MAMMOTH ENERGY SERVICES, INC. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Mammoth delivered steady execution while advancing its transformation plan, with Drilling segment being a standout with revenue tripling sequentially and record gross margins.
• The quarter marked positive free cash flow from operations, supported by monetization of underutilized assets. The company sold Piranha assets in the Sand segment and invested in aviation assets within Rentals.
• Over the past several quarters, the company has executed transactions to unlock value, reposition the portfolio, and focus on sustainable returns. Capital was deployed prudently in aviation, with purchases of engines and APU, and aircraft undergoing upgrades for higher lease rates.
• Operationally, teams executed well across businesses. Rentals (aviation) had strong customer demand and improving fleet availability. Infrastructure managed through schedule shifts but continued working on new projects. Sand faced challenges but remaining assets are in a better position. Accommodations had good quarter with margin expansion. Drilling was the standout with focus on Permian Basin and horizontal drilling.

Segment Performance

• Rentals: Segment revenue was $2.8 million, down 11% sequentially but up 24% year-over-year. Aviation performed well with a full quarter of revenue and solid customer demand. On average, ~286 pieces of equipment were rented out in Q3 2025 compared to 296 in Q2. Over 80% of current rental activity is tied to gas-weighted basins.
• Infrastructure: Revenue was $4.8 million, down 13% sequentially due to operational execution challenges on fiber projects. The segment is well-positioned for long-term growth in grid modernization, broadband, and AI data centers.
• Sand: Revenue was $2.7 million, down 49% from Q2 and 44% year-over-year, reflecting the divestiture of Piranha assets and weather-related disruptions in Canada. Incurred ~$0.6 million in expenses related to railcar returns. Expected to return to positive gross margin in 2026.
• Accommodations: Revenue was $2.3 million, up 29% sequentially but down 20% year-over-year. EBITDA rose to $0.5 million from $0.2 million in Q2 due to strong operational execution and cost discipline.
• Drilling: Revenue was $2.3 million, a 207% sequential increase and 47% year-over-year increase. Gross margin reached 19%, the highest in the segment's history, and EBITDA improved to $0.2 million from a loss in Q2. Generated positive free cash flow.

Guidance

• Expect improved cash generation and margin recovery in 2026 as transformation initiatives take hold.
• The organization is leaner, more focused, and better aligned with growth opportunities. Continues to focus on self-funding the transformation through disciplined capital allocation and portfolio optimization.
• Q4 will reflect continued portfolio transition, but outlook for 2026 is positive with margin improvement and cash flow enhancement.

Risks

• Uncertainty around the timing of PREPA exiting bankruptcy and the collection of the $20 million receivable.
• Tax liability negotiations related to Puerto Rico activities, which impact the net liability position.
• Continued challenges in the Sand segment with weather-related headwinds and operational execution issues.
• Market volatility affecting end markets for Energy Services and Infrastructure segments.

Question and Answer

Q: Can you speak on the visibility for sand volumes in 2026, ideally with some color on the basins you serve?

A: Our primary logistic advantage is into Western Canada (Montney) and the Northeast (Utica, Marcellus). Expect sand volumes in 2026 to increase from Q3 2025 levels, with encouraging conversations from the sales team regarding 2026.

Q: How is the balance sheet? Talk about cash, held for sale assets, escrow, PREPA puts and takes, and net liability range.

A: There's ~$5 million in held for sale related to drilling rig assets. ~$10 million in escrow from the T&D transaction expected to be released in April 2026 at the earliest. PREPA receivable is $20 million due when PREPA exits bankruptcy, and there's a tax liability, resulting in a ~$20-ish million net liability range.