Mammoth Energy Services, Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and good morning, everyone.

We appreciate you joining us for Mammoth's second quarter 2026 earnings conference call. Joining us on the call today are Mark Layton, Chief Financial Officer, and Bernard Lancaster, Chief Operating Officer. We will start today with our prepared remarks and then open it up for questions. I want to remind everyone that some of today's comments include forward-looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein. Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward-looking statements. Our comments today also include non-GAAP financial measures. The underlying detail and a reconciliation of GAAP to non-GAAP financial measures are included in our second quarter earnings press release, which can be found on our website.

As a reminder, today's call is being webcast, and a recorded version will be available on the investor relations section of Mammoth's website following the conclusion of this call. With that, I'll turn the call over to Mark.

Thank you, Mohammed, and good morning, everyone. I'll start with our second quarter results, the key themes driving the quarter's performance, capital allocation, and our updated outlook for 2026. I'll then turn it over to Bernard Lancaster, our Chief Operating Officer, to walk through operational performance by segment. I'll then come back to cover the financials, balance sheet, and our repurchase activity, after which we'll open the line for questions. We delivered another strong quarter. Revenue growth, a second consecutive quarter of positive adjusted EBITDA, and adjusted EBITDA margins of 10%, well ahead of plan. Importantly, the growth this quarter was driven by sand, drilling, infrastructure, along with the recurring rental revenue continuing to grow as aviation leasing and equipment rental activity expanded. I'll cover the drivers thematically here. The segment-level detail will come in my financial review later in the call.

Total revenue for the second quarter was $26.1 million, up 19% sequentially and up 110% year-over-year. Adjusted EBITDA was $2.6 million, up 37% sequentially compared to a loss of $3.5 million in the second quarter of last year. In our rental segment, lease revenue grew well ahead of the 19% headline rate. Higher utilization and continued asset deployment drove meaningful sequential revenue growth across both our aviation leasing and equipment and rental businesses. Overall, rentals revenue declined. That decline is entirely attributable to the swing in aviation asset sale revenue. In regards to aviation asset sale revenue, I want to be straightforward about how we think about it. We are focused on returns. If we can sell an asset for a better return than we might earn by continuing to lease it, we will sell it.

That means asset sale revenue will not always be linear quarter-to-quarter. Our decision-making will remain guided by returns. Our sand and drilling segments both outperformed this quarter, underpinned by improving activity in the basins where they work. More importantly, we saw the drilling segment turn Adjusted EBITDA positive, and in sand, gross margin turned positive. Turning to capital allocation. We invested $44 million in the quarter, our most active quarter of capital deployment since we began building the aviation platform. A good example of how we approach these opportunities. During the quarter, we acquired a Boeing 747 package that included the airframe, two installed engines, a spare engine, and spare parts inventory.

We placed the engines on lease with a blue-chip customer and subsequently sold the airframe and landing gear for $2 million, recovering a portion of our cost basis while retaining the highest returning components of the package. That is the discipline we intend to apply to every dollar we put to work in this business. We also completed our first acquisitions of operating businesses in eight years. On June 12th, we acquired Mission Construction LLC and BERE Rentals LLC for a combined consideration of $6.5 million, funded entirely with cash on hand. Both are providers of fiber optic services to utility customers in the Midwestern U.S. and both sit within our infrastructure segment, where we are seeing a growing opportunity set. These acquisitions extend our presence in the fiber optic services market, broaden our fleet of fiber equipment, and add experienced fiber crews.

We are pleased to welcome both teams to the Mammoth family. In total, including these acquisitions, we deployed approximately $50 million of capital during the quarter. Turning to the macro factor off across our end markets. On the natural gas side, LNG-driven demand continues to support activity in the Montney, where gas demand and production are both running at record levels heading into the back half of the year, a constructive setup for our sand business. In aviation, industry-wide demand for leased aircraft, engines, and auxiliary power units remains strong, with OEM production and maintenance capacity still constrained. A dynamic that favors the leasing model we've built our platform around. In the Permian, drilling activity firmed through the second quarter after a choppier start to the year, consistent with the utilization improvement Bernie will walk through in drilling.

As we look to the balance of the year, it's worth reflecting on how much the business has progressed over the last five months. When we set our initial 2026 guidance in March, we guided to revenue growth of greater than 50% for 2026 and said positive adjusted EBITDA was back within reach. At that time, we viewed mid-teens adjusted EBITDA margins as a 2027 objective. Following a strong first quarter, we raised our outlook in May to greater than 60% revenue growth and committed to being adjusted EBITDA positive for the full year. Today, after another quarter of broad-based execution and the contribution from the assets acquired during the second quarter, we're raising our outlook again. We now expect full year 2026 revenue growth of greater than 90% and adjusted EBITDA margins in excess of 10%.

Achieving double-digit margins this year puts us roughly a year ahead of where we expected to be at the start of 2026, marking our second upward revision in just five months on both revenue and profitability. That progress reflects what we're seeing across the business. Our aviation fleet continues to scale on plan. Activity has improved across our sand and drilling segments, and our cost structure is materially lower than it was a year ago. Put simply, our strategy is working, first in aviation and now increasingly across the rest of the portfolio. One final point on the revenue outlook. First half results included approximately $8.5 million of aviation asset sales. Because we do not forecast asset sales, our second half outlook is based entirely on recurring operating revenue.

In other words, our guidance reflects the underlying earnings power of the business as it stands today, and any future asset sales would represent upside to the outlook we've provided. With that, I'll turn it over to Bernie to walk through the operational performance in more detail.

Thanks, Mark, and good morning, everyone. Let me walk through the operational performance by segment. Starting with rentals in our equipment rental business, our average pieces of equipment on rent increased to 407 from 389 in the first quarter, continuing the build we've seen over recent quarters. Demand across our gas-weighted basins remains strong, and the customer and fleet mix work we began earlier this year continues to gain traction. It is showing up in both utilization and in the quality of the revenue we are capturing. In aviation, we ended the quarter with 38 assets in the fleet, up from 27 at the end of the first quarter, with 23 generating revenue on lease compared to 21 last quarter. As we've noted before, there is a natural lag between acquiring an asset and placing it on lease.

This quarter's fleet growth outpaced lease placement, which we expected given our pace of acquisition. We look for the on-lease count to continue building as the 11 recently acquired assets, a mix of aircraft, engines, and APUs, are placed on lease. In accommodations, facility occupancy softened modestly quarter-over-quarter in Q2, consistent with the seasonal trends we historically experienced during this period. More importantly, occupancy grew more than 79% year-over-year versus Q2 of 2025, underscoring the continued strength of underlying demand. In drilling, we saw a meaningful step-up in activity as utilization more than doubled quarter-over-quarter. We believe that the underlying demand from our customer base is there for us to build on a fantastic quarter from the team. In sand, we sold approximately 229,000 tons in the quarter, up from roughly 156,000 tons in the first quarter.