Mammoth Energy (TUSK) Q3 2026 Earnings Call Transcript

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DATE

Friday, Oct. 30, 2026

CALL PARTICIPANTS

• Chief Financial Officer - Mark Layton
• Chief Operating Officer - Bernie Lancaster
• Investor Relations - Mohammed Topiwala

TAKEAWAYS

• Revenue -- $21.3 million, growing 95% year over year driven by the expansion of the aviation rental fleet and higher utilization across the segment.
• Net Income -- $0.3 million, or $0.01 per diluted share, representing a return to profitability compared with a net loss of $12.6 million in the prior-year period.
• Adjusted EBITDA -- $5.8 million, more than doubling from $2.6 million in the second quarter due to a shift toward higher-margin aviation leasing.
• Adjusted EBITDA Margin -- 27.2%, an expansion from 10.0% in the previous quarter reflecting the growing contribution of aviation rentals.
• Aviation Fleet Size -- 44 assets at quarter-end, an increase from 15 assets a year ago, consisting of 14 aircraft, 14 engines, and 16 auxiliary power units.
• Aviation Utilization -- 66% at quarter-end, with 29 assets producing revenue compared to 23 assets at the end of the second quarter.
• Aviation Portfolio Cost -- $134.9 million as of Sept. 30, 2026, an increase from $108.1 million as of June 30, 2026, due to continued capital investment.
• Senior Secured Term Loan Facility -- Commitments of up to $58 million with Bank7, marking the company's first asset-backed financing against the aviation fleet.
• 2026 Adjusted EBITDA Margin Guidance -- Raised to the mid-teens, approximately one year ahead of the company's original strategic timeline.
• 2027 Adjusted EBITDA Outlook -- Growth of more than 40% year over year, assuming continued deployment of the existing fleet and incremental aviation investments.
• Rental Services Segment Revenue -- $9.6 million, an increase of more than threefold year over year reflecting increased aviation leasing activity.
• Sand Segment Revenue -- $5.2 million, a decrease from $8.0 million in the second quarter primarily due to lower freight revenue.
• Sand Sales Volumes -- 228,000 tons, consistent with the second quarter as stronger market demand offset a seasonal shift in production mix.
• Average Sand Price -- $22.18 per ton, an increase from $21.36 per ton in the previous quarter driven by a shift in grade mix.
• Accommodations Segment Revenue -- $3.4 million, up 6% sequentially and 48% year over year due to higher occupancy.
• Average Rooms Utilized -- 270 rooms, an increase from 259 in the second quarter, while room nights on rent rose 5% sequentially to 24,800.
• Drilling Segment Revenue -- $2.1 million, a decrease from $3.8 million in the second quarter due to lower utilization and seasonal budget exhaust by operators.
• Infrastructure Segment Revenue -- $1.1 million, an increase of 38% year over year as project awards and customer onboarding accelerated during the quarter.
• Liquidity -- $37.6 million at quarter-end, comprising $13.1 million in cash and $24.5 million in marketable securities.
• Capital Expenditures -- $41.8 million for the quarter, with $40.1 million dedicated to aviation and rental asset expansion.
• Aviation Investment Pipeline -- Approximately $24.5 million in actionable opportunities, supporting management's target for future fleet growth.
• SG&A Expense -- $4.1 million, including $1.8 million in transaction costs and legal matters, with a reaffirmed exit run rate guidance of $11 million to $12 million.
• Sand Plant Capacity Expansion -- $1.2 million investment in new screeners, which is expected to increase volume capacity by 10% to 15% upon completion in the fourth quarter.

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RISKS

• Mark Layton stated, "We expect a seasonally softer fourth quarter in Sand, Accommodations and Drilling," regarding the normal year-end slowdown in customer activity.
• Mark Layton noted that commodity prices "remain volatile," which continues to influence the pace of customer spending and activity in energy markets.

SUMMARY

Mammoth Energy Services, Inc. (NASDAQ:TUSK) reported a significant improvement in profitability during the third quarter driven by the continued expansion of its high-margin aviation leasing platform. Management reported that adjusted EBITDA margins expanded to 27.2%, reaching goals originally set for 2027 a full year ahead of schedule. The company secured a new $58 million debt facility, providing its first asset-backed financing against a fleet that has grown from 15 to 44 assets over the past year. Strategic focus remains on growing recurring aviation revenue while maintaining cost discipline across its sand, drilling, and infrastructure segments.

• Mark Layton indicated that aviation leasing generated approximately 75% of segment adjusted EBITDA during the quarter, highlighting the platform's operating leverage.
• Mark Layton stated, "A year ago, our aviation fleet had 15 assets. At the end of the third quarter, it had 44, and aviation is now the largest driver of our earnings."
• Management reported that 2025 divestitures generated over $150 million in proceeds, which were primarily reinvested to build the current aviation fleet.
• Bernie Lancaster noted that infrastructure utilization averaged just below 50% for the quarter, providing significant room for activity growth as new projects come online in the fourth quarter.
• Mark Layton stated, "Having funded the initial growth of the fleet entirely through our own capital, we now have an additional source of financing to support future investments."

INDUSTRY GLOSSARY

• APU: Auxiliary Power Unit; a device on an aircraft that provides energy for functions other than propulsion.
• Sand Proppant: Solid material, typically sand, used in hydraulic fracturing to keep an induced fracture open.
• Adjusted EBITDA: A non-GAAP measure that adjusts earnings before interest, taxes, depreciation, and amortization for specific items like asset disposals or marketable securities gains.
• Marketable Securities: Financial instruments that can be easily sold or exchanged for cash on public exchanges.
• Deployment Rate: The percentage of a fleet's total assets that are currently on lease and generating revenue.

Full Conference Call Transcript

Operator: Greetings, and welcome to the Mammoth Energy Services Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Mohammed Topiwala of Vizara Investor Relations. Please go ahead.

Mohammed Topiwala: Thank you, operator, and good morning, everyone. We appreciate you joining us for Mammoth's Third Quarter 2026 Earnings Conference Call. Joining us on the call today are Mark Layton, Chief Financial Officer; and Bernie 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 details and a reconciliation of GAAP to non-GAAP financial measures are included in our third quarter earnings press release, which can be found on our website, along with the presentation that accompanies today's remarks. 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.

Mark Layton: Thank you, Mohammed, and good morning, everyone. I'll start with the quarter, what drove our performance and then go over the progress we're making on our strategy, capital deployment and our updated outlook. Bernie will then walk through operations, and I'll come back to cover segment results and the balance sheet. This was an outstanding quarter for Mammoth. Adjusted EBITDA more than doubled sequentially to $5.8 million, and our adjusted EBITDA margin expanded to 27.2% from 10% in the second quarter. This was our third consecutive quarter of positive adjusted EBITDA and our strongest profitability since the portfolio reset. The improvement in earnings was driven mainly by 3 things: First, aviation leasing.

More of our fleet went on lease and rentals generated 3/4 of our segment adjusted EBITDA this quarter. Second, Sand delivered improved results, consistent with the stronger second half we anticipated on our last call, benefiting from higher pricing and better operating performance. Third, accommodations, where occupancy translated into stronger earnings. Third quarter revenue was $21.3 million, nearly double the third quarter of last year, but down sequentially, largely reflecting a decline in lower-margin revenue. The second quarter included aviation asset sales, which did not recur this quarter. As we have said before, we take an opportunistic approach to asset sales.

When selling an asset offers a better return than continuing to lease it, we sell the asset and redeploy the capital. Sand freight revenue, which has historically carried lower margins, also declined, and drilling activity eased during the quarter. The shift toward higher-margin aviation leasing, combined with our lean operating model, drove significant profitability improvement despite the lower sequential revenue. As more of the fleet goes on lease, we expect recurring aviation revenue to remain an important driver of earnings and margin improvement. Stepping back, I want to put these results in the context of our broader transformation.

In 2025, we completed 4 divestitures that generated more than $150 million of proceeds, and we reinvested most of that capital in aviation leasing. A year ago, our aviation fleet had 15 assets. At the end of the third quarter, it had 44, and aviation is now the largest driver of our earnings. At the same time, we have taken cost out of the organization and brought greater discipline to how we allocate capital. Every business in our portfolio competes for capital based on its returns. Our strategy remains straightforward: grow aviation where we see the most attractive returns, continue improving margins across the portfolio and maintain a strong balance sheet.

The results this quarter demonstrate the progress we are making. Turning to capital deployment. We invested $41.8 million during the quarter, primarily in aviation. Aviation remains our priority for capital given the attractive returns we see in that business. At September 30, the total cost of our aviation portfolio was approximately $134.9 million, up from $108.1 million as of June 30. We continue to evaluate opportunities to expand the fleet based on expected returns, deployment opportunities and available liquidity. This morning, we announced a senior secured term loan facility with Bank7, providing for commitments of up to $58 million, subject to the terms and conditions of the facility.

This is an important financing milestone given it is our first financing against the fleet and provides additional liquidity and capital to support continued growth in aviation. This is a natural next step in the evolution of our aviation platform. We have built the fleet to this point entirely with our own capital, including proceeds from divestitures. As we move into the next phase of growth, we now have the ability to combine operating cash flow with prudent asset-backed financing to continue scaling the business while maintaining balance sheet flexibility. I'll discuss the terms of the new facility in more detail when I return to the balance sheet. Turning to our markets and outlook.

In Aviation, demand for aircraft engines and auxiliary power units remained favorable during the quarter, supporting increased lease activity and revenue. We continue to see opportunities to expand the fleet where we can earn attractive risk-adjusted returns. In oil and gas, customer activity has improved this year, although commodity prices remain volatile. In our gas-weighted markets, natural gas demand continues to support activity, while customer budgets and seasonality affect the pace of spending. We expect a seasonally softer fourth quarter in Sand, Accommodations and Drilling. In fiber, demand continues to be supported by investment in broadband and communications infrastructure. Against that backdrop, we are once again raising our full year adjusted EBITDA margin outlook.

When we established our 2026 guidance in March, we said positive adjusted EBITDA was within reach, and we viewed mid-teens margins as a 2027 objective. In May, we committed to positive adjusted EBITDA for the full year. In August, we raised our outlook to double-digit margins. Today, we are raising it again. We now expect full year 2026 adjusted EBITDA margins in the mid-teens, putting us roughly a year ahead of the plan we laid out in March. Through the first 9 months, our adjusted EBITDA margin was already 15%. We are also reaffirming our outlook for full year revenue growth of greater than 90%.

Our guidance does not include any further aviation asset sales, so any sales would be additive. It also incorporates a seasonally softer fourth quarter in Sand, Drilling and Accommodations, which Bernie will cover in more detail. Despite the normal seasonal slowdown we expect in the first quarter, our improved outlook reflects the strength of our year-to-date performance and the growing contribution from aviation leasing. Turning briefly to 2027. As we announced this morning, we currently expect 2027 adjusted EBITDA to increase by more than 40% compared with full year 2026 adjusted EBITDA. With that, I'll turn it over to Bernie.

Bernard Lancaster: Thanks, Mark, and good morning, everyone. I'll start with Aviation and then walk through the rest of the portfolio. In Aviation, we grew the fleet to 44 assets at quarter end, up from 38 at the end of June. That includes 14 aircraft, 14 engines and 16 auxiliary power units or APUs. Utilization improved as well. 29 assets were on lease and generating revenue at quarter end, up from 23 at the end of the second quarter. That includes 10 aircraft, 9 engines and 10 APUs. As a result, our deployment rate rose to 66% from 61%. And of the assets we added in the second quarter, all but three are now earning revenue.

During the third quarter, we added 6 assets to the aviation fleet, consisting of 2 narrow-body engines, 1 regional engine, along with 2 wide-body APUs and 1 regional APU. 5 of the 6 arrived in September, so they had little time to earn in the quarter and will contribute as we place them on lease. Our main operating focus is placing the remaining 15 assets on appropriate terms, and we expect the number of revenue-producing assets to continue growing. In Equipment Rental, average pieces of equipment on rent rose to 430 from 407 in the second quarter and 286 a year ago.

We saw incremental growth in utilization during the third quarter, along with pricing improvement, particularly from our equipment deployed in West Texas. In Sand, we sold approximately 228,000 tons, in line with the second quarter, at an average price of $22.18 per ton, up from $21.36 per ton. Sand delivered a much improved performance in the third quarter, driven by a better sales mix between produced and brokered sand, along with efficiency gains in freight and at the wash plant. Given the seasonal nature of sand production, the third quarter is typically our most efficient period to mine and wash sand. The team took full advantage of that window, which this year also coincided with strong market demand.

During the quarter, we invested approximately $1.2 million in new screeners for the plant. The project will be completed in the fourth quarter and will increase the plant's volume capacity going forward. Discussions with customers on 2027 sales volumes have started. We expect fourth quarter volumes to soften as is typical when customers exhaust their annual budgets and activity slows into year-end. In Accommodations, average rooms utilized rose to 270 from 259 in the second quarter and 185 a year ago. Room nights on rent rose 5% sequentially to about 24,800. The team executed well and the margins improved quarter-over-quarter. We expect a seasonal softening in room utilization in the fourth quarter.

In Drilling, activity eased from a strong second quarter with utilization of 32% compared to 43%. We expect activity to remain soft through year-end, in line with the seasonal pattern as operators work through their budgets. In Infrastructure, this was our first full quarter with Mission Construction and BERE Rentals, and integration continued. We saw promising signs in the back half of the quarter as project awards and customer onboarding accelerated. Equipment and crew utilization averaged just below 50% for the quarter, so there is significant room for improvement. With projects coming online and customer onboarding continuing, we expect activity to build meaningfully in the fourth quarter. With that, I'll turn it back to Mark to cover the financials.

Mark Layton: Thanks, Bernie. I'll cover segment results, consolidated profitability and then the balance sheet and capital allocation. Rental segment revenue was $9.6 million, more than triple the third quarter of last year. Sequentially, revenue declined 6% as the quarter -- as the second quarter included aviation asset sales. Excluding those sales, rentals revenue grew 17%. Segment adjusted EBITDA increased to $5 million from $3.7 million in the second quarter, with margins exceeding 50%. This demonstrates the operating leverage in our aviation platform as each additional asset placed on lease generates revenue with relatively little incremental operating cost. Sand segment revenue was $5.2 million, compared to $8 million last quarter, primarily reflecting lower freight revenue.

Despite the decline in revenue, segment adjusted EBITDA improved significantly to $1.5 million compared to a loss of $0.4 million in the second quarter. Accommodations segment revenue was $3.4 million, up 6% sequentially and 48% year-over-year. Segment adjusted EBITDA margin expanded to 32% from 25% in the second quarter. Drilling segment revenue was $2.1 million, compared to $3.8 million last quarter, reflecting the lower activity Bernie discussed. The segment was approximately breakeven at the adjusted EBITDA level. Infrastructure segment revenue was $1.1 million, up 38% year-over-year. The segment recorded an adjusted EBITDA loss of $0.9 million, in line with the second quarter. Turning to consolidated profitability.

Our gross margin before depreciation expanded to 47% compared to 26% in the second quarter. This improvement was driven primarily by the shift in revenue mix toward our higher-margin businesses, particularly aviation leasing. SG&A was $4.1 million compared to $4.2 million in the second quarter. Year-to-date SG&A includes approximately $1.8 million in transaction costs, largely associated with the build-out of our aviation platform as well as approximately $1.3 million related to Puerto Rico legal matters. Excluding these items, we are reaffirming our SG&A exit run rate guidance of $11 million to $12 million.

Depreciation, depletion, amortization and accretion increased to $6.6 million from $4.6 million in the second quarter, reflecting additional aviation assets placed into service and higher depletion in sand. Net income from continuing operations was $0.3 million or $0.01 per diluted share. Turning to the balance sheet. We ended the quarter with no funded debt, $13.1 million in cash and cash equivalents and $24.5 million in marketable securities for combined liquidity from cash and marketable securities of $37.6 million. At quarter end, our aviation fleet remained unencumbered. As I mentioned earlier, this morning, we announced a $58 million term loan facility with Bank7 secured by aviation assets held by our subsidiaries.

The facility consists of a $25 million Term Loan A and $33 million Term Loan B with Term Loan B subject to certain conditions. Both loans mature in October 2030. This financing marks an important next step as we scale our aviation business. Having funded the initial growth of the fleet entirely through our own capital, we now have an additional source of financing to support future investments. Importantly, it allows us to pursue growth opportunities while maintaining a disciplined approach to leverage and balance sheet flexibility. Turning to capital allocation. We invested $41.8 million during the quarter, including $40.1 million in rentals, primarily aviation. Most of the remaining investment was in sand, principally for the new screeners Bernie mentioned.

Our pipeline of actionable aviation investment opportunities currently stands at approximately $24.5 million. We remain focused on deploying capital where we see the most attractive risk-adjusted returns while balancing growth opportunities, liquidity and potential share repurchases. We did not repurchase shares during the quarter. At September 30, reported shareholders' equity was $262.6 million, or approximately $5.46 per outstanding share. Book value remains one reference point as we evaluate potential repurchases alongside other investment opportunities and our funding requirements. To close, this quarter demonstrates the earnings power of the portfolio we have built. Aviation is becoming a larger contributor to our earnings with recurring high-margin revenue, while improvements in our other businesses are adding to profitability.

We are now tracking toward the margin objective we originally set for 2027, roughly a year ahead of plan. And with the new financing facility in place, we are entering the next phase of growth in our aviation platform. Our focus is on building on this momentum, placing more assets on lease, improving returns across the portfolio and remaining disciplined in how we deploy capital. I want to thank our employees for their hard work and execution this quarter and our shareholders for their continued support. With that, operator, we'll open the line for questions.

Operator: [Operator Instructions] Our first question is from John Daniel with Daniel Energy.

John Daniel: Mark, I'm going to stick to my wheelhouse and ask a question on the sand market, if that's okay. I'm just curious if you could give us some thoughts on what you're seeing in terms of inquiries for '27 and where the growth -- what the growth prospects might be? And just maybe perhaps a little color on Bakken versus Marcellus.

Mark Layton: Thanks, John. As we look at '27, I'd say we view it as encouraging. We've got a number of discussions regarding supply arrangements for '27 that helps us firm up our production capacity. And combined with the screener project that we talked about, to give you a little detail on that, we expect that to have a likely 10% to 15% impact on our production capability for the same amount of shift hours, which should have a direct impact on margin going forward. So I'd say it's dual fold. We're excited about the demand we're seeing that seems to be firming up, and we're excited about the improvements in our cost structure.

John Daniel: Okay. Do you see -- is one basin better than the other in terms of the inquiries?

Mark Layton: I'd say as we look at '27, it's split, but we're largely on the CN. So in the Montney, in Western Canada, and into the Utica, Marcellus, we're seeing firming demand out of the Montney as we look into '27 conversations.

John Daniel: Impressive to watch the aviation grow.

Operator: There are no further questions at this time. I would like to hand the floor back over to Mark Layton for any closing comments.

Mark Layton: Thank you for joining us. This quarter marked a substantial advance in profitability, and we have raised our outlook to reflect it. We look forward to updating you on our progress when we report our full year results.

Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you again for your participation.

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