Atlas Energy Solutions Inc. (AESI) Earnings Call Transcript & Summary

Hello, and welcome to Atlas Energy Solutions Operations Update for the second quarter of 2026. Today, we'll cover our rapidly growing power business and share important progress in our sand logistics operation. Let me start with the milestone we're especially proud of. Earlier this year, Atlas was contracted to build 120-megawatt power facility for an investment-grade technology infrastructure provider. Under power purchase agreement, Atlas is delivering turnkey construction of the facility. Once completed, we will own and operate the plant for the duration of the contract. Atlas is giving this customer a significant advantage by delivering long-term power in stages. This allows them to start operations early before the campus is fully built. Then they can scale up on our plant as demand grows. We've already delivered Phase 1, allowing them to begin operational testing right away. We expect the full 120 megawatts to be operational by the end of the first quarter of 2027. It was a strong quarter across both of our businesses -- the demand for distributed power has never been greater. Tim Ondrak, our SVP and President of Power, will now walk you through what we see across the markets for private power solutions.

Thanks, John. The commercial opportunity set for permanent behind-the-meter power continues to expand rapidly. The demand for compute capacity is exploding with the evolution of AI. And with it, Atlas has seen urgency in our commercial negotiations rise. Over the past few months, we have seen the nature of the power deals we are pursuing evolve in both size and duration. Simply put, our customers are seeking more power for longer. Atlas' ability to provide approximately 470 megawatts of power for start-up in 2027 positions us very well with the time lines of high-priority projects and our prospective customers. Combined with our experience executing infrastructure projects at scale, Atlas has positioned itself very well to be a key partner as these projects take off. We expect our contracted backlog to look quite different by year-end. Our oilfield power business is seeing stronger contracting momentum as well. This quarter, we signed additional contracts and agreements for current and future asset placements. These contracts will take our dedicated capacity beyond 50% of our availability by the end of 2026. We anticipate 180 to 200 total megawatts deployed in our oilfield power business by year-end, which represents effective full utilization of this fleet. We are seeing strong interest in the contracting of microgrid systems utilizing Atlas Energy's battery technology. With this technology, we can hybridize customer locations to increase reliability of those critical sites. Our hybrid technology combines our portable generators, a robust battery system and control software that manages sites for load and power. Our CFO, Blake McCarthy, will now expand on the tailwinds forming in our sand and logistics business units.

Thanks, Tim. Atlas' Sand and logistics operations reported improved profitability in the second quarter. While Q2 volumes were less than expected due to rig moves and completion schedule changes, our operational efficiency initiatives resulted in improved fixed costs at our plants. We expect these efficiency improvements to continue in the back half of the year. Our Last Mile team set a quarterly ship volume record, over 6 million tons delivered, resulting in a meaningful step-up in profitability. Inflation within the trucking market has become more apparent. Atlas' investments in the Dune Express and autonomous trucking have become key differentiators in our ability to derisk customers' operations. The Dune Express is meeting growing demand with greater efficiency and safety. During the quarter, we set another quarterly record for volume shipped down the Dune Express. With national over-the-road freight rates continuing to climb, the availability of drivers in the Permian continues to be strained. Dune Express' ability to enable significantly higher turns of our trucking assets and driver base is a key advantage, partially insulating Atlas from the broader market inflation. An innovation that continues to grow in importance is our use of autonomous trucking. Atlas operates 28 Kodiak-enabled autonomous trucks, the largest known fleet of driverless trucks in North America. We completed more than 4,600 autonomous deliveries during the quarter. Additionally, Kodiak's technology continues to improve, enabling the first double and triple trailer autonomous deliveries during the quarter. Importantly, Kodiak and Atlas expect to have our fleet operating on public roads in 2027, dramatically expanding the reach of our autonomous fleet. Timing will be subject to regulatory and operational milestones. As autonomous trucking continues to evolve in its capabilities, we remain on track for our fleet to reach 100 autonomous trucks by the summer of 2027. Improved macro conditions for the oil and gas industry are setting the stage for improved completion activity in the Permian. However, volatility in the market is leading most operators to take a measured approach to incremental activity. As overall industry proppant demand grows, we believe the lack of sustaining investment by the broader industry is likely to become apparent. This may result in a reevaluation of current opinions on the supply-demand balance in the West Texas sand market. Over the past 6 quarters, Atlas has used its position as the low-cost producer of sand to cement our position with key customers. We provide a level of service and execution reliability that is not duplicated in the market. As such, we are beginning to exercise more pricing discipline around the volumes we sell and the customers for whom we choose to work. We believe this is an important next step as we set Atlas up to maximize success in 2027.

Thanks, Blake. Our sand and logistics team continue to deliver for our customers. We have spent years developing innovative solutions to become the leading provider of sand and logistics. As the market tightens in the coming quarters, the value of our scale will become even more apparent as customers turn to us to solve their most pressing challenges. When a customer turns to Atlas for power, we handle all of it. We design it, engineer it, build it, operate it more than $1 billion in infrastructure solution to customers looking to solve their power issues that set us apart. As hyperscalers power, they need a partner with the depth to carry the project through its full life cycle from design throughout the entirety of its operations -- they need it on time and on budget. In a market where power itself is a scarce resource, the reason companies are choosing to partner with Atlas comes down to something simple. We have the power. The equipment is secured and ready to deploy on the time lines they need. As our power business grows, that's exactly what you'll see. I want to thank my colleagues, Tim and Blake, for sharing these updates, and thank you for joining us today. For more details, please join us on our second quarter investor call that's on Tuesday, August 4, at 9:00 a.m. Central Daylight Time.