MAMMOTH ENERGY SERVICES, INC. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• The second quarter marked a new chapter with $16.4 million in revenue and a net loss of $35.7 million (including a $31.7 million noncash impairment charge).
• Completed 3 transactions in Q2: 1 as a buyer (acquired 8 small passenger aircraft, 2 engines, 1 APU; invested $25M YTD in aviation portfolio) and 2 as sellers (sold infrastructure subsidiaries and hydraulic fracturing equipment).
• Focus on driving returns through asset utilization, margin expansion, and capital efficiency. Transformation is underway with a focus on repositioning the company to perform through cycles.
• Rental services grew via strategic aviation acquisitions, with 33% more equipment rented year-over-year. Infrastructure services (engineering and fiber) performed well with strong demand. Accommodation services quietly generated positive adjusted EBITDA.

Segment Performance

• Rental services: Generated revenue of $3.1 million, a 72% increase compared to the same quarter a year ago. The number of rented equipment pieces grew by 33% year-over-year. Aviation acquisitions have expanded capabilities, and expect construction equipment utilization in Q3 to diversify the customer base.
• Infrastructure services: Revenue was $5.4 million, a 20% increase from Q2 2024. Comprised of engineering and fiber, with strong demand driven by macro tailwinds in data centers, AI, and nuclear developments, contributing approximately 1/3 of total revenue.
• Sand proppant services: Generated revenue of $5.4 million, a 15% increase year-over-year. Sales volumes were up but offset by a 6% decline in pricing. Sold ~242,000 tons of sand at an average price of $21.41 per ton in Q2 2025.
• Accommodation services: Generated revenue of approximately $1.8 million, down from $2.7 million in the same quarter a year ago. Quietly generates favorable returns and positive adjusted EBITDA.
• Drilling services: Revenue was $743,000, slightly up from $736,000 in the same quarter a year ago.

Guidance

• Expect adjusted EBITDA loss from continuing operations to range from $3 million to $4 million in the back half of 2025.
• Anticipate cash burn related to discontinued operations to range from $4 million to $5 million, funded largely from proceeds of underutilized asset sales.
• 2025 CapEx for continuing operations is allocated at $42 million, primarily for growth in aviation and other equipment rental services.
• Debt-free with approximately $157 million in total cash, intending to deploy this capital into growth opportunities with target IRRs of 25%-35% in aviation sector.

Risks

• Macro factors such as tariffs and demand volatility affecting parts of the market.
• Ongoing litigation related to Puerto Rico, contributing to SG&A legal fees of ~$2 million-$2.5 million in the back half of 2025.
• Potential impact of market uncertainty on business spending and capital allocation decisions.

Question and Answer

Q: You highlighted 3 transactions in Q2, with growth potential in rental and accommodation services. Where do you see growth in the next 3-5 years with dry powder?

A: Near term, focused on aviation sector with target IRRs 25%-35%; 3-5 year hold expected to yield 2-3x multiple on invested capital. Also see opportunities in construction equipment rentals and accommodations with returns near aviation levels.

Q: How much of sand is sold domestically vs Canada, and market evolution?

A: Majority historically sold into Western Canada's Montney; expect split to remain weighted to Montney Shale due to Tier 1 acreage availability.

Q: Context on aviation market supply-demand imbalances and excess return window?

A: Tailwinds in aviation include favorable passenger travel, production delays at Boeing/Airbus; demand seen in aircraft, engines, and APU acquisitions.

Q: Thoughts on buybacks given stock below cash balance?

A: Board approved buyback, but in blackout period due to Q2 deals and reporting; lifts 2 full trading days after earnings if no actionable deals.

Q: Path to free cash flow positive?

A: Aviation deals positive from day 1; SG&A legal fees from Puerto Rico litigation expected to run out, leading to free cash flow neutrality; rentals and accommodations also compete for capital with returns near aviation levels.