter 2022 results. With me today are Matt Wilks, Executive Chairman; Ladd Wilks, Chief Executive Officer; Lance Turner, Chief Financial Officer and Coy Randle, Chief Operating Officer. Following my remarks, management will provide a high level commentary on the company, the financial details of the second quarter and outlook before opening the call on for your questions. There will be a replay of today's call that will be available by webcast on the company's website at www.pfholdingscorp.com as well as the telephonic recording available until August 19, 2022. More information on how to access these replay features is included in the company's earnings press release. Please note, that the information reported on this call speaks only as of today, August 12, 2022 and therefore, you're advised that any time sensitive information will no longer be accurate as of the time of any replay listening or a 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 performance. Various risks and 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 perspectives, Form 10-Q and other filings with the Securities and Exchange Commission, which can be found at sec.gov or on the company's investor relations website under the SEC filings tab to understand those risks, uncertainties and contingencies. The comments today also include also include certain non-GAAP measures as well as other adjusted figures to exclude the contributions of Flowtek. Additional details and reconciliations to the most direct comparable, consolidated and GAAP financial measures are included in the quarterly earnings press release issued yesterday, which can also be found on the company's website. And now, I'd like to turn the call over to Mr. Matt Wilks. Matt?

Thank you, Rick. I'd like to begin by setting how pleased we are to report exceptional results for the second quarter, to which Ladd and Lance will speak more about in their remarks. I will highlight that we've outperformed what we said we were going to do once again. I'm extremely proud of our $28 million of annualized EBITDA, adjusted EBITDA per fleet and more excited about the future opportunity than ever. Our view of the macro environment and oil field services has not changed and we are extremely well-positioned for the current US frac market where supply of pressure pumping horsepower is limited and incremental horsepower is bottlenecked. With many of our competitors completely sold out and having legacy footprints that need to be upgraded, the supply chain is extremely strained for maintaining and upgrading the existing fleets with a limited ability to build new capacity and as we all know, capital is more expensive. Taking together, these dynamics strengthen our belief that there is a great deal of link left in this cycle and margin expansion will continue through this cycle. We believe this is the best backdrop that we've seen since we started in the shell industry over 20 years ago and we see this lasting for quite some time. In terms of this of the path forward, I see opportunity for growth in multiple areas in pressure pumping that Lad will discuss, but I also see opportunities for continued execution on our growth strategy. As I've mentioned before, we have a two-pronged growth strategy acquire, retire, replace on the equipment side and a desire to scale our vertical integration on the supply chain. It is important to state that our M&A strategy is and will continue to be based on a very strict criteria for what…

Hey, thanks, Matt and good morning, everyone. Our business and our teams performed extremely well. During the second quarter, we had 31 total fleets active during the quarter, and we're currently deploying our first electric fleet into the field. During the quarter we experienced significant price increases as all fleets were brought up to the current market pricing, and we continue to see additional pricing power. More importantly, we see continued growth in profit per fleet. As we incorporate our electric fleets, our vertical integration enhancements and provide more materials to our customers. We expect to exit the third quarter at 32 fleets as we deploy our first electric fleet late in the third quarter, we plan to deploy two additional electric fleets during the fourth quarter. And we did not expect to deploy any incremental conventional fleets. We plan to focus our labor and our available supply chain on supporting existing fleets and our electric fleet deployments, margins and cash flow. While pricing continues to move higher. We see further incremental expansion from additional bundling. When we acquired FTS, they had effectively de bundled all their fleets. ProFrac has always aimed to provide sand chemicals, storage, and logistics, as it lowers the MPT on pad and lowers the overall cost to our customers while adding add adding incremental EBITDA to our fleets. In the second quarter, we provided more sand and chemicals on an absolute basis, but we only provided approximately 30% of sand that we pumped compared to 40% in the first quarter, as we look forward, we believe we have the supply, the proximity and cost to become the primary choice for our customers. This dynamic will allow ProFrac to continue growing profitability per fleet in the current environment beyond just pricing power of the fleets, but…

Thank you Ladd. Good morning, everyone. We're pleased to announce our second quarter 2022 results on a consolidated basis revenue for the second quarter, total of $589.8 million compared to the first quarter of $345 million as reported and $421.6 million on a pro forma basis adjusted for the FTS acquisition. The increase was due to higher average pricing on equipment and on materials, providing more materials for our customers and to a lesser extent, higher efficiency on our fleets as measured by pumping hours per fleet net income was $70.1 million for the quarter net income, excluding the stock compensation with a deemed contribution from a related party, would've been $108.9 million compared to $24.1 million. In the first quarter adjusted EBITDA was $210.6 million or $218 million when excluding the amount attributable to flow text results. This resulted in $28.1 million of EBITDA per fleet on an annualized basis. Excluding the impact from flow tech, this quarter included a couple of new developments that I would like to highlight as this will impact the comparability of our results to the first quarter. You will notice that we now have in other business activities in our business segment information, this is new in the second quarter and relates to the results attributable to flow tech. In May, we expanded our supply agreement with flow tech in exchange for an additional $50 million in convertible notes. We also received the ability to designate four of seven directors to flow tech board because of our right to appoint directors to the board without a direct equity interest in Flowtek, we determine the proper accounting treatment is to consolidate their results. As a result, subsequent to May 17. We have accounted for this transaction as a business combination and flow tech financial…

Our first question comes from Dan Kutz with Morgan Stanley. Please proceed with your question.

I wanted to ask Lance, it might have been you that mentioned that you saw that kind of the earnings up uplift from bundling of materials could be a bigger opportunity relative to price. I, I guess I just wanted to dig into that a little bit more and see you guys can kind of stack rank where you see the most kind of per fleet profitability growth opportunities from here as it relates to pricing efficiencies, adding fleets or incremental activity versus kind of the vertical integration benefits and the bundling of materials. Just wondering if you could expand on that, that comment a little bit.

So, I think my comment on the bundling is when we look forward over the next 12 months, I think the, the point is we see accretion, we see improved performance not just through increasing prices particularly as you look out into next year and I think that, as we said, we're only about 30% bundled or on the sand side and we think there's a lot of opportunity there as it relates to the short term we do continue to see pricing discussions and pricing improvement. We do intend to improve the bundling in the short term, but it's really a longer term picture when you look into next year that we really want to increase that the percent of materials that we provide materially. Yeah. And as we continue to expand our supply chain and we're having greater and greater success in bundling services. And I think that for example, with flow tech in Q3, we expect to average around 16 fleets with the Flotek chemistry, and expect to be at full contracted volumes early in 2023 on sand we're, we're really excited about bringing the bundling on there and continuing to see more and more fleets. We're further ahead on sand than we are on the chemistry. And just as an example frag fleet on average will consume about half a million tons per year per fleet. And so if you look at getting a gross margin of $20 a ton, that's $10 million contribution margin per fleet. And so it very quickly becomes a substantial contribution across the platform and of course, on the equipment, we are seeing very, very constructive conversations. The market continues to tighten, and we ex we expect to see that tightening continue on through 2023. As of now, what we're looking at is, is a very healthy uplift in double dig double digit percentage, quarter over quarter from Q2 to Q3.

Great. Thanks guys. It's really helpful. And then just wanted to ask about capital allocation priorities. So know that you guys have some electric crack fleet, new builds that you're doing. You're kind of -- you still have the upgrade program for some of the legacy conventional fleets. I know that, managing debt and hitting the leverage target that that you pointed to is, is, is obviously up there and wanted to ask, I guess, how shareholder returns fits into that. As well as potentially any incremental M and a, just wondering what your kind of capital allocation priorities are looking forward.

Definitely. So I'll touch on this and then hand it over to Lance, but our number one priority is for the equipment that we have today to be as good or in better shape than at the end of the year, compared to the beginning of the year. And so we want to make sure that we take good care of our equipment. And but we're also in an upgrade cycle because of diesel where old tier two old diesel fleets are considerably expensive for our end customer. So as we look to tier four DGB or dual fuel systems for to reduce our overall diesel consumption we see substantially higher margins on, on that equipment, on those fleets, as well as we're really excited about the EFL program. But beyond that, we prioritize our equipment and then it's shareholder returns. And then behind that is our growth initiatives. And so we want to make sure that we take the lead on returning capital to stakeholders. We think that this is very important for the entire oilfield services space to make it a priority that this isn't just a, a sector that you trade that this isn't a sector you can invest in. And when you prioritize profitability, it becomes investible. And we believe in that, and this is, this is why this, this is why we're in this business. And we think that this is an incredible industry to invest in and taking the lead on returning capital to stakeholders is exactly how you deliver an investment rather than a trade.

Got it. All right. Great. That's really helpful. Thanks a lot, guys. I'll turn it back.

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

Hey, good morning guys. Really impressive numbers. Matt, big picture question for you guys that just your view on power generation, who owns it, the best approach to generating it. Just any color there would be thought would be helpful.

Definitely. Good morning, John. Yeah, as we, as we look forward, we think that right now there's a lot of, a lot of power producers out there that are providing, providing equipment, but as we look forward, we we're, we're taking a wait and see approach. We're not quite at a spot where we would like to outline our specific plan, but just like everything else that we do, we have a very focused effort on making sure that the reliability of our equipment and the supply chain is in our custody so that we can control the moving pieces control the, the lead times control the timeframes. And I wouldn't expect this to be this part of our business to be any different.

Okay, fair enough. And then the last one for me, just on the stand side, I think you noted if I heard correctly capacity to call it cover 15 fleets and the Permian, I think that's about where you guys are 13 fleets, 15 fleets. I'm curious you have a big presence in other markets like the Eagle Ford in Haysville. Do, does the logic apply to having vertical integration on sand in those markets? Just your thoughts. A - Ladd Wilks Yeah, I think, I think each market is you evaluate whether it makes sense what can you purchase it for locally compared to what your cost would be owning it? And so we continue to evaluate, but we have nothing to report any expectations or, or intentions at this time.

Okay. I'll queue up again if none, no one else asks questions. Thank you for your time.

Our next question comes from Chase Mulvehill with Bank of America. Please proceed with your question.

So just quickly following up on John question on Sandra I think you said 15 fleets, so I'm just trying to do the math half a million ton per right. So it sounds like you can pretty much produce at all of that 8 million ton nameplate capacity, right? So for you, nameplate is basically the same as actually marketable or, or the amount of sand that you can produce just to clarify on that front.

Yeah. The way that these are built physically, they can each produce over, just right at, or just above 3 million tons each. Our La Lama plant is permitted for two million, but the equipment is rated for more than that. So once it's up in operational, we expect to go in and look to expand to that permit. So that'll gain us an additional million tons of name play capacity.

Okay. Okay. No, that makes sense, because we tend to think about nameplate and marketability a little differently. So that makes sense. Thanks for that clarification. And then in with clarification, I think the first question you said you expect I think I heard the word profitability to go up double digits to Q2 Q3 right. But I wanted to clarify it, does that mean even apple link to go of double digit two through three queue? So we are talking 28 point to 31 kind of a number. Is that what you meant?

Yeah, I don't want to nail it down to a specific, number of EBITDA per fleet, but I very comfortable saying that there, we, we expect to see a three handle on the EBITDA per fleet.

Okay. Okay. That makes sense. And obviously you got DSP Mohan acquisition that close in July, so that's going to be helpful.

Yeah. And just on that real quick, I'd like to comment on a few things there and that, as we look at that type of performance, there's several things that are really driving that, that, that I think it's important to highlight that, one is our maintenance rotation is phenomenal. We've got an incredible pit crew that allows our equipment to be out on location longer. And when it does come in for a tire change or, or to get topped off on fuel, like, like a race wood and pit row, we're able to get it back out working. And so you're when you've got a really good pit crew, your R&M expenses tend to run pretty consistently otherwise, but what you end up with is that race car is on the track longer running and that's, I think that's one of the main things that drives our superior performance and allows us to get the industry leading EBITDA per fleet. Whereas having uniform components is a big part of that. The supply chain is incredibly tight and it's, it's creating situations where many in the industry are having to go in and get fluid ins wherever they can. When you have different fluid ends from different manufacturers, you end up with a very complicated skew with your parts room, the training with your personnel on locations, swapping out fluid ins, cha changing valves and seeds. It gets really complicated and if they put the wrong valves and valve and seed in, or if they put the wrong part in, you have a higher number of failures. So it stresses your overall supply chain even further when you don't have uniformity. And so when you, when you look at this tight supply chain, we really see this as a driving factor in our standout performance relative to our peer class. And this is also what we believe is going to keep this from really becoming a, a, a new build cycle too quickly. So we're, we're really excited where we're positioned, how we've built this company and very, very proud of our vertical integration that allows us to consistently generate these results, not just in Q2 Q3, but we're really excited about how this, this this advantage will drive material results in 2023 as well.

Right? No, all of that makes sense. And then just quickly last one from me on the, on the E fleet side in the press release, you did say you are, you're doing the trials, you're doing trials on the first fleet on the field right now. And you expect the commercial deployment before the end of the third quarter rate quickly wanted to check on that. What, what are you seeing in the trials? How happy you are not happy you are with the trials, how are they going? And just as a follow up on that how are you thinking about new building on the EFL site for 2023, especially now that you're acquiring you as well?

Yeah. What, with the EFL program, these are commercial platforms. And so, we're really excited to get these out there. The reason we call this, this one is really getting out there on its first location. It's just running through diagnostics, making sure that we understand all the error codes that are kicked out by the controls and making sure that everything is communicating appropriately. So we're just going through getting that knocked out. And this is a much faster process than what you would see anywhere else, because this is a proven commercial platform. So we're really excited to have this thing fully available for all of Q4 and, and very delighted to see what kind of be able to share with, with our stakeholders. What kind of results these, these provide relative to conventional fleets.

Yeah. And chase, I would just add to that. We have two of our pumps out there on location now, and they're pumping today. So want to be clear that this isn't something that we're, mm-hmm, , we're planning to put out they're out today.

Okay. Cool. And thoughts on 2023 do think you want to build more, more easily, especially now that you're getting a lot more on the US side?

Yeah, we'd rather not discuss at this time out, our growth plans for 2023. But very excited looking forward to closing the us well, transaction early in Q4 and bringing in and integrating that business very similar to we, we, what you saw from us with the FTSI integration and how phenomenally, well, that has gone. We, we expect the us well transaction and integration process to go equally as successful. And this is with our vertical integration, the, the different components that we've built in specifically for these types of processes have shown incredible results so far, and we're getting better at it as we go. So as we look at the us well integration, we expect to see those types of results carry forward. So yeah, it's exciting time for us looking forward to, to getting that taken care of. But it's too early to tell and would rather not get into that at this point on any further growth initiatives for 2023.

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

Thanks. And good afternoon or good morning everybody. So I guess two things for me, if I could start with we've, we've heard from, from some of your peers about equipment demand for 2023 and, and, and your customers trying to lock up capacity for 23. What are you seeing on that front and, and how do you think about that balance when you're looking at pricing?

Yeah, we're seeing a, a, a great deal of, of early looks from and it, it seems like the RFQ season has started earlier than usual. Typically that, that that means better margins and continued expansion of, of, of pricing. We like what we're seeing on the CapEx budgets, and there is a shortage of horsepower in the market and with the complexity and the mismatch, the as you see more of our peers adding, mismatching fluid ends and mismatching components when you look at the amount of horsepower, that's in a maintenance cycle at any given point 20% to 25% usually when you start mismatching parts and having different types of fluid ins, different types of iron you start seeing more frequent failures and more stress on that supply chain. So as we look at the, the market going forward, I think that this, this does not ease up, it actually tightens further, but what we're really proud of is the customers that we have now about the reliability that we bring and the consistency that we bring and that, that reliability and consistency is a value proposition. That's, easy to take up. So we think our, our peer class is, is going to continue to struggle with, with supply chain and many price improvement improvements with these, these competitors likely will be going to a more and more complicated R&M and supply chain.

Great. Thank you. And when we think about us well services they recently announced numbers they've clearly been hurt by sort of a lack of a lack of overhead absorption as they roll out new assets. But I think they've ran the last quarter, EBIT toper fleet, like five and a half million dollars on annualized basis. How long do you think it takes, based on what about the contracts that they have in place to get their assets up to your level of profitability?

Yeah, I'd really rather not comment or speculate on where their contracts are or, or anything like that. What we really look at is what we're capable of with the same assets and you then going back and looking at what we've been able to accomplish with the FTS integration and quickly being able to get in and see material commercial results as where as well as operational operational results. And so we're really looking at this rather than how do we get from where they are really looking at it from the perspective of what can we do with it. And we typically these things would take nine to 12 months. We take a conservative approach what we, what feels like to us, a conservative approach of around six months, but that's also what we put out for FTSI. And we're able to realize that within the, within a very short order of being able to get their profitability up. And so given it some bookends, I'd say an outside date would be six months and our own internal expectations for ourselves would be, in a very similar timeline to what we did with F DSI.

Great. And if I could fill one other quick one, I don't know if you, you could comment on this or not. Do you have, can you give us a sense for rev flow tech revenue per fleet per year?

Yeah, I don't want to, I don't want to okay. Get an indication there. But what we do like is that the contracts that we have with them is going according to plan, they continue to scale operations and not just with us, but also out with third, with true third party customers on their end. So we're really excited to see that business continue to, to scale and really look forward to the early, early part of 2023 to get this to fully contracted volumes that that, that we've, mutually negotiated. And of course as that as that, does get to scale, we're really excited to see what that does with their financials in bringing this to profitability. We're also outside of that agreement. We, we're very excited about the JP three agreement that we have in place that gives us confidence in the quality of the gas that we're, that we're pumping with. And being able to monitor BTUs in near real time allows us to protect our equipment and provide reliable service for not just the dual fuel systems, but also for the turbines providing or for the power gin on location that runs on the gas. So making sure that we have good high quality gas on location is a very important thing. We're also excited about what that means for flow tech and the JP three team, because being able to monitor BTUs for gas has far reaching, consequences has far reaching, impacts across the entire oil and gas industry, and especially for the for the midstream side for, for these operators, as they look to make sure that they capture every dollar for the gas that they, they sell down the line.

Our next question comes from Don Crist with Johnson Rice. Please proceed with your question.

I wanted to touch a couple people have asked about sand but given the, the significant impact to, to the potential financials next year, it could be, 10% or 15% of your total EBITDA. Just wanted to ask about number one volumes. Do you think you can, you can get up to that, call it seven and a half or so million tons per year. And number two, what your thoughts are around pricing? I know it, I know it spiked in, in the first quarter of this year to, upwards of 80 to a hundred dollars a ton, but didn't know what kind of long term price that you were kind of expecting going forward?

Yeah, there was, there was a point early in the year where it was $8,200 a ton at the mine gate. It, it hasn't I think occasionally you'll see it get there depending on, on whether it's a, a spot pad or not, but for the most part we've got contracted volumes that are much lower than that really would prefer not to go into specifically where for obvious reasons but what we can say is that this is one on utilization. We definitely believe we can get our utilization where it needs to be, to provide a minimum of seven to seven to seven and a half million tons on annual annual basis. But when you look at the, the pricing on that end, I think that it, it, you wouldn't see spot pricing across the board, but trying not to box myself in, cause I like you guys,

Let me let throw a range. Like you guys, how you are, you agree with do that next quarter. I don't want you to do that to me. Well, if is it between call it 35 and 50? Is it, is that a, a good enough range to kind of not box you in?

That's a good range.

Okay. And then two kind of clean-ups for me. Lance, can you tell us what the share count was in the second quarter? It wasn't in the press release.

Yeah. So it'll still be about 142.4 million the, when you get the financials because the IPO happened mid-quarter EPS will be a little nuanced given the FC structure. But, but that share count at the IPO is, and forward is about 142.4.

Okay. And then just one final one for me SG&A was a little bit crazy this quarter with, with the shares going to, to the Wilkes brothers, obviously go going forward. Do you think it's going to be in that call it 40 to 45 million? Or do you think it's going to be closer to what it was in the first quarter?

You're exactly right. If you back out those three items I called out that kind of gets you into the 40 to 45. And that's, that's probably our best estimate at this point. The first quarter, you had a lot of things going on with, with the companies coming together and not having been together previously the IPO, etcetera. And then, and so I think Q2 is going to be a better measure than Q1 and then $4 million of that was the acquisition related expenses, obviously with us. Well, I'm sure we'll, we'll have some of those that will elevate it in future quarters as well, but we'll, we'll be sure to call those out.

Yeah. And that anomaly that you see on there is related to the GAAP requirements that we put that in the SG&A the share account pre and post is exactly the same. Those shares were private transaction paid for by the, the individuals receiving that.

Understood. I appreciate the caller. I'll turn it back.

Our next question is from Tom Curran with Seaport Global. Please proceed with your question.

Just wanted to, just wanted to pick up where Steven left off with, with flow tech. So, I know it was a profitability drag in the quarter with adjusted EBIDA loss of 7 million in flow Tech's release. They emphasize that as chemical deliveries ramped to your contract's full scope margin should expand toward or, or into positive territory and operating leverage and economies of scale. What are your own expectations for when flow tech should get there? Sounds, you've referenced it twice. I believe so far in the call. Sounds like it should be around early 20, 23, maybe. And just, what sort of potential run rate EBIDA contribution do you see there longer term, how collaborative is, is the relationship at this point when it comes to flow Tech's broader company revival plan?

Yeah, as we look at that, it is early 2023 for getting to full contracted volumes. What we're excited about is, is, as they ramp and they get to a higher utilization, they'll be able to absorb a lot of the early costs that you saw in, in Q2. Our, our procurement and their commercial team is working very, very constructively to, to bring these volumes up and to get things in line we're also, as we bring these volumes on, we're excited to see that they're able to get their economies of scale and a greater purchasing power to bring their overall cost structure lower. So not only do they gain on the top line as we scale to full contracted volumes, but those economies of scale will drive their per unit cost lower on every product that they have, and continue to expand, not just the profitability associated with our contracted volumes, but also with the third party customer base that they have. They'll also benefit from the economies of scale that, that these types of volumes drive

Makes sense and when it comes to your conventional and, and dual spread reactivation situation, is it a scenario in which, you could already definitely get the pricing in terms you'd want re really, the return on that incremental deployment, but are holding back as, as part of your fleet growth, discipline and strategy, and if you were to anchor reactivation contract, what sort of lead time advantages would you expect to have over the industry norm at this point?

So right now we have no intentions of activating any, any fleets that are on the side-lines. But what I would like to touch on is through the upgrade program of, of upgrading tier two conventional fleets to dual fuel fleets. It's giving us additional engines that we have at our disposal to use as swing units. And these swing units have an incredible ability to really shift and change the way that our R&M program is, is currently operated so that if you have a hard down engine, we don't have to bring it all the way back to here in Aledo or out into Cisco where we'll do a engine rebuild or a transmission rebuild. Instead of having the pumping trailer sitting there, waiting for the rebuild to be completed. These excess engines allows us to swing them in the district where we can get a, a 48 hour turn and have them back out in the field pumping. So when you look at the R&M expense associated with that, our engine rebuild and transmission rebuild are going to pretty much fix the same number of engines and the same number of transmissions in a given period of time. But by having this swing program, it doesn't keep the actual trailer itself tied up while those repairs are being completed. Instead those trailers stay in the field longer generating revenue. And so just kind of looking at prior to the FTS transaction, we had 17 fleet out of 20 fleet active. Those other three fleets were supporting a lengthy R and M cycle. And so now that we've brought in the, the engine repair and transmission repair in house, and we also continue to see expansion of our swing unit program for engines and transmissions that we can do in the district. As we see that come to come to scale, what you'll see is we'll get those three get those three fleets back, and rather than supporting an R&M cycle, they'll be available to generate revenue out in the field. So I wouldn't necessarily call those activations, or reactivations, they're already active. They're just not generating revenue, they're supporting an R and M cycle. And so these are high value fleets in a very low cost way of getting them back out there, generating revenue for, for equipment that is already active. It just doesn't generate the same revenue and the R&M cycle and the cost of that R&M should relatively remain the same. So those three fleets would come, at a higher profitability because we're already paying for the R and M.

Got it. And just to clarify, as it stands today, do you have any horsepower and if so, how much left that is, is neither participating in this swing program nor being, cannibalized or used as a source for parts components, but is solely idle parked against the fence. And you're still deciding what to eventually do with it. Is there any horsepower that would fall into that category still?

There is no equipment that is in a yard anywhere in this company that we anticipate bringing back. And, and just going back to the swing program, what I like to, to, to look at on it, just as a, just an example, just to highlight just how material it is, if you can get a trailer that has a hard down engine or a hard down transmission, if you can get it back out in the field, generating revenue in 48 hours, as opposed to close to 20 days or three weeks it's kind of like seeing a raise car go into pit row and get a new set of tires and topping off the fuel in 10 seconds instead of a hundred seconds. And it's incredible the cumulative effect that that type of cycle time has on your overall performance across your entire company. And so those are the types of improvements we like to focus on. And those are the, the immediate opportunities that we see to, to continue improving the profitability of pro rack looking at the demand side and we like what we see there, but rather than responding to it with adding capacity to the market, what we're looking at is that busted old equipment that's in, on a fence or any yard somewhere and needs to stay there.

Yeah. And Tom, you're kind of hitting around just, just EBIT O per fleet, like, and how we think about all of our fleets. And that's how we talk about it, EBIT O per fleet, but, fleet a fleet, isn't a, like, they're not all the same. And even though we kind of talk like they are they haven't, they've, they're not what they used to be either. Like, and if you think back to 2018, a fleet was closer to 45,000 horsepower. And today our fleets are around 62,000 horsepower that we have out in the, the, well with the, with the equipment that we have maintenance that we're and in that maintenance rotation, it's closer to that 62,000 right now. And that equipment that's coming back in that Matt's talking about, we're going to use that to support the fleets that we have out in the field and, and get better utilization and when you think about, when you look at other people's fleets, that they have a similar, it's similar for them as well. And when you think about new build economics, it's actually a lot higher than what people talk about with inflation, but also just the larger, the more the, with these more jobs that are more intense, you have to have more, more horsepower to support them. Yeah. When you look at the strength of your, of your supply chain and your R and M cycles being able to really focus on your efficiencies and your utilize utilization there keeps you from having to really reach out into a boneyard and activate fleets that wouldn't have otherwise. think reviving these zombie fleets is definitely not something that pro rack is going to do or has to do to continue providing the top quality service that we're known for. And so that I think that we are we're in the same industry as everybody else, but when you look at the vertical integration, the capabilities that we have, I think that we, what you see is a better utilization, better performance delivered because of the quick cycle times that we have and it's not everybody is positioned to replicate those results.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to management for closing comments.

Well, we definitely appreciate everybody for, for their questions. And look forward to the days ahead, the quarters ahead and to 2023, as we continue to expand our overall platform, continue to execute on our commitment to our stakeholders of delivering incredible results and continue to expansion and, and on our acquired retire, replace and consolidation within the supply chain. Our commitment is to profitability over growth and we look forward in the in the months ahead of providing further guidance on exactly what we mean by that with specifics and are very excited to look forward to the opportunity to pay dividends. And with that, we want to thank everybody. Thank our stakeholders, have a good day. Thanks.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.