Atlas Energy Solutions Inc. 2026 Q2 Earnings Call

Hello, welcome to the Atlas Energy Solutions conference call and webcast for the second quarter of 2026. With us today are John Turner, President and CEO, Blake McCarthy, CFO, Tim Ondrak, President of Power, and Bud Brigham, Executive Chair. John, Blake, and Bud will be sharing their comments on the company's operational and financial performance for the second quarter of 2026, after which we will open the call for Q&A. Before we begin our prepared remarks, I would like to remind everyone that this call will include forward-looking statements as defined under the U.S. security laws. Such statements are based on the current information and management's expectations as of this statement and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. Our actual outcomes and results could differ materially.

You can learn more about these risks in the annual report on Form 10-K filed with the SEC on February 24, 2026 and our quarterly report on Form 10-Q for the first quarter and current reports on Form 8-K and other SEC filings. You should not place undue reliance on forward-looking statements. We undertake no obligation to update these forward-looking statements. We will also make reference to certain non-GAAP financial measures such as adjusted EBITDA, adjusted free cash flow, and other operating metrics and statistics. You will find the GAAP reconciliation comments and calculations in yesterday's press release. With that said, I will turn the call over to John Turner.

Thanks, Kyle. For the second quarter, Atlas generated revenue of $293.2 million and adjusted EBITDA of $49.5 million, which represents an EBITDA margin of approximately 17%. Blake will cover the financial detail later on the call. Before I get into the quarter, let me lay out how our power business is organized, because we get a lot of questions about it. We have two divisions. Oilfield power sells generation to oil and gas operators across many basins, and we expect that fleet to exit this year with 180-200 megawatts deployed, the majority of which are under long-term agreements. Long-term behind-the-meter power sells primary, permanent power to large-scale users, principally data centers. We signed our first contract in that division this quarter, and our Global Framework Agreement with Caterpillar supports its growth.

The second quarter was highlighted by the execution of our first behind the meter contract, a 120-megawatt power purchase agreement with a subsidiary of an investment-grade technology infrastructure provider. The economics are as follows. Total project capital is approximately $190 million. We expect the contract to generate approximately $55 million of adjusted free cash flow on an annualized basis once the permanent facility is operating. This is a cash-on-cash payback of less than three and a half years. These economics are specific to this contract, this counterparty, and this site and should not be applied to future projects. Just as important, the capital required to build this facility sits inside the capital guidance we gave you last quarter. We are not raising our previously announced capital budget to fund this growth. The site is in Socorro, Texas, and here is the full sequence.

We have completed construction of a 26-megawatt facility that is powering the site today through the customer's construction and testing phase. We begin installing Atlas equipment for the permanent plant in the third quarter. Commissioning begins in the fourth quarter. The 120-megawatt facility electrifies at the end of the first quarter of 2027, and we begin recognizing revenue on this new system in the second quarter of 2027. That sequence is the whole point. This project demonstrates Atlas' full solution approach to the behind the meter market, providing customers with a one-call option to solving their power procurement issues in every phase of a project's life cycle, from powering the pivotal early-stage ramp-up to providing power through the life of the facility. The commercial opportunity set for the permanent behind the meter power continues to expand rapidly.

As demand for compute capacity explodes with the evolution of AI, we have seen the urgency of our commercial negotiations rise. As the frontier models grow in complexity and ability, the need to accelerate access to token generation rises. The priority placed on access to power is best exemplified by the hyperscalers continuing to build out their internal procurement teams, where they have added seasoned power professionals that have accelerated and focused contract negotiations. Over the past few months, we have seen the nature of the power deals we are pursuing evolve from both a size and duration perspective. When we entered into our framework agreement with Caterpillar, we assumed it would take eight to 10 projects to fully contract the capacity we placed on order. We were very confident we could do so. We expected it would require significant commercial effort.

As our commercial capabilities have become more apparent with prospective customers, we have found the scale of the projects on which we are engaged has grown significantly in magnitude. Thus, it is becoming increasingly more likely that two to four projects could contract our remaining uncommitted capacity compared with our previous assumption of eight to 10 projects. Additionally, we have seen an increasing appetite, even need, from our prospective customers for longer tenure contracts. With grid access becoming increasingly difficult to secure on any predictable timeline, prospective customers are embracing island power as a long-term solution for their sites. Initially, we were looking at 10-year contracts as a sweet spot. We are increasingly seeing a desire for 15 to 20-year terms from our prospective customers as they look to de-risk power supply to their facilities for the long term.

With potential customers looking to execute on the prerogative of procuring long-term island power quickly, we are finding that our strategy of providing a full service solution from early engineering through full life cycle maintenance and operations is gaining traction. Prospective data center customers are looking to us to solve the entirety of the power problem. They don't want to provide specifics on engineering or equipment. They want to provide a load quantum with productive load swings and a reliability metric. They want us to provide a system that achieves their goals in the shortest amount of time and with a partner they can trust to operate for the long term. Lastly, we are not seeing potential deals shifting to the right. There is a sense of urgency to get projects moving forward.

We expect the industry to see additional contract activity over the coming weeks and months. We believe Atlas is well positioned to compete for those opportunities. Outside of the 120 megawatts attached to our recently announced project, we have an additional 120 megawatts arriving at the end of this year and another 350 megawatts scheduled for delivery over the course of 2027. The availability of this 470 megawatts for deployment in 2027 with a clear line of sight on a steady ramp phase lines up well with the request we are seeing from our prospective customers, putting Atlas in a strong competitive position. We believe our contracted backlog has the potential to evolve meaningfully in the second half of this year. We will announce new contracts when they are signed.

A question we often get is, "What are the competitive advantages for Atlas in power? Why is Atlas the right partner in long-term private power solutions?" Atlas has built over $1 billion worth of infrastructure projects, which includes many of the lowest cost mining facilities in West Texas, along with a first of its kind 42-mile conveyor with the Dune Express. We designed, engineered, constructed, powered, and now operate these projects. Large, complex construction projects are in our DNA. That significant expertise is being called on in the markets today as our power customers are facing new challenges that demand precise execution. As customers like data center operators increasingly look to private power, they demand confidence that their power provider has the depth and experience to deliver on time and on budget.

As our power business grows, you will see how our engineering and execution expertise transforms the way companies obtain the critical power they need. The equipment you choose and the construction partners you pick will matter. Innovation is the core to the Atlas culture. We're the only company to dredge mine in the Permian, the first to deliver frac sand autonomously in the Permian, the only company offering multi-trailer sand deliveries. We built the longest sand conveyor system in North America to change the way sand is delivered into the Northern Delaware Basin. We plan to bring that same outside of the box mentality to the private power market. In our oilfield power assets, we continue to see strong contracting momentum.

This quarter, we signed additional contracts and agreements for current and future megawatt placements and now expect total oilfield megawatts deployed to exit the year between 180 and 200 megawatts, the majority of which will be under long-term agreements. We are being very deliberate about the placement of our current oilfield fleet, prioritizing longer tenure agreements over near-term deployments. We anticipate continued desire from our customer base to sign agreements to secure their power needs as traditional utility power timelines continue to slip. We are also seeing growing interest in microgrid systems utilizing Atlas's battery technology. With this technology, we can hybridize customer locations to increase reliability. Our hybrid technology combines our portable generators, a robust battery system, and a control software that manages site loads and power availability, which leads to a more robust service for our customers and our operating efficiencies for Atlas.

Demand for private power is robust. We believe we are still in the early stages of a major infrastructure growth cycle. We have the right equipment, the right strategy, and most importantly, the right people. I will turn the call over to our CFO, Blake McCarthy, to expand on what we are seeing in our sand and logistics segments.