Mammoth Energy Services Q4 2025 Earnings Call - Aviation Ramp and Execution Shortfalls Leave EBITDA in the Red

Operator: Greetings and welcome to the Mammoth Energy Services fourth quarter and full year 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mohammed Topiwala with Vizara Advisors, Investor Relations. Thank you. You may begin.

Mohammed Topiwala, Investor Relations, Vizara Advisors: Thank you, operator, and good morning, everyone. We appreciate you joining us for Mammoth’s fourth quarter and full year 2025 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 details and a reconciliation of GAAP to non-GAAP financial measures are included in our fourth 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.

Mark Layton, Chief Financial Officer, Mammoth Energy Services: Thank you, Mohammed. Good morning, everyone. I’ll start with a brief review of 2025 as a whole, cover fourth quarter results, turn it over to Bernard Lancaster, our Chief Operating Officer, to walk through operational performance by segment. I’ll come back to cover the financials and our outlook for 2026. After which, we’ll open the line for questions. With that, let me start with 2025. Over the course of the year, we executed four major transactions that meaningfully reshaped the company. Collectively, these transactions generated approximately $150 million of proceeds. They reflect two things. First, the value embedded in assets we built and operated well. Second, our willingness to monetize businesses that no longer fit our long-term return objectives. We sold our transmission and distribution and our engineering businesses at valuations we believe were attractive.

Those were good businesses. The prices we achieved reflect that. We think those outcomes are a direct signal of the value that exists inside this company. Value that, in our view, is not reflected in where the stock currently trades. We also exited 2 businesses that were not meeting our return standards. First, we sold our pressure pumping equipment, which lacked scale, was capital intensive and increasingly challenged from a cycle and return standpoint. Second, we divested a sand mine that had become a drag on performance and didn’t warrant continued investment based on logistical challenges with that particular mine and processing plant. Those were the right exits. We are a leaner, more focused company because of them. At the same time, 2025 was the year we initiated a meaningful expansion of our platform in aviation rentals.

We deployed more than $65 million of capital with the goal of creating a more stable recurring revenue stream with strong cash flow characteristics. Aviation started the year with limited scale. It ended the year with real operating scale and a clear path to becoming a core earnings contributor as utilization ramps. Put simply, 2025 was a deliberate pivot. Exit assets without a clear path to sustainable returns and redeploy capital into areas where we see a better return profile. Turning to the fourth quarter. Revenue was $9.5 million compared to $10.9 million in the third quarter of 2025 and $10 million in the fourth quarter of 2024, a year-over-year decline of approximately 6%.

For the full year, revenue was $44.3 million versus $45.6 million in 2024, down approximately 3%, which we view as a reasonable outcome given the amount of portfolio change we executed throughout the year. Within the quarter, there were areas that performed well. Rentals, infrastructure and accommodations all came in ahead of our internal revenue expectations. Aviation revenue continued its upward trajectory relative to continued deployment of aviation assets on lease. Infrastructure showed solid demand across grid and broadband related project work. Accommodations continued to improve on both occupancy and cost efficiency. I want to be direct about where we fell short. EBITDA in Q4 was below our expectations and below our standard. This was not a demand problem. It was an execution and cost control issue, and we own it. We’ve already started taking action.

In infrastructure, we made additional management changes within the fiber business to address the performance issues that surfaced during the quarter. Across the rest of the portfolio, we are making targeted investments to address cost structure and improve the conversion of revenue to EBITDA. Bernie will walk through the specifics by segment. With that, I’ll turn the call over to Bernard Lancaster.

Bernard Lancaster, Chief Operating Officer, Mammoth Energy Services: Thanks, Mark. Q4 was a mixed quarter operationally, with some pockets of real strength, which we will build upon in 2026. In our rental segment, we continued to build on our aviation business with another full quarter of revenue contribution. We exited third quarter with approximately 15 aviation assets and added another 11 assets during the fourth quarter. A total of 16 of the 26 aviation assets were on lease at quarter end, and we expect the remaining assets to go on lease during the first half of 2026, subject to maintenance schedules and customer delivery timing. There is still meaningful runway here. Non-aviation rentals showed good top line momentum. Assets on rent increased 15% sequentially to approximately 328 pieces. Profitability was pressured by higher equipment rental costs and insurance premiums. Our non-aviation rentals have lost some of the advantages previously realized from economies of scale.

As a result, we have identified additional opportunities to be more strategic with our customer and fleet mix in an effort to reduce overall coverage requirements and expect to work through this process as we move into 2026. Investing in the non-aviation rental business is a priority in 2026 as we see strong demand and a tightening equipment market. Turning to infrastructure. Revenue came in ahead of our expectations, which speaks to the demand environment across network hardening, broadband expansion, and data center related work. EBITDA, however, was not acceptable. Execution challenges in our fiber operations drove significant cost overruns and margin compression. We’ve already acted and made top-down management changes within the fiber business and tightened project oversight to improve accountability, schedule discipline, and cost control. These are meaningful changes and our focus is on restoring consistent execution so the business can convert demand into profitable growth in 2026.

Accommodations revenue was up, driven by a 25% increase in occupancy. This segment has been improving quarter after quarter and the team deserves considerable credit for their consistent execution and excellent safety record. Sand and drilling were challenged in the quarter. In sand, pricing and volume pressure continued to significantly constrain the team’s results. We are focused on positioning ourselves to obtain more consistent volumes while also reducing the lease expense burden from parts of our railcar fleet that are no longer needed. In drilling, Q4 2025 stepped down from a very strong third quarter performance as customer timing worked against our team. One of our priorities in 2026 is to invest back into our drilling business and improve performance through high-grading the asset base where we see a clear path to better utilization and profitability.

We believe that adding motor and MWD capacity to reduce rental expense and upgrading our power sections to improve customer marketability during the first half of the year will lead to material improvement in 2026. Overall, revenue performance in the fourth quarter showed that demand is there in several parts of our portfolio, but our execution and cost management didn’t meet our expectations. We’re not making excuses, we’re making changes, and I’m confident the actions underway will drive a better trajectory in 2026. Thank you to our employees for the hard work through a demanding quarter. With that, I’ll hand it back to Mark.

Mark Layton, Chief Financial Officer, Mammoth Energy Services: Thanks, Bernie. Let me walk through our segment results for the fourth quarter of 2025, and then I’ll cover consolidated results, balance sheet, and our outlook. Rental segment revenue was $3.3 million, up 19% sequentially and 179% year-over-year, mainly driven by the 23% sequential increase in aviation rentals in line with our commercial expectations. Non-aviation rental revenue increased 18% during the quarter, reflecting improved asset utilization. Our rental segment faced cost overruns driven by insurance costs and equipment rental expense due to equipment needed to support our operations and customer demands. Stronger equipment utilization and favorable aviation rental mix helped offset some of these pressures, the sequential rise in operating costs reduced overall segment profitability. Infrastructure segment revenue was $1.2 million, up 44% sequentially and 231% year-over-year.

Profitability was impacted by fiber execution issues, as Bernie described. Management and oversight changes we have made are focused on ensuring revenue performance flows through to the bottom line going forward. While we expect that there will be an EBITDA overhang on this business through the first half of 2026, we are encouraged by the early steps taken by the new leadership team. Accommodations revenue was $2.8 million, up 24% sequentially and up 19% year-over-year, reflecting higher occupancy. Sand segment revenue was $1.7 million, down 37% sequentially and down 67% year-over-year. Drilling segment revenue was $0.5 million, down 80% sequentially and down 38% year-over-year. Turning to consolidated results.

For the fourth quarter of 2025, total revenue was $9.5 million, down 13% sequentially and 6% year-over-year. For the full year 2025, total revenue was $44.3 million compared to $45.6 million in 2024, a year-over-year decline of 3%. Net loss from continuing operations for the fourth quarter was $12.3 million or $0.26 per diluted share, compared to $0.20 in the fourth quarter of 2024. Adjusted EBITDA from continuing operations was a loss of $6.8 million in the fourth quarter of 2025, compared to a loss of $6 million in the prior year period. The underperformance relative to our plan was operationally driven and we are taking targeted actions across each segment to address it.

In our sand and drilling segments, cost of services decreased at a significantly lower rate than activity levels, resulting in margin compression driven by reduced utilization and lower fixed cost absorption during the winter slowdown typical in the oil and gas industry. In the other segment, fully idled operations led to no revenue and only partial cost reductions, creating an unavoidable drag on profitability. SG&A expense during the quarter was $5.7 million, down from $6.9 million in Q4 2024, a reduction of approximately 17% year-over-year. On a fully normalized basis, excluding the bad debt expense related to PREPA in 2Q 2024, SG&A declined approximately 22%.

We have more work to do on the cost structure as we continue to rightsize the company for the portfolio we have today. That remains a priority heading into 2026. Capital expenditures during the quarter were $25.9 million, nearly all directed toward aviation. Eight APUs, two engines, and one small aircraft were acquired during the quarter to bolster capacity and support future contracted deployment. For the full year, aviation accounted for the vast majority of our approximately $70 million in total 2025 CapEx, reflecting our conviction in the return profile and scalability of that platform. Very little capital was allocated to drilling, sand, accommodations, or infrastructure during the year. We expect that to change meaningfully in 2026 as we high-grade assets, pursue equipment acquisitions that reduce costs, and invest in the operational improvements needed to drive profitability across those segments.

At quarter end, we had $121.6 million of unrestricted cash equivalents, and marketable securities, and total liquidity of approximately $158.3 million, including our undrawn credit facility. Mammoth remains debt-free. This gives us the flexibility to invest across the portfolio, pursue accretive opportunities, and absorb near-term volatility without any balance sheet pressure. Subsequent to quarter end, we closed the sale of a property in Ohio that previously supported our pressure pumping operations, generating net proceeds of $4.6 million. The asset was no longer in use following our exit from that business. Converting it to cash was the logical next step. We flagged this because we think it is representative of a broader dynamic. There are assets on our balance sheet, some obvious and some less so, that carry value not reflected in where the stock trades.

We will continue to identify and monetize positions where we are not generating an adequate return. We expect to surface additional value through that process over time. Entering 2026, we are constructive on the path ahead, seeing a path to greater than 50% revenue growth in 2026 versus 2025, primarily driven by two main things: full year of aviation contribution at higher utilization and improved asset utilization across our oil and gas exposed businesses. To add some detail regarding our aviation portfolio, we nearly doubled the monthly revenue out of the portfolio from $0.6 million in December to $1 million in January. Once fully utilized, we believe this portfolio can generate monthly revenue of approximately $1.6 million per month.

On capital allocation, we expect non-aviation CapEx of approximately $11 million in 2026, a mix of maintenance and targeted growth investments across our oil and gas and infrastructure segments. To be direct, we have underinvested in these businesses for several years, and that has been one of the contributors to the cost and performance issues. The investments are going into an existing asset base to address specific inefficiencies with identifiable paybacks. We expect the returns to be meaningful and relatively quick to materialize. On aviation, CapEx will remain opportunistic. As we have demonstrated, we are disciplined on entry point, and we will continue to deploy capital there only where the economics are compelling. Taking all of this together, we expect 2026 to be a year of inflection for Mammoth. Revenue growth accelerating and positive EBITDA back within reach. We want to be clear on that last point.

The current asset base operated better and supported by the right level of investment is capable of delivering positive EBITDA. From that foundation, our sights are set on mid-teens EBITDA margins and positive free cash flow as we move into 2027. The path is clear. The work is to execute against it. The macro backdrop in both areas is favorable. Oil and gas demand fundamentals are solid. Activity in our core basins is steady. We see specific investment opportunities we are actively evaluating. In aviation, leasing demand in the regional market is holding up, and we have capacity coming available as the fleet continues to ramp. Revenue growth is only part of the equation. The priority in 2026 is ensuring that growth converts into EBITDA and cash flow, and we are working to improve operational execution along with the deploying additional capital to help improve returns.

On behalf of the entire Mammoth team, thank you to our employees for their continued commitment and to our shareholders for their support. That concludes our prepared remarks. Operator, please open the line for questions.

Operator: Thank you. At this time, we’ll be conducting our 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 that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, to ask a question, press star one. We’ll pause for a moment while we pull for questions. Ladies and gentlemen, there are no questions at this time, so I will now hand the floor to Mark Layton for closing remarks.

Mark Layton, Chief Financial Officer, Mammoth Energy Services: Thank you again for joining us on the call today. 2025 was a year of real change for this company in the portfolio, in the asset base, and in how we are positioned going forward. Q4 was a re-reminder that the work is not finished and we take that seriously. The setup heading into 2026 is straightforward. The demand is there, aviation is ramping, and the balance sheet gives us room to invest. The job is to execute. We look forward to updating you next quarter.

Operator: Thank you. With that, we conclude today’s call. All parties may disconnect. Have a good day.