Atlas Energy Solutions Inc. (AESI) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects a positive sentiment with strong financial performance, strategic initiatives like the Dune Express, and growth in market share. The Q&A session highlighted Atlas's strategic focus on efficiency and long-term partnerships, with positive guidance for Q3 and Q4 volumes. Despite some uncertainties, the overall tone is optimistic, supported by strategic acquisitions and market share growth. Given the company's market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Key Financial Performance
Adjusted EBITDA $70.5 million, representing a 24% adjusted EBITDA margin. This was at the low end of the $70 million to $80 million guidance range due to a slowdown in Permian Basin completion activity, driven by customer pauses, extended delays between pads, and schedule shifts.
Sales Revenue $288.7 million. The decline in volumes was attributed to the slowdown in Permian Basin completion activity and customer schedule shifts.
Proppant Sales Revenue $126.3 million. Proppant volumes were 5.4 million tons, down approximately 4% from the first quarter. Average revenue per ton was $23.29, boosted by shortfall revenue from unmet customer pickups. Excluding this, the average price was $21.17 per ton.
Logistics Revenue $146.4 million. This was part of the total revenue breakdown.
Power Rentals Revenue $16 million. This was part of the total revenue breakdown.
Operating Cash Flow $88.6 million, a considerable improvement from the first quarter due to better working capital intensity and improved customer collections.
Adjusted Free Cash Flow $48.9 million or 17% of revenue. This was defined as adjusted EBITDA less maintenance CapEx.
Total CapEx $34.1 million for the second quarter, consisting of $12.5 million in growth CapEx and $21.6 million in maintenance CapEx. Total CapEx for the first half was approximately $69.6 million.
Net Income Negative $5.6 million, resulting in a loss of $0.04 per share. This was influenced by elevated cash SG&A due to third-party consulting costs and litigation expenses.
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Operating Highlights
Dune Express: Fully operational with construction and commissioning completed on time. Delivered over 1.5 million tons of proppant in Q2 2025, reducing public road traffic and emissions. Expected to secure additional contracts for 2026.
PropFlow: Acquired as a patented on-site proppant filtration system enabling 24-hour continuous pumping. Enhances wellsite efficiency and eliminates operational disruptions.
Moser Energy Systems: Acquisition completed in early 2025. Integrated power operations exceeded expectations, with over 200 megawatts of opportunities being evaluated across various sectors.
Market Share Expansion: Atlas expanded its market share from 15% at IPO to approximately 35% of all sand sold by 2025, supported by the Hi-Crush acquisition.
New Market Penetration: Power business expanded into manufacturing, technology, and industrial markets, diversifying beyond oil and gas.
Operational Efficiencies: Achieved record production at Kermit plant and Encore mines. Logistics team set a quarterly volume record of 5.5 million tons delivered to well sites. Autonomous trucking milestones reached.
Cost Management: Reduced per ton plant operating costs to $11.23 excluding royalties. Further normalization expected in Q3 2025.
Strategic Acquisitions: Acquired Moser Energy Systems and PropFlow to enhance market position and operational capabilities.
Long-term Contracts: Focus on securing longer-term contracts in power business to stabilize cash flows and reduce cyclicality.
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Risk or Challenges
Permian Basin slowdown: The well-documented slowdown in Permian Basin completion activity has led to a decline in volumes, driven by customer pauses, extended delays between pads, and schedule shifts. This has been exacerbated by commodity price uncertainty.
Decline in frac crew count: The Permian frac crew count has declined to around 80, the lowest since 2017 (excluding the COVID downturn), which has a magnified impact due to significant frac efficiency gains in recent years.
Exposure to activity declines: Despite operational advantages, Atlas remains exposed to further declines in activity in the West Texas oilfield services market, which could impact financial performance.
Spot price challenges: Spot prices for West Texas sand remain in the mid- to high teens, levels insufficient to justify continued reinvestment for much of the industry, leading to competitors idling underutilized mines and reducing shift schedules.
Economic and commodity price uncertainty: Economic and commodity price uncertainty has led to cautious behavior from customers, resulting in deferred scheduled completions and impacting revenue and EBITDA.
Litigation and consulting costs: Elevated third-party consulting costs and litigation expenses have increased SG&A expenses, impacting profitability.
Proppant sales price decline: A forecasted decline in average proppant sales price and reduction in shortfall revenue is expected to negatively impact consolidated revenue and EBITDA in the third quarter.
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Guidance & Outlook
Sequential increase in volumes for Q3 2025: Atlas anticipates a sequential increase in volumes for the third quarter of 2025, supported by continued market share gains and the strength of its high-quality customer base, despite challenges in the West Texas oilfield services market.
Year-over-year growth in annual sand volumes: Atlas expects year-over-year growth in annual sand volumes for 2025, driven by 22 million committed tons for the year.
Market share expansion: Atlas has expanded its market share to approximately 35% of all sand sold and expects additional market share gains in 2026 through contract optimization and utilization of the Dune Express.
Supply rationalization and pricing recovery: Atlas anticipates further supply rationalizations in the sand market over the next few quarters, setting the stage for a pricing recovery when completion activity rebounds.
Dune Express operational efficiencies: The Dune Express is fully operational, and Atlas has identified over 12 million tons of additional sales opportunities for 2026, signaling strong demand.
Growth in power business: Atlas is optimistic about the growth potential of its power business, with over 200 megawatts of opportunities being evaluated across various sectors. The company expects further diversification of its customer base and longer-term contracts exceeding a decade.
Integration of Moser Energy Systems: Atlas expects its power business, bolstered by the Moser Energy Systems acquisition, to serve as a critical growth driver in 2026 and beyond.
PropFlow acquisition benefits: The addition of PropFlow is expected to enhance wellsite efficiency and operational reliability, positioning Atlas to expand its customer base and market penetration.
Q3 2025 financial expectations: Atlas expects mid-single-digit sequential growth in volumes for Q3 2025, with August and September being the strongest months. However, a forecasted decline in average proppant sales price and reduction in shortfall revenue is expected to result in a sequential decline in consolidated revenue and EBITDA.
2025 total CapEx budget: Atlas maintains a total CapEx budget of $115 million for 2025, with second-half CapEx expected to decline compared to the first half.
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Shareholder Return Plan
Dividend per share: $0.25 per share
Dividend yield: 7.9% as of Friday's close
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Key Q&A
Q:Can you talk about the share gains in the Permian and how they might play out over the next several quarters?
A:Atlas has seen significant share gains in the Permian, with their frac crew count remaining flat at 24-25 crews since Q1, despite a market decline from 95 to 70-80 active crews. Atlas estimates they are selling 35% of all sand in the Permian, up from the high 20s in 2024. If the crew count is closer to 70, their market share could be 40-45%. This growth is attributed to their reputation as a reliable sand provider, investments in logistics, technology like the Dune Express, and strong customer service.
Q:How does Atlas prioritize capital allocation in a soft market?
A:Atlas focuses on maintaining a balance between investing in the business and returning capital to shareholders. They are not investing in incremental mines but are continuing to invest in logistics, such as the recent PropFlow acquisition and partnerships like Kodiak. They aim to widen the gap with competitors in efficiency and customer experience. Despite the down cycle, they are generating cash and protecting the balance sheet while maintaining dividends.
Q:Can you expand on the opportunities in the power business outside of oil and gas?
A:Atlas is exploring opportunities in commercial and industrial (C&I), technology, government, and data centers. They acquired Moser to grow their power business in these areas, leveraging Moser's technical talent and innovations. They are building microgrids, providing bridge power, and offering power as a service, with contracts often spanning 5-15 years. These opportunities are seen as attractive for long-term cash flow stability.
Q:What evidence supports the claim of a supply contraction in the Permian sand market?
A:Atlas has confirmation that a major mine in Kermit has shut down, and there are reports of layoffs and reduced staff across the industry. They estimate that 20% of the market supply is not available due to these constraints. Competitors are not investing in their facilities, which could lead to further supply reductions.
Q:How is Atlas responding to operators' focus on minimizing well costs?
A:Atlas focuses on total delivered value rather than just price per ton. They have built a strategic platform with low-cost operations, logistics integration, and innovations like the Dune Express and PropFlow. They align with efficient operators who value long-term partnerships and reliability, avoiding low-value opportunities and transactional pricing.
Q:What is the outlook for the Dune Express and its adoption by customers?
A:The Dune Express has faced initial skepticism but is gaining traction as customers see its efficiency. Atlas has transitioned some customers to 100% of their work with the Dune. They expect more adoption during the upcoming RFP season, with new customers showing interest. The Dune Express is seen as a strategic differentiator.
Q:What factors contributed to lower costs per ton at Atlas' mines despite lower volumes?
A:Atlas has focused on operational excellence, lean operations, and cost reductions throughout their value chain. They have optimized production at their lowest-cost facilities, such as Kermit, which has overperformed expectations. This strategy has allowed them to reduce costs per ton even as volumes decreased.
Q:What is the strategic rationale behind the PropFlow acquisition?
A:The PropFlow acquisition enhances Atlas' customer value proposition by completing the wet sand value chain. It eliminates equipment in the red zone, enables 24/7 continuous pumping, and improves customer efficiency. This aligns with Atlas' strategy of providing total delivered cost efficiency and reliability.
Q:How has the customer mindset evolved in the current market environment?
A:Customer mindset varies, with larger operators continuing to pump through downturns and smaller independents adjusting quickly. There is a sense of stability in the market, and customers are evaluating their Q4 programs. Atlas expects more clarity after budget season in September-October.
Q:What is the outlook for logistics volumes and margins, including the Dune Express?
A:Atlas expects logistics volumes to remain flat in the second half of the year, with sequential volume growth of 4-5%. Dune Express margins are higher than traditional logistics margins, and multi-trailer operations offer even greater efficiency. Atlas is educating customers on the benefits of multi-trailer operations to drive adoption.
Q:What is the guidance for Q3 volumes and the outlook for Q4?
A:Atlas expects Q3 volumes to grow 4-5% sequentially, driven by share gains and deliveries pushed from Q2. For Q4, they anticipate typical seasonality with potential extended breaks during the holidays. They are also exploring new customer opportunities for 2026.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the size of the power market opportunities, stating they are still evaluating it. Additionally, they did not quantify the exact impact of the Dune Express on future volumes or provide precise numbers for Q4 expectations, citing the need for more clarity after budget season.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Co
Delaware Basin
EVP President
Energy Systems
Financial
LLC Research
Line
Moser Energy
President Sand
PropFlow portfolio
Proppant
Research Division
SGA party
Sand Logistics
Scholla
Turner
activity decline
challenge West
close
completion activity
completion program
family
filtration system
gain
gas operator
intensity
market end
market share
oil gas
pad
party consulting
power
proppant
pumping
reduction
schedule shift
trust
AESI Transcript
Atlas Energy Solutions Inc. (AESI) Q3 2025 Earnings Call Transcript
Unknown11-4
The earnings call presented mixed signals. While there are positive developments such as market share gains, potential growth in the power business, and strategic acquisitions, these are offset by weak financial performance, including a net loss, higher operating expenses, and reduced revenue projections. The Q&A highlighted uncertainties in cost management and future volumes. Given the company's mid-sized market cap, the net effect is expected to be neutral over the next two weeks, as positive and negative factors balance each other out.
Atlas Energy Solutions Inc. (AESI) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call reflects a positive sentiment with strong financial performance, strategic initiatives like the Dune Express, and growth in market share. The Q&A session highlighted Atlas's strategic focus on efficiency and long-term partnerships, with positive guidance for Q3 and Q4 volumes. Despite some uncertainties, the overall tone is optimistic, supported by strategic acquisitions and market share growth. Given the company's market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.
Atlas Energy Solutions Inc. (AESI) Q1 2025 Earnings Call Transcript
Unknown5-6
The earnings call reveals mixed signals: strong strategic moves and dividend increase contrast with operational challenges and economic uncertainty. While revenue and EBITDA were slightly below expectations, optimistic guidance and potential market recovery offer hope. The Q&A indicates cautious optimism but lacks clarity, leading to a neutral prediction. With a market cap of $2.17 billion, the stock is unlikely to experience extreme volatility, suggesting a neutral stock price movement within -2% to 2% over the next two weeks.
Earnings call transcript: Atlas Energy Solutions Q1 2025 misses EPS forecasts
Unknown5-6
The earnings call presented a mixed picture. Positive aspects include the acquisition of Moser Energy Systems and a dividend increase, but these are offset by higher costs and market uncertainty. The Q&A highlighted management's cautious tone and vague responses, reflecting uncertainty in market conditions and project deferrals. While the company has strong fundamentals, the lack of clear guidance and market volatility suggest a neutral impact on stock price over the next two weeks, particularly given the market cap size.
AESI Slides
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