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Atlas Energy Solutions Inc. (AESI)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue rose 49% QoQ to $287.5M on a full-quarter contribution from Hi-Crush; Adjusted EBITDA of $72.0M (25% margin) and diluted EPS of $0.13 reflected elevated costs from the Kermit feed system reconstruction and lower average pricing .
  • Logistics delivered a record quarter, with more than 50% of volumes handled by Atlas’ own last-mile crews and 26 crews operating; management guided Q3 EBITDA to $90–$100M and volumes up ~20% sequentially as Kermit normalizes .
  • Dune Express construction remained on-time and on-budget, with 39 of 42 miles installed and critical crossings completed; initial commercial operations targeted by year-end 2024 .
  • The dividend moved from base+variable to a $0.23/share standalone base dividend payable Aug 22, 2024, supported by strong cash generation and anticipated 2025 FCF inflection as growth CapEx declines .

What Went Well and What Went Wrong

What Went Well

  • Logistics outperformance: “Our logistics team set a quarterly record for loads delivered… delivering more than 50% of our sand volumes utilizing our own last mile crews,” with ~26 crews running, evidencing scale and integration synergies .
  • Dune Express execution: “We remain both on time and on budget… 39 out of the 42 miles of conveyor modules have now been installed,” with belt installation completing by end of September and commercial sand targeted by year-end .
  • Contracting visibility: “Today, we have more than 9 million tons of sand contracted for delivery into the Delaware Basin next year,” underpinning 2025 demand and Dune Express utilization .

What Went Wrong

  • Kermit incident impact: Elevated plant OpEx per ton ($13.84) and throughput constraints from temporary mobile loadout weighed on margins; average sales price fell to ~$26.07/ton .
  • Non-GAAP adjustments reflect incident: Loss on disposal of assets ($11.1M) and a $10.0M insurance recovery gain tied to the Kermit fire affected reported metrics (excluded in Adjusted EBITDA) .
  • Looser market/pricing: Management cited a looser Permian proppant supply-demand balance and spot pricing near breakeven for less-advantaged competitors, implying industry price pressure and potential competitor shutdowns .

Financial Results

Core P&L vs prior periods and estimates

MetricQ2 2023 (oldest)Q1 2024Q2 2024 (newest)Consensus (S&P Global)
Total Sales ($USD Millions)$161.8 $192.7 $287.5 Unavailable (SPGI rate limit)
Net Income ($USD Millions)$71.2 $26.8 $14.8 Unavailable (SPGI rate limit)
Diluted EPS ($USD)$0.67 $0.26 $0.13 Unavailable (SPGI rate limit)
Adjusted EBITDA ($USD Millions)$92.8 $75.5 $72.0 Unavailable (SPGI rate limit)
Net Income Margin (%)44% 14% 5% Unavailable (SPGI rate limit)
Adjusted EBITDA Margin (%)57% 39% 25% Unavailable (SPGI rate limit)

Note: S&P Global consensus data was unavailable at time of publication due to rate limit; tables reflect reported figures only.

Segment breakdown

MetricQ2 2023 (oldest)Q1 2024Q2 2024 (newest)
Product Sales ($USD Millions)$125.2 $113.4 $128.2
Service Sales ($USD Millions)$36.6 $79.2 $159.3
Total Sales ($USD Millions)$161.8 $192.7 $287.5

KPIs and operating metrics

KPIQ2 2023 (oldest)Q1 2024Q2 2024 (newest)
Sales Volumes (million tons)—3.9 4.9
Avg Sales Price ($/ton)—~$29 ~$26.07
Plant OpEx ($/ton, excl. DD&A)—$10.88 $13.84
Operating Cash Flow ($USD Millions)$103.9 $39.6 $60.9
Adjusted FCF ($USD Millions)$86.8 $71.1 $66.6
Last-mile Crews (#)—~24 in Permian ~26

Non-GAAP notes: Adjusted EBITDA and Adjusted Free Cash Flow exclude items such as stock-based comp, acquisition-related costs, loss on disposal of assets (Kermit fire), and insurance recovery gains; see press release reconcilations .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EBITDA ($USD Millions)Q3 2024Not provided$90–$100 Raised visibility (new range)
VolumesQ3 2024Not provided~20% sequential increase Raised
SG&A ($USD Millions)Q3 2024Q2 inflated by ~$6M acquisition and ~$5M SBC Normalize to ~$15 Lowered
DividendQ3 2024 (Aug 2024 pay date)$0.22/share base+variable (May payout) $0.23/share standalone base; payable Aug 22, 2024 Structure changed; increased
OpEx per tonH2 2024Elevated near term due to ramp Normalize by year-end Improving trajectory

Earnings Call Themes & Trends

TopicQ4 2023 (Previous - oldest)Q1 2024 (Previous)Q2 2024 (Current)Trend
Dune Express progressOn-time/on-budget; 2024 commissioning targeted Construction milestones; commissioning late Q3/early Q4 39/42 miles installed; belt install finishing by Sept; commercial by year-end Improving; on track
Pricing and demand2024 adj. EBITDA $425–$475M post Hi-Crush; contracted volumes $26–$28/ton Avg price ~$29/ton; mid-20s new contracts; 80% volumes contracted Spot prices near breakeven for weaker peers; bifurcation on reliability Pricing pressure; demand resilience
Kermit incident & cost—$20–$40M Q2 EBITDA impact; temporary loadout Plant OpEx $13.84/ton; throughput constraints; insurance recovery and asset disposal Normalizing by year-end
Logistics scaleLargest logistics footprint; high-capacity trucking >50% volumes delivered by Atlas crews; 28 crews Record loads; 26 crews; some normalization expected Strong; slight normalization
Autonomous trucking——Kodiak partnership; first driverless sand delivery; commercial ops early 2025 Emerging adoption
Regulatory (DSL listing)——Dunes Sagebrush Lizard listing; Atlas under CCAA; no disruptions expected Manageable; industry impact
Capital returnsRaised dividend to $0.21 (Feb 2024) Raised to $0.22 (May 2024) Shift to $0.23 base dividend; FCF inflection 2025 Increasing stability
M&A/integrationAnnounced Hi-Crush acquisition; logistics + OnCore scale Integration underway; synergies; combined customer base Evaluating opportunities; selective, valuation-sensitive Ongoing; selective

Management Commentary

  • CEO: “While second quarter results were weighed down by lower throughput and higher costs related to the reconstruction of the Kermit Feed System… With the recovery in our productive capacity, we expect our third quarter financial results to meaningfully improve sequentially” .
  • Executive Chairman: “These are very exciting times at Atlas… construction of the Dune Express… continues on pace and on budget. We are now just months away from commissioning” .
  • CFO: “Adjusted EBITDA was… $72 million… Revenues from product sales were approximately $128 million on volumes of 4.9 million tons, yielding an average sales price of approximately $26.07 per ton… Service revenues were approximately $159 million… double the levels of the first quarter” .

Q&A Highlights

  • Logistics/pricing: Despite lower trucking rates in the Permian, Atlas’ structural advantages (multi-trailer, digital dispatch, proximity via Dune/OnCore) support margins; Dune Express returns were underwritten to current market conditions .
  • Volume ramp and contracts: Q3 volumes guided +~20% sequential; >9M tons contracted for Delaware in 2025 with line of sight to more .
  • Market structure: Spot pricing near breakeven for high-cost competitors; management hearing about shift cuts and potential mine shutdowns, improving long-term pricing dynamics .
  • Delaware demand and Dune Express: Expect substantial Dune utilization serving northern Delaware; Kermit mines to feed Dune; minimal reliance on Hi-Crush Kermit for Dune .
  • Capital returns: Dividend moved to a fixed structure to telegraph durability; broader capital return framework to be discussed once Dune Express is operational .

Estimates Context

  • S&P Global consensus for Q2 2024 EPS and revenue was unavailable at the time of this analysis due to SPGI rate limits; therefore, beat/miss vs. estimates cannot be determined at this time (Consensus data unavailable from S&P Global).
  • Given management’s guidance and operational normalization, sell-side estimates may need to reflect improved Q3 volumes (+20% sequential) and EBITDA ($90–$100M), plus SG&A normalization ($15M) .

Key Takeaways for Investors

  • Q2 was a transition quarter: strong top-line growth from Hi-Crush inclusion offset by Kermit-related cost headwinds; normalization in H2 with Q3 EBITDA $90–$100M is the near-term catalyst .
  • Logistics leadership and contracting visibility (>9M tons for 2025 Delaware) support Dune Express utilization and 2025 margin expansion, aided by declining growth CapEx .
  • Structural cost advantages (dredge mining, Dune Express, OnCore proximity, multi-trailer) position Atlas to outperform in a looser pricing environment and potentially gain share as weaker competitors rationalize capacity .
  • Dividend stability improved with a $0.23/share base payout and a path to higher returns once Dune is operational and CapEx steps down in 2025 .
  • Watch Q3 operational normalization: plant OpEx per ton should improve from $13.84/ton as Kermit ramp completes; logistics results may “normalize” from a record Q2 but remain robust .
  • Non-GAAP adjustments (insurance recovery, asset disposal, acquisition-related costs) materially affected reported metrics in Q2; Adjusted EBITDA/FCF remain the better operating indicators .
  • Near-term trading setup: focus on Dune Express execution milestones, Q3 sequential improvement delivery, and incremental contracting updates; any confirmation of competitor capacity reductions could tighten pricing and support sentiment .