Mammoth Energy Q3 Adjusted EBITDA Reaches $5.8M, Margin Expands to 27.2%

Mammoth Energy Services released its third-quarter financial results on Friday. Below is the transcript of the company's third-quarter earnings conference call.

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Summary

Mammoth Energy Services reported adjusted EBITDA increased significantly to $5.8 million, with margins expanding to 27.2%, driven primarily by aviation leasing, sand, and lodging operations.

Third-quarter revenue was $21.3 million, nearly doubling year-over-year, but declined sequentially due to lower-margin revenue decreases and the absence of aviation asset sales.

The company continues to prioritize capital deployment into aviation leasing, investing $41.8 million during the quarter, and added a new $58 million term loan facility to support growth.

Mammoth raised its full-year 2026 adjusted EBITDA margin outlook to mid-teens, ahead of plan, and expects 2027 adjusted EBITDA to grow more than 40% over 2026.

Operational highlights include increased aviation fleet assets, improved sand sales performance, and continued growth in equipment rental and lodging operations.

Management emphasized the strategic shift toward higher-margin aviation leasing and maintained a strong balance sheet with no interest-bearing debt and liquidity of $37.6 million.

Full Transcript

Operator

Good day, and welcome to the Mammoth Energy Services Third Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. If you require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to introduce Mohammad Tapiwalla from Vizara Investor Relations. Please go ahead.

Mohammad Tapiwalla

Thank you, operator, and good morning, everyone. Thank you for joining Mammoth's third quarter 2026 earnings call. With us today are Chief Financial Officer Mark Layton and Chief Operating Officer Bernie Lancaster. We will begin with prepared remarks and then open the call for questions. I'd like to remind everyone that some of today's comments contain forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from any expectations expressed herein. Please refer to our most recent filings with the U.S. Securities and Exchange Commission for risk factors and cautions regarding forward-looking statements.

Our comments today also include non-GAAP financial measures. Details and underlying data for reconciliations of GAAP to non-GAAP financial measures are included in our third-quarter earnings press release, which, along with the presentation accompanying today's remarks, can be found on our website. As a reminder, today's call is being webcast, and a replay will be available on the Investor Relations section of Mammoth's website following the call.

With that, I'll turn the call over to Mark.

Mark Layton

Thank you, Mohammad, and good morning, everyone. I'll start with the quarter, discussing what drove our performance, and then review our progress on strategy, capital deployment, and our updated outlook. Bernie will then cover operations, and I'll return to discuss 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 marks our third consecutive quarter of positive adjusted EBITDA and our strongest profitability since the portfolio reset. The earnings improvement was driven primarily by three factors. First, aviation leasing — more of our fleet assets were on lease, and lease revenue contributed three-quarters of that segment's adjusted EBITDA during the quarter.

Second, improved sand performance, consistent with our expectation for stronger second-half results discussed on our last call, driven by higher pricing and better operational performance. Third, lodging, where occupancy translated into stronger profitability. Third-quarter revenue was $21.3 million, nearly double the year-ago period, but down sequentially, primarily reflecting lower-margin revenue reductions. The second quarter included aviation asset sales, which did not recur this quarter. As we've said before, we take an opportunistic approach to asset sales. When selling assets provides better returns than continuing to lease them, we will sell and redeploy capital. Historically lower-margin sand freight revenue also declined, and drilling activity slowed during the quarter.

Despite the sequential revenue decline, the shift toward higher-margin aviation leasing, combined with our streamlined operating model, drove significant profitability improvement. As more fleet comes online for leasing, we expect recurring aviation revenue to remain a significant driver of earnings and margin improvement. Stepping back, I'd like to frame these results within the context of our broader transformation. In 2025, we completed four divestitures, generating over $150 million in proceeds, and we reinvested most of that capital into aviation leasing. A year ago, our aviation fleet had 15 assets. At the end of the third quarter, that number reached 44, and aviation is now our largest driver of profitability. At the same time, we've reduced organizational costs and instilled greater discipline in how we allocate capital.

Every business in our portfolio competes for capital based on its returns. Our strategy remains clear: grow in aviation where we see the most attractive returns, continue to improve margins across the portfolio, and maintain a strong balance sheet. This quarter's results demonstrate the progress we're making. Turning to capital deployment, we invested $41.8 million during the quarter, primarily in aviation. Given the attractive returns we see in that business, aviation remains our capital priority. As of September 30, the total cost of our aviation portfolio was approximately $134.9 million, up from $108.1 million at 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 Bank 7, providing up to $58 million in commitments, subject to the terms and conditions of the facility. This is a significant financing milestone, as it marks our first financing secured by fleet assets and provides additional liquidity and capital to support continued growth in the aviation business. This is a natural next step in the evolution of our aviation platform. To date, we've built the fleet entirely with our own capital.

As we enter 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 financing arrangement in more detail when I return to the balance sheet section. Turning to our markets and outlook: In aviation, demand for aircraft engines and auxiliary power units remained healthy during the quarter, supporting growth in leasing activity and revenue. We continue to see opportunities to expand the fleet in areas where we can achieve attractive risk-adjusted returns. In oil and natural gas, customer activity has improved this year, though commodity prices remain volatile in our gas-weighted markets. Natural gas demand continues to support activity, while customer budgets and seasonality influence the pace of spending.

We expect seasonal softness in sand, lodging, and drilling during the fourth quarter. In fiber, investment in broadband and communications infrastructure continues to support demand. Against this backdrop, we are again raising our full-year adjusted EBITDA margin outlook. When we set our 2026 guidance in March, we said positive adjusted EBITDA was within reach and viewed mid-teens margins as a 2027 target. In May, we committed to positive adjusted EBITDA for the full year. In August, we raised our outlook to double-digit margins. Today, we're raising it again. We now expect full-year 2026 adjusted EBITDA margins in the mid-teens, roughly a year ahead of the plan we laid out in March.

Through the first nine months, our adjusted EBITDA margin was 15%. We are also reaffirming our outlook for full-year revenue growth of more than 90%. Our guidance does not include any further aviation asset sales, so any sales would be incremental. The guidance also incorporates the fourth-quarter seasonal softness in sand, drilling, and lodging that Bernie will discuss in more detail. While we expect normal seasonal slowing in the first quarter, our improved outlook reflects strong year-to-date performance and the growing contribution from the aviation leasing business. Briefly touching on 2027, as we announced this morning, we currently expect 2027 adjusted EBITDA to grow more than 40% over full-year 2026 adjusted EBITDA.

With that, I'll turn the call over to Bernie.

Bernie Lancaster

Thanks, Mark, and good morning, everyone. I'll start with aviation and then cover the rest of the portfolio. On the aviation side, we expanded 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. Utilization also improved. We had 29 assets 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.

So our deployment rate increased from 61% to 66%. And of the assets we added in the second quarter, all but three are now generating revenue. During the third quarter, we added six assets to the aviation fleet, including two narrowbody engines, one regional engine, and two widebody APUs and one regional APU. Five of those six assets arrived in September, so they had limited time to generate earnings during the quarter, and they will begin contributing revenue as we put them on lease. Our primary operational focus is placing the remaining 15 assets on lease under appropriate terms, and we expect the number of revenue-generating assets to continue growing.

On the equipment rental side, average equipment on rent increased to 430 units from 407 in the second quarter and 286 in the year-ago period. We saw gradual utilization growth and improved pricing during the third quarter, particularly for equipment deployed in West Texas. On the sand side, we sold approximately 228,000 tons, flat with the second quarter, at an average price of $22.18 per ton, up from $21.36 per ton. The sand business delivered significantly improved results in the third quarter, benefiting from a better sales mix between company-produced and distributed sand, as well as efficiencies in freight and the wash plant. Given the seasonal nature of sand production, the third quarter is typically our peak period for mining and washing efficiency.

The team took full advantage of this window, which also coincided with strong market demand this year. During the quarter, we invested approximately $1.2 million in new screening equipment for the wash plant. This project will be completed in the fourth quarter and will enhance the plant's future capacity. Discussions with customers regarding 2027 sales volumes have already begun. We expect fourth-quarter sales volumes to soften as they typically do, as customers exhaust annual budgets and activity slows toward year-end.

On the lodging side, average rooms utilized increased to 270 from 259 in the second quarter and 185 in the year-ago period. Occupied room nights grew 5% sequentially to approximately 24,800. The team executed well, and margins improved sequentially. We expect seasonal softness in room utilization during the fourth quarter. On the drilling side, activity slowed from a strong second quarter, with utilization at 32% versus 43% in the second quarter. We expect activity to remain soft through year-end as operators execute within budgets, consistent with seasonal patterns.

On the infrastructure side, this was our first full quarter following the integration of Mission Construction and BRE Rentals, and the integration continues. We saw encouraging signs in the latter half of the quarter as project awards and customer onboarding accelerated. Average equipment and personnel utilization was just under 50% during the quarter, so there is significant room for improvement. As projects come online and customer onboarding continues, we expect a meaningful increase in activity during the fourth quarter.

With that, I'll turn the call back over to Mark for the financial review.

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 last year's third quarter. It declined 6% sequentially, as the second quarter included aviation asset sales. Excluding those sales, rental revenue grew 17%. Segment adjusted EBITDA increased to $5 million from $3.7 million in the second quarter, with margins above 50%. This demonstrates the operating leverage in our aviation platform, as each additional asset placed on lease generates revenue with relatively modest incremental operating costs.

Sand segment revenue was $5.2 million, compared to $8 million in the prior quarter, primarily reflecting lower freight revenue. Despite the revenue decline, segment adjusted EBITDA improved significantly to $1.5 million, versus a loss of $0.4 million in the second quarter. Lodging segment revenue was $3.4 million, up 6% sequentially and up 48% year-over-year. Segment adjusted EBITDA margins expanded to 32% from 25% in the second quarter. Drilling segment revenue was $2.1 million, compared to $3.8 million in the prior quarter, reflecting the reduced activity Bernie discussed.

Segment adjusted EBITDA was near breakeven. Infrastructure segment revenue was $1.1 million, up 38% year-over-year. The segment recorded an adjusted EBITDA loss of $0.9 million, consistent with the second quarter. Turning to consolidated profitability, our pre-depreciation gross margin expanded to 47% from 26% in the second quarter. This improvement was driven primarily by a shift in revenue mix toward higher-margin businesses. Selling, general, and administrative expenses were $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, primarily related to the aviation platform build-out, and approximately $1.3 million in expenses related to Puerto Rico legal matters.

Excluding these items, we reaffirm our SG&A exit run-rate guidance of $11 million to $12 million. Depreciation, depletion, amortization, and accretion expense increased to $6.6 million from $4.6 million in the second quarter, reflecting newly placed aviation assets and higher sand depletion. Net income from continuing operations was $0.3 million, or $0.01 per diluted share. Turning to the balance sheet, at quarter-end we had no interest-bearing debt, $13.1 million in cash and cash equivalents, and $24.5 million in marketable securities, for combined liquidity of $37.6 million in cash and marketable securities. At quarter-end, our aviation fleet remained unencumbered. As I mentioned earlier, this morning we announced a $58 million term loan facility with Bank 7, secured by aviation assets held by our subsidiaries. The facility includes a $25 million Class A term loan and a $33 million Class B term loan, with the Class B loan subject to certain conditions.

Both loans mature in October 2030. This financing marks an important next step in scaling our aviation business. After funding the fleet's initial growth entirely with our own capital, we now have an additional source of financing to support future investments. Importantly, it allows us to maintain disciplined leverage and balance sheet flexibility while pursuing growth opportunities. Turning to capital allocation, we invested $41.8 million during the quarter, with $40.1 million directed to the rental business, primarily aviation. The remaining investment was largely in the sand business, primarily for the new screening equipment Bernie mentioned. Our current actionable aviation investment opportunity pipeline is approximately $24.5 million. We remain focused on deploying capital to areas with the most attractive risk-adjusted returns, while balancing growth opportunities, liquidity, and potential share repurchases.

We did not repurchase shares during the quarter. Reported shareholders' equity was $262.6 million as of September 30, or approximately $5.46 per share outstanding. Book value remains a reference point when evaluating potential repurchases alongside other investment opportunities and capital needs. Finally, this quarter demonstrates the profitability of the portfolio we've 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 approaching the margin targets we originally set for 2027, roughly a year ahead of plan. With the new financing facility in place, we are entering the next phase of growth for the aviation platform.

Our focus is on building on this momentum, placing more assets on lease, improving returns across the portfolio, and maintaining discipline in capital deployment. I want to thank our employees for their hard work and excellent execution this quarter, and our shareholders for their continued support. With that, operator, we'll open the call for questions.

Operator

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If you would like to remove your question from the queue, you may press star two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we gather questions.

Thank you. Our first question comes from John Daniel of Daniel Energy.

John Daniel

Good morning, guys. Thanks for having me on. Mark, I wanted to ask a question in an area I'm familiar with, about the sand market, if I could. I'm curious if you could provide some thoughts on the 2027 inquiry levels, how the growth outlook looks, and maybe the Bakken and Marcellus regions. Thanks.

Mark Layton

Thanks, John. Looking ahead to 2027, I think the picture is encouraging. We're having multiple discussions regarding 2027 supply arrangements, which helps us firm up capacity. Combined with the screening equipment project we mentioned, to be specific, we expect that project could have a 10% to 15% impact on our production capacity over the same shift hours, which should have a direct impact on future margins.

So I think it's twofold. We're excited about what appears to be firming demand, and we're also excited about the improvement in our cost structure.

John Daniel

Okay. In terms of inquiries, which basin do you think is performing better?

Mark Layton

Looking to 2027, I think it's mixed, but we're primarily along the Canadian National Railway. So in Montney, Western Canada, and the Utica Marcellus region, from the 2027 discussions, we're seeing firming demand in the Montney.

John Daniel

Makes sense. Okay. Well, thank you. The aviation growth is impressive to see.

Mark Layton

Thanks, John.

Operator

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Mark Layton for closing remarks.

Mark Layton

Thank you for joining. This quarter delivered substantial progress in profitability, and we've raised our outlook to reflect that. We look forward to updating you on our progress when we report full-year results.

Operator

This concludes today's conference call. You may now disconnect. Thank you again for your participation.

Disclaimer: This transcript is for informational purposes only. While we strive for accuracy, this automated transcription may contain errors or omissions. For official company statements and financial information, please refer to the company's filings with the U.S. Securities and Exchange Commission and official press releases. Statements by company participants and analysts reflect their views as of the date of this call and are subject to change without notice.