Atlas Energy Solutions Inc.: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis should be read in conjunction with the financial statements and related notes presented in this Quarterly Report on Form 10-Q (this “Report”), as well as our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Annual Report”), filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 25, 2025.

Cautionary Note Regarding Forward-Looking Statements

This Report contains forward-looking statements that are subject to risks and uncertainties. All statements, other than statements of historical fact included in this Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Report, the words “may,” “forecast,” “continue,” “could,” “would,” “will,” “plan,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the section titled “Risk Factors” included in this Report, our Annual Report, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, filed with the SEC on May 6, 2025. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we believe that the forward-looking statements contained in this Report are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to:

• uncertainties as to whether the Moser Acquisition will achieve its anticipated benefits and projected synergies within the expected time period or at all;
• our ability to integrate the business of Moser in a successful manner and in the expected time period;
• unforeseen or unknown liabilities, future capital expenditures and potential litigation relating to the Moser Acquisition;
• limitations on our financial flexibility due to our existing and any future indebtedness;
• our ability to successfully execute our share repurchase program or implement future share repurchase programs;
• higher than expected costs to operate our proppant production and processing facilities or the Dune Express;
• the amount of proppant we are able to produce, which could be adversely affected by, among other things, operating difficulties and unusual or unfavorable geologic conditions;
• the volume of proppant we are able to sell and our ability to enter into supply contracts for our proppant on acceptable terms;
• the prices we are able to charge, and the margins we are able to realize, from our sales of proppant, logistics services, or mobile power generation;
• the demand for and price of proppant and power generation, particularly in the Permian Basin;
• the success of our electric dredging transition efforts;
• fluctuations in the demand for certain grades of proppant;
• the domestic and foreign supply of and demand for oil and natural gas;
• the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries and other oil producing nations (together, “OPEC+”) with respect to production levels or other matters related to the prices of oil and natural gas;
• changes in the price and availability of natural gas, diesel fuel or electricity that we use as fuel sources for our proppant production facilities and related equipment;
• changes in the availability of grid power that would reduce the need for mobile power supply, particularly in the Permian Basin;
• the availability of capital and our liquidity;
• the level of competition from other companies;
• pending legal or environmental matters;
• changes in laws and regulations (or the interpretation thereof) or increased public scrutiny related to the proppant production and oil and natural gas industries, silica dust exposure or the environment;
• facility shutdowns in response to environmental regulatory actions;
• technical difficulties or failures;
• liability or operational disruptions due to pit-wall or pond failure, environmental hazards, fires, explosions, chemical mishandling or other industrial accidents;
• unanticipated ground, grade or water conditions;
• inability to obtain government approvals or acquire or maintain necessary permits or mining, access or water rights;
• changes in the price and availability of transportation services;
• inability of our customers to take delivery;
• difficulty collecting on accounts receivable;
• the level of completion activity in the oil and natural gas industry;
• inability to obtain necessary proppant production or power generation equipment or replacement parts;
• the amount of water available for processing proppant;
• any planned or future expansion projects or capital expenditures;
• our ability to finance equipment, working capital and capital expenditures;
• inability to successfully grow organically, including through future land acquisitions;
• inaccuracies in estimates of volumes and qualities of our frac sand reserves;
• failure to meet our minimum delivery requirements under our supply agreements;
• material nonpayment or nonperformance by any of our significant customers;
• development of either effective alternative proppants or new processes that replace hydraulic fracturing;
• our ability to borrow funds and access the capital markets;
• our ability to comply with covenants contained in our debt instruments;
• the potential deterioration of our customers’ financial condition, including defaults resulting from actual or potential insolvencies;
• changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements, including such changes that may be implemented by U.S. and foreign governments;
• volatility in political, legal and regulatory environments;
• changes in global political or economic conditions, including sustained inflation as well as financial market instability or disruptions to the banking system due to bank failures, both generally and in the markets we serve;
• the impact of geopolitical developments and tensions, war and uncertainty in oil-producing countries (including the invasion of Ukraine by Russia, the Israel-Hamas war, the Israel-Iran conflict, continued instability in the Middle East, including from the Houthi rebels in Yemen, and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy);
• health epidemics, such as the COVID-19 pandemic, natural disasters or inclement or hazardous weather conditions, including but not limited to cold weather, droughts, flooding, tornadoes and the physical impacts of climate change;
• physical, electronic and cybersecurity breaches;
• the effects of litigation;
• plans, objectives, expectations and intentions described in this Report that are not historical; and
• other factors discussed elsewhere in this Report, including in Item 1A. “Risk Factors.”

We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, the risks described under the section titled “Item 1A. Risk Factors” in this Report and the risk factors disclosed under the heading “Risk Factors” included in our Annual Report and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, filed with the SEC on May 6, 2025.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Report. Should one or more of the risks or uncertainties described in this Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements to reflect events or circumstances after the date of this Report.

Overview

Atlas Energy Solutions Inc., a Delaware corporation (f/k/a New Atlas HoldCo. Inc.) (“New Atlas” and together with its subsidiaries “we,” “us,” “our,” or the “Company”), was formed on June 28, 2023, pursuant to the laws of the State of Delaware, and is the successor to AESI Holdings Inc. (f/k/a Atlas Energy Solutions Inc.), a Delaware corporation (“Old Atlas”). New Atlas is a holding company and the ultimate parent company of Atlas Sand Company, LLC (“Atlas LLC”), a Delaware limited liability company formed on April 20, 2017.

We are a low-cost producer of high-quality, locally sourced 100 mesh and 40/70 sand used as a proppant during the well completion process. Proppant is necessary to facilitate the recovery of hydrocarbons from oil and natural gas wells. One hundred percent of our sand reserves are located in Texas within the Permian Basin and our operations consist of proppant production and processing facilities, including four facilities near Kermit, Texas (together, the “Kermit facilities”), a fifth facility near Monahans, Texas (the “Monahans facility”), and the OnCore distributed mining network.

We operate a differentiated logistics platform that is designed to increase the efficiency, safety and sustainability of the oil and natural gas industry within the Permian Basin. This includes our fleet of fit-for-purpose trucks, trailers, and the Dune Express, an overland conveyor infrastructure solution. We have also begun integrating autonomous driving technologies in certain of our fit-for-purpose trucks, creating the first semi-autonomous oilfield logistics network in an effort to increase our automation of the oil and gas proppant supply chain.

We also provide distributed power solutions through a fleet of more than 950 natural gas-powered reciprocating generators, with approximately 225 megawatts of existing power generation, primarily supporting production and artificial lift operations across all major United States resource basins. Our generators are designed for heavy-duty, harsh environments for mission critical power needs. Our in-house manufacturing and remanufacturing capabilities, coupled with critical in-field service, provide quality control and standardization across the fleet ensuring market-leading uptime.

Recent Developments

Share Repurchase Program

During the three months ended June 30, 2025, the Company repurchased 16,380 shares of the Company’s par value $0.01 per share common stock (the “Common Stock”) through open-market purchases, pursuant to our share repurchase program, at an average price, including commission, of $12.21 for an aggregate purchase price of $200,000. As of June 30, 2025, $199.8 million remains available for repurchase.

Moser Acquisition

On February 24, 2025, the Company completed the transactions contemplated by that certain Stock Purchase Agreement (the “Moser Purchase Agreement”) by and among Wyatt Holdings, LLC, a Delaware limited liability company and an indirectly wholly-owned subsidiary of the Company (the “Purchaser”), Moser Holdings, LLC, a Delaware limited liability company (the “Seller”), and for the limited purposes set forth therein, the Company (together with the Purchaser and the Seller, the “Parties”), pursuant to which the Purchaser acquired (i) 100% of the authorized, issued and outstanding equity ownership interests in Moser Acquisition, Inc., a Delaware corporation (“Moser AcquisitionCo”), and (ii) Moser Engine Service, Inc. (d/b/a Moser Energy Systems), a Wyoming corporation and a wholly-owned subsidiary of Moser AcquisitionCo (such transaction, the “Moser Acquisition”), collectively referred to as “Moser.”

Under the terms and conditions of the Moser Purchase Agreement, the aggregate consideration paid to the Seller in the Moser Acquisition (the “Moser Consideration”) consisted of (i) $180.0 million in cash and (ii) approximately 1.7 million shares (the “Moser Stock Consideration”) of Common Stock, issued at the closing of the Moser Acquisition. The Moser Consideration is subject to customary post-closing adjustments.

The foregoing description of the Moser Acquisition and the Moser Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Moser Purchase Agreement, a copy of which is filed as Exhibit 2.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, filed with the SEC on May 6, 2025.

Dividends and Distributions

On May 2, 2025, the Company declared a dividend of $0.25 per share of Common Stock. The dividend was paid on May 22, 2025 to holders of record of Common Stock as of the close of business on May 15, 2025.

On August 3, 2025, the Company declared a dividend of $0.25 per share of Common Stock. The dividend will be payable on August 21, 2025 to holders of record of Common Stock as of the close of business on August 14, 2025.

Recent Trends and Outlook

Drilling and completions activities for oil and gas are highly correlated to oil and gas prices. Despite commodity price fluctuations due to ongoing uncertainties in geopolitics, OPEC+ production plans, tariffs, and Chinese economic growth, amongst other factors, North American drilling and completion activity remained relatively flat during the period. The price for West Texas Intermediate (“WTI”) crude oil ended the second quarter of 2025 at $65.11 per barrel (“Bbl”), as compared to $81.54 per Bbl in the second quarter of 2024, representing a decrease of approximately 20%. Global oil prices declined during the first half of 2025 on oversupply fears largely due to the OPEC+ decision to increase production, but we believe global economic growth coupled with an increased focus on energy security and large projected multi-year increases in power consumption should bolster demand, in both crude oil and natural gas, in the coming years.

On April 2, 2025, the U.S. government announced a 10% tariff on product imports from almost all countries and has since announced individualized higher tariffs on certain other countries. Additionally, on June 3, 2025, the U.S. government imposed a 50% tariff on steel imports, an increase from the previously announced 25% tariff. As a result of the current administration’s trade policy, tariffs may increase our and our customers’ raw material input costs. Any further trade restrictions, retaliatory trade measures or additional tariffs could result in higher input costs to produce our products and increased costs to provide our services. To the extent that we are unable to pass all or any of such cost increases on to our customers, such cost increases could adversely affect our returns on investment and limit our ability to pursue future growth projects.

To the extent any such tariffs remain in place for a sustained period of time, or in the event of a global or domestic recession resulting therefrom, our customers could decide to delay currently planned growth projects or forego them entirely, each of which could result in decreased demand for our products and services and adversely affect our business and financial condition.

The effect of tariffs and the application and interpretation of existing trade agreements continues to evolve, and we continue to monitor these matters and assess any potential negative impacts on our business.

How We Generate Revenue

We generate revenue by mining, processing and distributing proppant that our customers use in connection with their operations. We sell proppant to our customers under supply agreements or as spot sales at prevailing market rates, which is dependent upon the cost of producing proppant, the proppant volumes sold and the desired margin and prevailing market conditions.

Revenues also include charges for sand logistics services provided to our customers. Our logistics service revenue fluctuates based on several factors, including the volume of proppant transported, the distance between our facilities and our customers, and prevailing freight rates. Revenue is generally recognized as products are delivered in accordance with the contract.

Some of our contracts contain shortfall provisions that calculate agreed upon fees that are billed when the customer does not satisfy the minimum purchases over a period of time defined in each contract.

We also generate revenue through the rental of our power equipment and related services, including transportation of our generators and field supervision and support. Power equipment rentals and provision of related services are performed under a variety of contract structures.

Costs of Conducting Our Business

We incur operating costs primarily from direct and indirect labor, freight charges, utility costs, fuel and maintenance costs and royalties. We incur labor costs associated with employees at our proppant production facilities, which represent the most significant cost of converting proppant to finished product. Our proppant production facilities undergo maintenance to minimize unscheduled downtime and ensure the ongoing quality of our proppant and ability to meet customer demands. We may incur variable utility costs in connection with the operation of our processing facilities, primarily natural gas and electricity, which are both susceptible to market fluctuations. We lease equipment in many areas of our operations, including our proppant production hauling equipment. We incur variable royalty expense and/or delay rentals related to our agreements with the owners of our reserves. In addition, other costs including overhead allocation, depreciation and depletion are capitalized as a component of inventory and are reflected in cost of sales when inventory is sold. Our logistics services incur operating costs primarily composed of variable freight charges from trucking companies’ delivery of sand to customer wellsites, equipment leases, direct and indirect labor, fuel and maintenance costs and royalties.

We also have expenses comprising our costs of sales (excluding depreciation, depletion, and accretion expense) of (i) direct labor costs, and related travel and lodging expenses, (ii) generator transportation costs and (iii) the costs of maintaining our equipment. A large portion of our costs of sales (excluding depreciation, depletion, and accretion expense) are variable based on the number of generators deployed with customers.

How We Evaluate Our Operations

Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted EBITDA less Capital Expenditures, Adjusted Free Cash Flow Margin, Adjusted EBITDA less Capital Expenditures Margin, Adjusted Free Cash Flow Conversion, Contribution Margin, Maintenance Capital Expenditures and Net Debt are non-GAAP supplemental financial measures used by our management and by external users of our Financial Statements such as investors, research analysts and others, in the case of Adjusted EBITDA, to assess our consolidated operating performance on a consistent basis across periods by removing the effects of development activities, provide views on capital resources available to organically fund growth projects and, in the case of Adjusted Free Cash Flow and Adjusted EBITDA less Capital Expenditures, assess the financial performance of our assets and their ability to sustain dividends or reinvest to organically fund growth projects over the long term without regard to financing methods, capital structure or historical cost basis.

We define Adjusted EBITDA as net income before depreciation, depletion and accretion expense, amortization expense of acquired intangible assets, interest expense, income tax expense, stock and unit-based compensation, loss on extinguishment of debt, loss on disposal of assets, insurance recovery (gain), unrealized commodity derivative gain (loss), other acquisition related costs, and other non-recurring costs. Management believes Adjusted EBITDA is useful because it allows them to more effectively evaluate our consolidated operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Certain prior period non-recurring costs of goods sold are now included as an add-back to adjusted EBITDA in order to conform to the current period presentation and to more accurately describe the Company’s consolidated operating performance and results period-over-period.

We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total sales.

We define Adjusted Free Cash Flow as Adjusted EBITDA less Maintenance Capital Expenditures. We define Adjusted EBITDA less Capital Expenditures as Adjusted EBITDA less net cash used in investing activities. We believe that Adjusted Free Cash Flow and Adjusted EBITDA less Capital Expenditures are useful to investors as they provide measures of the ability of our business to generate cash.

We define Adjusted Free Cash Flow Margin as Adjusted Free Cash Flow divided by total sales.

We define Adjusted EBITDA less Capital Expenditures Margin as Adjusted EBITDA less Capital Expenditures divided by total sales.

We define Adjusted Free Cash Flow Conversion as Adjusted Free Cash Flow divided by Adjusted EBITDA.

We define Contribution Margin as gross profit plus depreciation, depletion and accretion expense.

We define Maintenance Capital Expenditures as capital expenditures excluding growth capital expenditures, reconstruction of previously incurred growth capital expenditures, equipment assets acquired through debt, and asset retirement obligations. Certain prior period equipment assets acquired through debt and asset retirement obligations have been removed from capital expenditures in order to conform to the current period presentation and to more accurately describe the Company’s consolidated operating performance and results period-over-period.

We define Net Debt as total debt, net of discount and deferred financing costs, plus finance right-of-use lease liabilities, less cash and cash equivalents.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted EBITDA less Capital Expenditures, Adjusted Free Cash Flow Margin, Adjusted EBITDA less Capital Expenditures Margin, Adjusted Free Cash Flow Conversion, Contribution Margin, Maintenance Capital Expenditures and Net Debt do not represent and should not be considered alternatives to, or more meaningful than, net income, income from operations, net cash provided by operating activities or any other measure of financial performance presented in accordance with GAAP as measures of our financial performance. Adjusted EBITDA, Adjusted Free Cash Flow, and Adjusted EBITDA less Capital Expenditures have important limitations as analytical tools because they exclude some but not all items that affect net income, the most directly comparable GAAP financial measure. Our computation of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted Free Cash Flow Margin, Adjusted EBITDA less Capital Expenditures, Adjusted EBITDA less Capital Expenditures Margin, Adjusted Free Cash Flow Conversion, Contribution Margin, Maintenance Capital Expenditures and Net Debt may differ from computations of similarly titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow, Adjusted EBITDA less Capital Expenditures, Adjusted Free Cash Flow Margin, Adjusted EBITDA less Capital Expenditures Margin, Adjusted Free Cash Flow Conversion, Contribution Margin, Maintenance Capital Expenditures and Net Debt to the most directly comparable GAAP financial measure for the periods indicated.

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(1) Represents loss on disposal of assets as a result of the fire at one of the Kermit plants that caused damage to the physical condition of the Kermit asset group.

(2) Represents insurance recovery (gain) deemed collectible and legally enforceable related to the fire at one of the Kermit plants.

(3) Other non-recurring costs includes costs incurred during our 2025 Term Loan Credit Facility (defined below under Debt Agreements) transaction, credit loss expense due to a dispute with a counterparty, reorganization under a new public holding company (the “Up-C Simplification”), temporary loadout, and other infrequent and unusual costs.

(4) Represents transactions costs incurred in connection with acquisitions, including fees paid to finance, legal, accounting and other advisors, employee retention and benefit costs, and other operational and corporate costs.

(5) A reconciliation of these items used to calculate Adjusted Free Cash Flow to comparable GAAP measures is included below.

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(6) Positive working capital changes reflect capital expenditures in the current period that will be paid in a future period. Negative working capital changes reflect capital expenditures incurred in a prior period but paid during the period presented. In addition, this amount includes equipment assets acquired through debt and asset retirement obligations.

Factors Affecting the Comparability of Our Results of Operations

M&A Activity

On March 5, 2024, the Company completed the Hi-Crush Transaction, in which the Company acquired substantially all of Hi-Crush Inc.’s, a Delaware corporation (“Hi-Crush”), Permian Basin proppant production and logistics businesses and operations in exchange for (i) cash consideration of $140.1 million, (ii) 9.7 million shares of Common Stock issued at the closing of the transaction, and (iii) the Deferred Cash Consideration Note in an aggregate principle amount of $111.3 million. This history impacts the comparability of our operational results from year to year. Additional information on these transactions can be found in Note 3 - Acquisitions of the condensed consolidated financial statements included elsewhere in this Report.

On February 24, 2025, the Company completed the Moser Acquisition, in which the Company acquired 100% of the authorized, issued and outstanding equity ownership interests in Moser AcquisitionCo and Moser Engine Service, Inc. (d/b/a Moser Energy Systems) in exchange for (i) cash consideration of $180.0 million and (ii) the Moser Stock Consideration. This history impacts the comparability of our operational results from year to year. Additional information on these transactions can be found in Note 3 - Acquisitions of the condensed consolidated financial statements included elsewhere in this Report.

Results of Operations

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Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Product Revenue. Product revenue decreased by $1.9 million to $126.3 million for the three months ended June 30, 2025, as compared to $128.2 million for the three months ended June 30, 2024. There was a decrease in proppant prices between the periods which contributed to a $26.1 million decrease in product revenue. This was offset by an increase in sales volume contributed to a $12.7 million increase in product revenue. There was $11.5 million in shortfall revenue for the three months ended June 30, 2025, as compared to no shortfall revenue for the three months ended June 30, 2024.

Service Revenue. Services revenue, which includes freight for last-mile logistics services, decreased by $12.9 million to $146.4 million for the three months ended June 30, 2025, as compared to $159.3 million for the three months ended June 30, 2024. The decrease in logistics revenue was due to a decrease in prices on volumes shipped to last-mile logistics customers.

Rental Revenue. Rental revenue is $16.0 million for the three months ended June 30, 2025, due to the acquisition of Moser and the related revenue from leasing power equipment. There was no rental revenue for the three months ended June 30, 2024.

Cost of sales (excluding depreciation, depletion and accretion expense). Cost of sales (excluding depreciation, depletion and accretion expense) decreased by $6.2 million to $195.9 million for the three months ended June 30, 2025, as compared to $202.1 million for the three months ended June 30, 2024.

Cost of sales (excluding depreciation, depletion and accretion) related to product revenue decreased by $1.9 million to $66.1 million for the three months ended June 30, 2025, as compared to $68.0 million for the three months ended June 30, 2024. This decrease was due to higher costs related to the temporary loadout equipment associated with the mechanical fire at the Kermit facility for the three months ended June 30, 2024.

Cost of sales (excluding depreciation, depletion and accretion expense) related to services decreased by $10.2 million to $123.9 million for the three months ended June 30, 2025, as compared to $134.1 million for the three months ended June 30, 2024. The decrease was due to lower freight costs associated with higher utilization of the Dune Express.

Cost of sales (excluding depreciation, depletion, and accretion expense) related to rentals is $5.9 million for the three months ended June 30, 2025, due to the acquisition of Moser and the cost of sales associated with leasing power equipment. There was no cost of sales related to rentals for the three months ended June 30, 2024.

Depreciation, depletion and accretion expense. Depreciation, depletion and accretion expense increased by $15.6 million to $40.6 million for the three months ended June 30, 2025, as compared to $25.0 million for the three months ended June 30, 2024, due to additional depreciable assets placed into service when compared to the prior period as well as contribution from Moser.

Selling, general and administrative expense. Selling, general and administrative expense increased by $7.1 million to $34.4 million for the three months ended June 30, 2025, as compared to $27.3 million for the three months ended June 30, 2024. The increase is due to an increase of $2.8 million from stock-based compensation, an increase of $0.2 million in corporate costs, as well as $4.1 million contribution from Moser for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

Our selling, general and administrative expense includes the non-cash expense for stock-based compensation expense for equity awards granted to our employees. For the three months ended June 30, 2025, stock-based compensation expense was $8.3 million, as compared to $5.5 million of stock-based expense for the three months ended June 30, 2024.

Credit loss expense. Credit loss expense is $4.1 million for the three months ended June 30, 2025, as compared to no credit loss expense for the three months ended June 30, 2024, due to certain shortfall receivables. See Note 2 - Summary of Significant Accounting Policies - Accounts Receivable and Allowance for Credit Losses for more information.

Amortization expense of acquired intangible assets. Amortization expense of acquired intangible assets increased $2.7 million to $6.5 million for the three month ended June 30, 2025, as compared to $3.8 million for the three month ended June 30, 2024. The increase was primarily due to the amortization of intangibles associated with the Moser acquisition.

Loss on disposal of assets. There was no loss on disposal of assets for the three months ended June 30, 2025, as compared to $11.1 million loss on disposal of assets for the three months ended June 30, 2024, due to $11.1 million disposal of certain assets associated with mechanical fire at the Kermit facility. See Note 6 - Property, Plant and Equipment, Net - Impairment or Disposal of Long-Lived Assets for more information.

Insurance recovery (gain). There was no insurance recovery for the three months ended June 30, 2025, as compared to $10.0 million insurance recovery for the three months ended June 30, 2024, due to $10.0 million of an insurance claim associated with the mechanical fire. See Note 6 - Property, Plant and Equipment, Net - Impairment or Disposal of Long-Lived Assets for more information.

Interest (expense), net. Interest expense, net increased by $4.3 million to $14.8 million for the three months ended June 30, 2025, as compared to $10.5 million for the three months ended June 30, 2024. The increase is driven by the 2025 Term Loan Credit Facility and associated debt refinancing.

Income tax expense (benefit). Income tax expense (benefit) decreased $4.8 million to $(1.7) million for the three months ended June 30, 2025, as compared to $3.1 million for the three months ended June 30, 2024. The decrease is primarily attributable to a decrease in income before income taxes for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Product Revenue. Product revenue increased by $24.4 million to $266.0 million for the six months ended June 30, 2025, as compared to $241.6 million for the six months ended June 30, 2024. An increase in sales volume contributed to a $61.0 million increase in product revenue. This was partially offset by a decrease in proppant prices between the periods which contributed to a $60.5 million decrease in product revenue. There was $23.9 million in shortfall revenue for the six months ended June 30, 2025, as compared to no shortfall revenue for the six months ended June 30, 2024.

Service Revenue. Services revenue, which includes freight for last-mile logistics services, increased by $58.5 million to $297.0 million for the six months ended June 30, 2025, as compared to $238.5 million for the six months ended June 30, 2024. The increase in logistics revenue was due to higher sales volumes shipped to last-mile logistics customers.

Rental Revenue. Rental revenue is $23.3 million for the six months ended June 30, 2025, due to the acquisition of Moser and the related revenue from leasing power equipment. There was no rental revenue for the six months ended June 30, 2024.

Cost of sales (excluding depreciation, depletion and accretion expense). Cost of sales (excluding depreciation, depletion and accretion expense) increased by $93.1 million to $402.0 million for the six months ended June 30, 2025, as compared to $308.9 million for the six months ended June 30, 2024.

Cost of sales (excluding depreciation, depletion and accretion) related to product revenue increased by $29.0 million to $136.4 million for the six months ended June 30, 2025, as compared to $107.4 million for the six months ended June 30, 2024, due to increased production.

Cost of sales (excluding depreciation, depletion and accretion expense) related to services increased by $55.9 million to $257.4 million for the six months ended June 30, 2025, as compared to $201.5 million for the six months ended June 30, 2024. The increase was due to higher sales volumes shipped to last-mile logistics customers during the period.

Cost of sales (excluding depreciation, depletion, and accretion expense) related to rentals is $8.2 million for the six months ended June 30, 2025, due to the acquisition of Moser and the cost of sales associated with leasing power equipment. There was no cost of sales related to rentals for the six months ended June 30, 2024.

Depreciation, depletion and accretion expense. Depreciation, depletion and accretion expense increased by $35.4 million to $77.6 million for the six months ended June 30, 2025, as compared to $42.2 million for the six months ended June 30, 2024, due to additional depreciable assets placed into service when compared to the prior period as well as contribution from Moser.

Selling, general and administrative expense. Selling, general and administrative expense increased by $13.6 million to $68.8 million for the six months ended June 30, 2025, as compared to $55.2 million for the six months ended June 30, 2024. The increase is due to an increase of $5.1 million from stock-based compensation, an increase of $2.6 million in corporate costs, as well as $5.9 million contribution from Moser for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

Our selling, general and administrative expense includes the non-cash expense for stock-based compensation expense for equity awards granted to our employees. For the six months ended June 30, 2025, stock-based compensation expense was $14.8 million, as compared to $9.7 million of stock-based expense for the six months ended June 30, 2024.

Credit loss expense. Credit loss expense is $4.1 million for the six months ended June 30, 2025, as compared to de minimis credit loss expense for the six months ended June 30, 2024, due to certain shortfall receivables. See Note 2 - Summary of Significant Accounting Policies - Accounts Receivable and Allowance for Credit Losses for more information.

Amortization expense of acquired intangible assets. Amortization expense of acquired intangible assets increased $6.5 million to $11.3 million for the six month ended June 30, 2025, as compared to $4.8 million for the six month ended June 30, 2024. The increase was primarily due to the amortization of intangibles associated with the Moser acquisition.

Loss on disposal of assets. There was no loss on disposal of assets for the six months ended June 30, 2025, as compared to $11.1 million loss on disposal of assets for the six months ended June 30, 2024, due to $11.1 million disposal of certain assets associated with mechanical fire at the Kermit facility. See Note 6 - Property, Plant and Equipment, Net - Impairment or Disposal of Long-Lived Assets for more information.

Insurance recovery (gain). There was no insurance recovery for the six months ended June 30, 2025, as compared to $10.0 million insurance recovery for the six months ended June 30, 2024, due to $10.0 million of an insurance claim associated with the mechanical fire. See Note 6 - Property, Plant and Equipment, Net - Impairment or Disposal of Long-Lived Assets for more information.

Interest (expense), net. Interest expense, net increased by $11.5 million to $26.9 million for the six months ended June 30, 2025, as compared to $15.4 million for the six months ended June 30, 2024. The increase is driven by the 2025 Term Loan Credit Facility and associated debt refinancing.

Income tax expense (benefit). Income tax expense decreased $10.4 million to $0.6 million for the six months ended June 30, 2025, as compared to $11.0 million for the six months ended June 30, 2024. The decrease is primarily attributable to a decrease in income before income taxes for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity to date have been capital contributions from our owners, cash flows from operations, and borrowings under our previous term loan credit facilities, and our previous asset-based loan credit facilities. Going forward, we expect our primary sources of liquidity to be cash flows from operations, availability under our 2023 ABL Credit Facility as amended, borrowings under our 2025 Term Loan Credit Facility, or any other credit facility we enter into in the future and proceeds from any future issuances of debt or equity securities. We expect our primary use of capital will be used for the payment of any dividends to our stockholders and for investing in our business, specifically for acquisition of fit-for-purpose equipment used in our logistics platform, and power-related growth capital expenditures. In addition, we have routine facility upgrades and additional ancillary capital expenditures associated with, among other things, contractual obligations and working capital obligations.

As of June 30, 2025, we had working capital, defined as current assets less current liabilities, of $119.7 million and $124.8 million of availability under the 2023 ABL Credit Facility. Our cash and cash equivalents totaled $78.8 million.

Cash Flow

The following table summarizes our cash flow for the periods indicated:

(Unaudited)

(In thousands)

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Net Cash Provided by Operating Activities. Net cash provided by operating activities was $81.2 million and $100.4 million for the six months ended June 30, 2025 and 2024, respectively. Net income (loss) adjusted for non-cash items for the six months ended June 30, 2025 resulted in a cash increase of $106.7 million compared with a cash increase of $122.3 million for the six months ended June 30, 2024. This change was primarily due to lower earnings in 2025. Changes in net working capital for the six months ended June 30, 2025 resulted in a cash decrease of $25.5 million compared with a cash decrease of $21.9 million for the six months ended June 30, 2024. This change was primarily due to a decrease in accounts payable and accrued liabilities and other liabilities in 2025, which was partially offset by a decrease in accounts receivable in 2025.

Net Cash Used in Investing Activities. Net cash used in investing activities was $268.8 million and $353.5 million for the six months ended June 30, 2025 and 2024, respectively. The decrease in cash used is primarily attributable to less capital spending at the Kermit and Monahans facilities, OnCore distributed mining network, Dune Express and logistics assets during the six months ended June 30, 2025 when compared to the six months ended June 30, 2024. This was offset by a $39.3 million increase in acquisitions with Moser for the six months ended June 30, 2025 when compared to Hi-Crush for the six months ended June 30, 2024. Additionally, we collected $5.4 million in insurance proceeds for the six months ended June 30, 2025 as compared to no insurance proceeds received for the six months ended June 30, 2024.

Net Cash Provided by Financing Activities. Net cash provided by financing activities was $194.7 million and $147.6 million for the six months ended June 30, 2025 and 2024, respectively. This increase is primarily related to the proceeds from an underwritten public offering of 11.5 million shares of our Common Stock at a public offering price of $23.00 per share (the “Equity Offering”) and term loan borrowings for the six months ended June 30, 2025 when compared to the six months ended June 30, 2024. This increase was partially offset by payments on the Deferred Cash Consideration Note, the 2023 ABL Credit Facility and dividends for the six months ended June 30, 2025 when compared to the six months ended June 30, 2024.

Capital Requirements

Our primary growth and technology initiatives include continued acquisition of fit-for-purpose equipment used in our logistics platform and power-related growth capital expenditures. Outside of our growth and technology initiatives, our business is not presently capital intensive in nature and only requires the maintenance of our facilities. In addition to capital expenditures, we have certain contractual long-term capital requirements associated with our lease and royalty payments and debt. See Note 7 - Leases, Note 8 - Debt and Note 9 - Commitments and Contingencies of the Financial Statements included elsewhere in this Report. Our current level of maintenance capital expenditures is expected to remain within our cash on hand and internally generated cash flow.

We intend to fund our capital requirements through our primary sources of liquidity, which include cash on hand and cash flows from operations and, if needed, availability under our 2023 ABL Credit Facility and borrowings under our 2025 Term Loan Credit Facility.

Debt Agreements

2025 Term Loan Credit Facility

On February 21, 2025, Atlas LLC entered into a credit agreement (the “2025 Term Loan Credit Agreement”) with Stonebriar Commercial Finance LLC (“Stonebriar”), as administrative agent and initial lender, pursuant to which Stonebriar extended Atlas LLC a term loan credit facility comprised of a $540.0 million single advance term loan that was made on February 21, 2025 (the “2025 Term Loan Credit Facility”).

The 2025 Term Loan Credit Facility is payable in eighty-five consecutive monthly installments, consisting of forty-eight monthly installments of combined principal and interest, thirty-six installments of interest only payments, and a final payment of the remaining outstanding principal balance at maturity. The 2025 Term Loan Credit Facility has a final maturity date of March 1, 2032. The 2025 Term Loan Credit Facility bears interest at a rate equal to 9.51% per annum.

The 2025 Term Loan Credit Facility includes a discount of $18.8 million and de minimis deferred financing fees. As discussed below (2023 Term Loan Credit Agreement), the 2025 Term Loan Credit Facility also includes previously unamortized debt discount and deferred financing fees of $7.2 million, associated with prior Stonebriar borrowings. These amounts are recorded as a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method. Interest expense associated with the 2025 Term Loan Credit Facility was $12.7 million and $18.2 million for the three and six months ended June 30, 2025, respectively, and the interest expense associated with the discount and deferred financing costs was $0.8 million and $1.1 million for the three and six months ended June 30, 2025, respectively.

In the event that the Leverage Ratio (as defined under the 2025 Term Loan Credit Agreement) as of the end of any fiscal quarter ending on or after June 30, 2025 is equal to or greater than 2.5:1.0, Atlas LLC will be required to prepay the 2025 Term Loan Credit Facility with 50% of Excess Cash Flow (as defined under the 2025 Term Loan Credit Agreement) for the fiscal quarter period most recently ended less the aggregate amount of optional prepayments of the Term Loan made during such period.

Atlas LLC may voluntarily redeem the loan outstanding under the 2025 Term Loan Credit Facility, provided that any such prepayment shall include a prepayment fee equal to the sum of the Make-Whole Amount (as defined in under the 2025 Term Loan Credit Agreement) plus (a) three percent (3%) of the principal amount being repaid if such prepayment occurs on or prior to February 21, 2028, (b) two percent (2%) of the principal amount being repaid if such prepayment occurs after February 21, 2028 but on or prior to February 21, 2029 and (c) one percent (1%) of the of the principal amount being repaid if such prepayment occurs thereafter. The Make-Whole Amount shall equal zero (0) when calculating any prepayment made after February 21, 2027. Upon the maturity of the 2025 Term Loan Credit Facility, the entire unpaid principal amount of the loan outstanding thereunder, together with interest, fees and other amounts payable in connection with the facility, will be immediately due and payable without further notice or demand.

Dividends and distributions to equity holders are permitted to be made pursuant to certain limited exceptions and baskets described in the 2025 Term Loan Credit Agreement and otherwise generally subject to certain restrictions set forth in the 2025 Term Loan Credit Agreement, including the requirement that no Event of Default (as defined under the 2025 Term Loan Credit Agreement) has occurred and is continuing.

The 2025 Term Loan Credit Facility includes certain non-financial covenants, including but not limited to restrictions on incurring additional debt and certain distributions. The 2025 Term Loan Credit Facility is subject to two financial covenants, which require that the Loan Parties (as defined in the 2025 Term Loan Credit Agreement) maintain a maximum Leverage Ratio of 4.0 to 1.0 and a minimum Liquidity (as defined in the 2025 Term Loan Credit Agreement) of $40,000,000. Such financial covenants are tested as of the last day of each fiscal quarter.

The Company used the proceeds from the 2025 Term Loan Credit Facility (i) to refinance the existing 2023 Term Loan Credit Facility and the ADDT Loan (as defined below), (ii) to finance the cash consideration for the Moser Acquisition, and (iii) for general corporate purposes.

The 2025 Term Loan Credit Facility is unconditionally guaranteed, jointly and severally, by Atlas LLC and its subsidiaries and secured by substantially all of the assets of Atlas LLC and its subsidiaries. The 2025 Term Loan Credit Facility is also unconditionally guaranteed on an unsecured basis by the Company.

As of June 30, 2025, Atlas LLC was in compliance with the covenants of the 2025 Term Loan Credit Facility.

Deferred Cash Consideration Note

In accordance with the Hi-Crush Merger Agreement, the Company issued a secured PIK toggle seller note in an aggregate principle amount of $111.3 million, with a final maturity date of January 31, 2026 (the “Deferred Cash Consideration Note”). The Deferred Cash Consideration Note was part of the consideration transferred and valued at fair value at the acquisition date. This amount is subject to adjustments as set forth in the Hi-Crush Merger Agreement. The Deferred Cash Consideration Note bears interest at a rate of 5.00% per annum if paid in cash, or 7.00% per annum if paid in kind. Interest on the Deferred Cash Consideration Note is payable quarterly in arrears beginning March 29, 2024 through maturity. Interest expense associated with the Deferred Cash Consideration Note was $0.2 million and $0.9 million for the three and six months ended June 30, 2025, respectively. Interest expense associated with the Deferred Cash Consideration Note was $1.4 million and $1.8 million for the three and six months ended June 30, 2024, respectively.

The Deferred Cash Consideration Note included $4.6 million of debt discount and approximately $0.1 million deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method. Interest expense associated with the discount and deferred financing costs were approximately $0.6 million and $1.2 million in total for the three and six months ended June 30, 2025, respectively. Interest expense associated with the discount and deferred financing costs were approximately $0.7 million and $0.8 million in total for the three and six months ended June 30, 2024, respectively.

Atlas LLC’s obligations under the Deferred Cash Consideration Note are secured by certain of the assets acquired in connection with the Hi-Crush Transaction. The Deferred Cash Consideration Note is also unconditionally guaranteed by Atlas LLC on an unsecured basis.

Partial Repayment of the Deferred Cash Consideration Note

In February 2025, the Company used a portion of the proceeds from the Equity Offering, to repay $101.3 million of the outstanding principal balance of the Deferred Cash Consideration Note. The Company intends to repay the remaining $10.0 million of principal at maturity.

2023 Term Loan Credit Facility

On July 31, 2023, Atlas LLC entered into a credit agreement (the “2023 Term Loan Credit Agreement”) with Stonebriar, as administrative agent and initial lender, pursuant to which Stonebriar extended Atlas LLC a term loan credit facility comprising a $180.0 million single advance term loan that was made on July 31, 2023 (the “Initial Term Loan”) and commitments to provide up to $100.0 million of delayed draw (the “DDT Loan”) term loans (collectively, the “2023 Term Loan Credit Facility”), which was subsequently amended to provide an additional delayed draw term loan (the “ADDT Loan”) in the aggregate principal amount of $150.0 million and increase the existing DDT Loan by an aggregate principal amount of $100.0 million to a total of $200.0 million.

On February 21, 2025, Atlas LLC entered into the 2025 Term Loan Credit Agreement with Stonebriar, proceeds from which were used to repay $332.4 million of the remaining principal and $1.8 million of accrued interest of the Initial Term Loan, the DDT Loan, and the ADDT Loan. As this transaction was accounted for as a modification under ASC 470, “Debt,” these fees paid to the lender, as well as previously unamortized debt discount and deferred financing fees associated with the Initial Term Loan, the DDT Loan, and the ADDT Loan of $7.2 million were deferred and recorded as a direct reduction from the carrying amount of the debt obligation on the condensed consolidated balance sheets. These deferred costs are amortized to interest expense using the effective interest method. In connection with this refinancing, on February 21, 2025, we incurred prepayment fees on the Initial Term Loan, the DDT Loan, and the ADDT Loan of $13.3 million. The Company recorded the prepayment fees as additional debt discount and amortizes the amount as an adjustment over the remaining term of the modified debt instrument.

2023 ABL Credit Facility

On February 22, 2023, Atlas LLC, certain of its subsidiaries, as guarantors, Bank of America, N.A., as administrative agent (the “ABL Agent”), and certain financial institutions party thereto as lenders (the “2023 ABL Lenders”) entered into a Loan, Security and Guaranty Agreement (the “2023 ABL Credit Agreement”) pursuant to which the 2023 ABL Lenders provide revolving credit financing to the Company in an aggregate principal amount of up to $75.0 million (the “2023 ABL Credit Facility”), with Availability (as defined in the 2023 ABL Credit Agreement) thereunder subject to a “Borrowing Base” as described in the 2023 ABL Credit Agreement. The 2023 ABL Credit Facility includes a letter of credit sub-facility, which permits issuance of letters of credit up to an aggregate amount of $25.0 million. The scheduled maturity date of the 2023 ABL Credit Facility is February 22, 2028; provided that the 2023 ABL Credit Facility will mature on June 30, 2027 if any amount of the 2023 Term Loan Credit Facility that has a maturity date less than 91 days prior to February 22, 2028 is outstanding on June 30, 2027.

Atlas LLC may also request swingline loans under the 2023 ABL Credit Agreement in an aggregate principal amount not to exceed $7.5 million. During the six months ended June 30, 2025 and the year ended December 31, 2024, Atlas LLC had no outstanding swingline loans under the 2023 ABL Credit Facility.

Borrowings under the 2023 ABL Credit Facility bear interest, at Atlas LLC’s option, at either a base rate or Term SOFR (as defined in the 2023 ABL Credit Agreement), as applicable, plus an applicable margin based on average availability as set forth in the 2023 ABL Credit Agreement. Term SOFR loans bear interest at Term SOFR for the applicable interest period plus an applicable margin, which ranges from 1.50% to 2.00% per annum based on average availability as set forth in the 2023 ABL Credit Agreement. Base rate loans bear interest at the applicable base rate, plus an applicable margin, which ranges from 0.50% to 1.00% per annum based on average availability as set forth in the 2023 ABL Credit Agreement. In addition to paying interest on outstanding principal under the 2023 ABL Credit Facility, Atlas LLC is required to pay a commitment fee which ranges from 0.375% per annum to 0.500% per annum with respect to the unutilized commitments under the 2023 ABL Credit Facility, based on the average utilization of the 2023 ABL Credit Facility. Atlas LLC is required to pay customary letter of credit fees, to the extent that one or more letter of credit is outstanding. For the three and six months ended June 30, 2025, we recognized $0.2 million and $0.3 million, respectively, of interest expense, unutilized commitment fees and other fees under the 2023 ABL Credit Facility, classified as interest expense. For the three and six months ended June 30, 2024, we recognized $0.1 million and $0.3 million, respectively, of interest expense, unutilized commitment fees and other fees under the 2023 ABL Credit Facility, classified as interest expense.

The Borrowing Base was initially set at $75.0 million and the amount of available credit changes every month, depending on the amount of eligible accounts receivable and inventory we have available to serve as collateral. With the First Amendment to the 2023 ABL Credit Agreement, discussed below, the Borrowing Base increased to $125.0 million. The Borrowing Base components are subject to customary reserves and eligibility criteria.

On March 5, 2024 and November 12, 2024, the Company drew down $50.0 million and $20.0 million, respectively, under the 2023 ABL Credit Facility for general corporate purposes. The Company had no interest expense associated with the debt for the three months ended June 30, 2025 and had $0.6 million of interest expense for the six months ended June 30, 2025. There was interest expense of $0.9 million and $1.1 million for the three and six months ended June 30, 2024, respectively. The draw included $0.3 million in debt issuance costs and $0.3 million in deferred financing costs. These costs are recorded under other long-term assets on the condensed consolidated balance sheets and are amortized on a straight-line basis over the life of the agreement. Interest expense associated with the amortization of these costs were de minimis and $0.1 million for the three and six months ended June 30, 2025, respectively. Interest expense associated with the amortization of these costs was $0.1 million for both the three and six months ended June 30, 2024.

The 2023 ABL Credit Facility requires that if Availability is less than the greater of (i) 12.50% of the Borrowing Base and (ii) $7.5 million, Atlas LLC must maintain a Fixed Charge Coverage Ratio (as defined in the 2023 ABL Credit Agreement) of at least 1.00 to 1.00 while a Covenant Trigger Period (as defined in the 2023 ABL Credit Agreement) is in effect.

Under the 2023 ABL Credit Agreement, Atlas LLC is permitted to make payments of dividends and distributions pursuant to certain limited exceptions and baskets set forth therein and otherwise generally subject to certain restrictions described therein, including that (i) no Event of Default (as defined under the 2023 ABL Credit Agreement) has occurred and is continuing, and (ii) no loans and no more than $7.5 million in letters of credit that have not been cash collateralized are outstanding, and liquidity exceeds $30.0 million at all times during the 30 days prior to the date of the dividend or distribution; provided that if any loans are outstanding or outstanding letters of credit exceed $7.5 million and no Event of Default has occurred and is continuing, then Atlas LLC is permitted to make payments of dividends and distributions if, (i) Availability (as defined under the 2023 ABL Credit Agreement) is higher than the greater of (a) $12 million and (b) 20% of the pro forma Borrowing Base then in effect and during the 30 days prior to the date of the dividend or distribution as if such dividend or distribution had been made at the beginning of such period, or if (ii) (a) Availability is higher than the greater of (x) $9 million and (y) 15% of the pro forma Borrowing Base then in effect and during the 30 days prior to the date of the dividend or distributions as if such dividend or distribution had been made at the beginning of such period and (b) the Fixed Charge Coverage Ratio (as defined under the 2023 ABL Credit Agreement), as calculated on a pro forma basis, is greater than 1.00 to 1.00, as provided under the 2023 ABL Credit Agreement. Additionally, Atlas LLC may make additional payments of dividends and distributions in qualified equity interests and may make Permitted Tax Distributions (as defined under the 2023 ABL Credit Agreement).

The 2023 ABL Credit Facility contains certain customary representations and warranties, affirmative and negative covenants, and events of default. As of June 30, 2025, the Company was in compliance with the covenants under the 2023 ABL Credit Facility.

The 2023 ABL Credit Facility is unconditionally guaranteed, jointly and severally, by Atlas LLC and its subsidiaries and secured by substantially all of the assets of Atlas LLC and its subsidiaries.

First Amendment to the 2023 ABL Credit Agreement

On February 26, 2024, Atlas LLC and certain other subsidiaries of the Company entered into the First Amendment to Loan, Security and Guaranty Agreement (the “ABL Amendment”), among Atlas LLC, the subsidiary guarantors party thereto, the lenders party thereto and the ABL Agent, which amends the 2023 ABL Credit Agreement.

The ABL Amendment increased the revolving credit commitment to $125.0 million. The existing lenders increased their commitment by $25.0 million which resulted in a debt modification under ASC 470, “Debt.” The ABL Amendment also added a new lender with a $25.0 million commitment, thus creating a new debt arrangement under ASC 470, “Debt.” The deferred financing costs and debt issuance cost will be amortized on a prospective basis over the term of the agreement. The maturity date of the ABL Credit Agreement was extended from February 22, 2028 to the earliest of (a) February 26, 2029; (b) the date that is 91 days prior to the maturity date for any portion of the Term Loan Debt; or (c) any date on which the aggregate Commitments terminate hereunder.

The ABL Amendment requires that if Availability is less than the greater of (i) 12.50% of the Borrowing Base and (ii) $12.5 million, Atlas LLC must maintain a Fixed Charge Coverage Ratio (as defined in the 2023 ABL Credit Agreement) of at least 1.00 to 1.00 while a Covenant Trigger Period (as defined in the 2023 ABL Credit Agreement) is in effect.

Under the ABL Amendment, Atlas LLC is permitted to make payments of dividends and distributions pursuant to certain limited exceptions and baskets set forth therein and otherwise generally subject to certain restrictions described therein, including that (i) no Event of Default (as defined under the 2023 ABL Credit Agreement) has occurred and is continuing, and (ii) no loans and no more than $7.5 million in letters of credit that have not been cash collateralized are outstanding, and liquidity exceeds $30.0 million at all times during the 30 days prior to the date of the dividend or distribution; provided that if any loans are outstanding or outstanding letters of credit exceed $7.5 million and no Event of Default has occurred and is continuing, then Atlas LLC is permitted to make payments of dividends and distributions if, (i) Specified Availability (as defined under the 2023 ABL Credit Agreement) is higher than the greater of (a) $20.0 million and (b) 20% of the pro forma Borrowing Base then in effect and during the 30 days prior to the date of the dividend or distribution as if such dividend or distribution had been made at the beginning of such period, or if (ii) (a) Specified Availability is higher than the greater of (x) $15.0 million and (y) 15% of the pro forma Borrowing Base then in effect and during the 30 days prior to the date of the dividend or distributions as if such dividend or distribution had been made at the beginning of such period and (b) the Fixed Charge Coverage Ratio (as defined under the 2023 ABL Credit Agreement), as calculated on a pro forma basis, is greater than 1.00 to 1.00, as provided under the 2023 ABL Credit Agreement. Additionally, Atlas LLC may make additional payments of dividends and distributions in qualified equity interests and may make Permitted Tax Distributions (as defined under the 2023 ABL Credit Agreement).

Second Amendment to the 2023 ABL Credit Agreement

On January 27, 2025, Atlas LLC and certain other subsidiaries of the Company entered that certain Second Amendment to Loan, Security and Guaranty Agreement (the “Second ABL Amendment”), among Atlas LLC, as the borrower, the subsidiary guarantors party thereto, the lenders party thereto and Bank of America, N.A., as the ABL Agent. The Second ABL Amendment amends that certain Loan, Security and Guaranty Agreement dated as of February 22, 2023, as amended.

The Second ABL Amendment permitted the Company and its applicable affiliates to enter into the Second Term Loan Amendment, pursuant to which the principal amount of the existing DDT Loan was increased by an aggregate principal amount of $100.0 million.

Third Amendment to the 2023 ABL Credit Agreement

On February 21, 2025, Atlas LLC and certain other subsidiaries of the Company entered into that certain Third Amendment to Loan, Security and Guaranty Agreement (the “Third ABL Amendment”), among Atlas LLC, as the borrower, the subsidiary guarantors party thereto, the lenders party thereto and Bank of America, N.A., as the ABL Agent. The Third ABL Amendment amends that certain Loan, Security and Guaranty Agreement dated as of February 22, 2023, as amended.

The Third ABL Amendment permitted the Company and its applicable affiliates to enter into the 2025 Term Loan Credit Agreement, pursuant to which Atlas LLC borrowed $540.0 million from Stonebriar in a single advance term loan that was made on February 21, 2025.

Repayment of the 2023 ABL Credit Facility

In February 2025, the Company used a portion of the proceeds from the Equity Offering, to repay the remaining $70.0 million of the outstanding principal balance of the 2023 ABL Credit Facility.

As of June 30, 2025, Atlas LLC had no outstanding borrowings and $0.2 million in outstanding letters of credit under the 2023 ABL Credit Facility. Additionally, as of June 30, 2025, the Borrowing Base was $125.0 million, and Availability was $124.8 million.

Other Indebtedness

The Company has other indebtedness of $11.2 million of equipment finance notes as of June 30, 2025. There was de minimis interest expense and $0.1 million of interest expense for the three and six months ended June 30, 2025, respectively, and de minimis interest expense for both the three and six months ended June 30, 2024. These equipment finance notes have terms ending in April 2026 through April 2031 and interest rates ranging from 2.24% to 10.89%.

Critical Accounting Policies and Estimates

As of June 30, 2025, there have been no material changes to our critical accounting policies and related estimates previously disclosed in our Annual Report. Refer to the accounting policies discussed in the notes to our Financial Statements under Note 2 - Summary of Significant Accounting Policies.

Property, Plant and Equipment, Including Depreciation and Depletion

In order to calculate depreciation of our fixed assets, other than plant facilities and mine development costs, we use the best estimated useful lives at the time the asset is placed into service.

Mining property and development costs, including plant facilities directly associated with mining properties, are amortized using the units of production method on estimated measures of tons of in-place reserves. The impact to reserve estimates is recognized on a prospective basis. Drilling and related costs are capitalized for deposits where proven and probable reserves exist. These activities are directed at obtaining additional information on the deposit or converting non-reserve minerals to proven and probable reserves, with the benefit being realized over a period greater than one year. At a minimum, we will assess the useful lives and residual values of all long-lived assets on an annual basis to determine if adjustments are required. The actual reserve life may differ from the assumptions we have made about the estimated reserve life.

We evaluate long‑lived assets for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such a review should indicate that the carrying amount of long-lived assets is not recoverable, the Company will reduce the carrying amount of such assets to fair value.

Business Combinations

We allocate the purchase price of any business we acquire to the identifiable assets acquired and liabilities assumed based on their estimated fair values. Any excess purchase price over the fair value of the net identifiable assets acquired is recorded as goodwill. We use all available information to estimate fair values, including quoted market prices, the carrying value of acquired assets and assumed liabilities and valuation techniques such as discounted cash flows, relief-from-royalty method, with or without method, multi-period excess earnings method, or cost to recreate method. We engage third-party appraisal firms to assist in the fair value determination of identifiable long-lived assets, identifiable intangible assets, as well as any contingent consideration that provides for additional consideration to be paid to the seller if certain future conditions are met. These estimates are reviewed during the 12-month measurement period and adjusted as soon as the necessary information becomes available but no later than one year from the acquisition date. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our financial condition or results of operations. For further discussion on our recently completed acquisitions, see Note 3 - Acquisitions, to the accompanying Financial Statements included elsewhere in this Report.

Valuation of Goodwill and Acquired Intangible Assets

We assess our goodwill for impairment annually, or whenever events or circumstances indicate that the carrying amount of goodwill may not be recoverable. We determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value after considering qualitative, market and other factors. If it is necessary to perform the quantitative assessment to determine if our goodwill is impaired, the fair value is determined using significant unobservable inputs, or Level 3 in the fair value hierarchy. If the carrying amount exceeds the fair value, an impairment loss is recognized in the current period in an amount equal to the excess.

The expected future cash flows used for impairment reviews and related fair value calculations are based on subjective, judgmental assessments of projected revenue growth, pricing, gross profit rates, SG&A rates, working capital fluctuations, capital expenditures, discount rates and terminal growth rates. The acquired definite-lived intangible assets are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For further discussion on our recently completed acquisitions, see Note 4 - Goodwill and Acquired Intangible Assets, to the accompanying Financial Statements included elsewhere in this Report.

Our business is subject to various types of market risks that include interest rate risks, market demand risks, commodity pricing risks, credit risks and inflation risks. Except as set forth below, our risk exposure related to these items has not changed materially since December 31, 2024.

Interest Rate Risks

In February 2025, we used a portion of the net proceeds from the Equity Offering to repay the remaining $70.0 million of outstanding principal under the 2023 ABL Credit Facility. As of June 30, 2025, we had no variable-rate indebtedness outstanding.

Credit Risks

We recognized credit loss expense of $4.1 million for both the three and six months ended June 30, 2025, due to a dispute with a counterparty. See Note 2 – Summary of Significant Accounting Policies of the Financial Statements included elsewhere in this Report for additional information.

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting described below.

Material Weakness

As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, management identified deficiencies related to our information technology (“IT”) general controls (“ITGCs”) in the area of IT program change management and logical access controls that, when viewed in combination, aggregated to a material weakness. Specifically, management determined that we did not maintain effective controls over program change management and logical access for financially significant applications to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately. As a result, the application controls and IT-dependent manual controls that rely upon information from the impacted IT applications were also deemed ineffective.

While we have concluded that this material weakness did not result in a material misstatement in our Financial Statements, it was not remediated as of June 30, 2025, and thus could have created a reasonable possibility that a material misstatement to the annual or interim financial statements would not have been prevented or detected on a timely basis. Accordingly, we determined that these control deficiencies constituted a material weakness.

With respect to the material weakness above, management developed a remediation plan to address the material weakness and to improve the design and operating effectiveness of our ITGCs. As part of such plan we have, among other things, evaluated and implemented enhanced process controls around user access management and expanded documentation and review procedures to monitor, evaluate and support control effectiveness. We believe that upon completion, we will have strengthened our ITGCs to address and successfully remediate the identified material weakness. However, control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively.

Moser Acquisition

As disclosed in Note 3 - Acquisitions in the notes to the accompanying Financial Statements, we acquired Moser and its wholly-owned subsidiary on February 24, 2025, and its total revenues constituted approximately 5.5% and 4.0% and of total revenues as shown in our Financial Statements for the three and six months ended June 30, 2025, respectively. The total assets of Moser acquired constituted approximately 12.3% of total assets as shown in our Financial Statements as of June 30, 2025. We excluded Moser’s disclosure controls and procedures that are subsumed by its internal control over financial reporting from the scope of management’s assessment of the effectiveness of our disclosure controls and procedures. This exclusion is in accordance with the guidance issued by the Staff of the SEC that an assessment of a recently acquired business’s internal controls may be omitted from management’s assessment of internal control over financial reporting for one year following the acquisition. As part of the Company’s ongoing integration activities, the Company’s financial reporting controls and procedures are in the process of being implemented with respect to the acquired operations. The Company and Moser used separate accounting systems through June 30, 2025. The Financial Statements presented in this Report were prepared using information obtained from these separate accounting systems.

Changes in Internal Control over Financial Reporting

Other than the material weakness and incorporating Moser’s controls following the Moser Acquisition described above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, during the three months ended June 30, 2025, there have been no material changes to the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, filed with the SEC on May 6, 2025.

Changes in U.S. trade policy and the impact of tariffs could adversely affect our business, results of operations and financial position.

Our business and results of operations may be adversely affected by uncertainty and changes in U.S. trade policies, including tariffs, trade agreements or other trade restrictions imposed by the U.S. or other governments. For example, on April 2, 2025, the U.S. government announced a 10% tariff on product imports from almost all countries and has since announced individualized higher tariffs on certain other countries. Additionally, on June 3, 2025, the U.S. government imposed a 50% tariff on steel imports, an increase from the previously announced 25% tariff. As a result of the current administration’s trade policy, tariffs may increase our and our customers’ raw material input costs. Any further trade restrictions, retaliatory trade measures or additional tariffs could result in higher input costs to produce our products and increased costs to provide our services. To the extent that we are unable to pass all or any of such cost increases on to our customers, such cost increases could adversely affect our returns on investment and limit our ability to pursue future growth projects.

To the extent any such tariffs remain in place for a sustained period of time, or in the event of a global or domestic recession resulting therefrom, our customers could decide to delay currently planned growth projects or forego them entirely, each of which could result in decreased demand for our products and services and adversely affect our results of operations and financial condition.

The ultimate impact of these trade measures on our business operations and financial results is uncertain and may be affected by various factors, including whether and when such trade measures are implemented, the timing when such measures may become effective, and the amount, scope, or nature of such trade measures, and our ability to execute strategies to mitigate the potential negative impacts resulting therefrom.