Flowco Holdings Inc.: Form 10-Q for the period ended Mar 31, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. The following discussion includes forward-looking statements that involve certain risks and uncertainties. For further information on items that could impact our future operating performance or financial condition, see the sections entitled “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and in this Quarterly Report, and “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report. We assume no obligation to update any of these forward-looking statements, except as required by law. Unless otherwise indicated or the context otherwise requires, the historical financial information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects only the historical financial results of Flowco Holdings Inc. and its consolidated subsidiaries and references to the “Company,” “we,” “our,” or “us” are to Flowco Holdings Inc. and its consolidated subsidiaries

Background and Business Overview

We are a leading provider of production optimization, artificial lift and methane abatement solutions for the oil and natural gas industry. The Company’s core technologies include high pressure gas lift (“HPGL”), conventional gas lift, plunger lift, and vapor recovery units (“VRUs”), all supported by proprietary digital tools that enable real-time remote monitoring and control to enhance efficiency and performance.

Consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources, our operations are conducted, managed and presented within the following two reportable segments:

• Production Solutions: segment consists of our artificial lift operations, digital solutions and methane abatement technologies; and
• Natural Gas Technologies: segment consists of our vapor recovery and natural gas systems operations.

The Production Solutions operations are critical to maximizing the economic lifespan and profitability of oil and gas wells, particularly as production naturally declines over time – especially in shale formations. The Company’s artificial lift and optimization technologies are essential in maintaining production rates and enabling wells to remain economically viable, making these offerings less discretionary and more integrated into ongoing operations.

In the Natural Gas Technologies segment, the Company also holds a leading position in the rapidly growing market for methane abatement, offering innovative VRUs and related technologies that capture fugitive emissions of methane and other hydrocarbons. These solutions not only provide economic value by monetizing captured gas, but also help customers achieve decarbonization goals and comply with increasingly stringent environmental regulations. Initially driven by safety and operational benefits, demand for these solutions has accelerated due to their strong return on investment and regulatory necessity. As a result, the Company’s offerings are viewed as indispensable in both economic and environmental contexts, providing our customers with durable earnings and stable through-cycle performance in their well productions.

Overall, we have strategically positioned ourselves to provide products and services that include a full range of equipment and technology solutions that enable our customers to efficiently and cost-effectively maximize the profitability and economic lifespan of the production phase of their operations. As a result of this strategic position, we are able to generate revenues throughout the long producing lives of oil and natural gas wells. Our products and services also integrate proprietary digital technologies that allow for remote monitoring and controls, and other enhanced uses of our equipment. We have an operating presence in every major onshore oil and natural gas producing region in the United States.

As of March 31, 2025, our Production Solutions and Natural Gas Technologies segments combined operated a fleet of over 4,400 active systems, generating consistent, recurring revenues through the long production life of wells. For a more detailed overview of our business, see Part 1. Item 1. Business and Part 1. Item 2. Properties included in our Annual Report.

Recent Developments and Trends

IPO

We consummated our IPO on January 15, 2025, in which we issued and sold 20,470,000 shares of our Class A common stock at a price of $24.00 per share, resulting in net proceeds to us of approximately $461.8 million, after deducting the underwriting discount of approximately $29.5 million.

The Transactions

The results of operations discussed in this Quarterly Report include those of Flowco LLC prior to the completion of the Transactions, including the IPO. As a result, the historical consolidated financial data may not give you an accurate indication of what our actual results would have been if the transactions described in Basis of Presentation – The Transactions had been completed at the beginning of the periods presented or of what our future results of operations are likely to be. For more detailed discussions, see Basis of Presentation – The Transactions.

Macroeconomic Conditions and Outlook

We monitor macroeconomic conditions and industry-specific drivers and key risk factors affecting our business segments as we formulate our strategic plans and make decisions related to allocating capital and human resources. Our business segments provide products and services to support oil and natural gas production. As a result, we are substantially dependent upon global oil production levels, as well as operating expenditures and new investment activity levels in the oil and natural gas sector. Demand for our products and services is impacted by overall global demand for oil and natural gas, ongoing depletion rates of existing oil and natural gas wells, and our customers’ willingness to invest in the development of new oil and natural gas resources. Our customers determine their operating and capital budgets based on current and expected future crude oil and natural gas prices and expectation of industry cost levels, among other factors. Crude oil and natural gas prices are impacted by supply and demand, which are influenced by geopolitical, macroeconomic and local events, and have historically been subject to substantial volatility and cyclicality.

In April 2025, the Trump administration continued to push for new and significant trade policies by imposing a 10% baseline tariff on imported products with numerous U.S. global trade partners and additional individualized reciprocal tariffs on certain countries with which the U.S. has the largest trade deficits, followed by a 90-day pause in the effectiveness of some tariffs. Current uncertainties about the tariffs and their effects on trading relationships may affect costs for and availability of raw materials or contribute to inflation in the markets in which we operate and increase economic pressures on our customers. We continue to actively monitor the economic effects of the uncertainties created from these tariffs, as well as opportunities to mitigate their related impacts, costs and other effects in our business operations.

Over the mid to long-term, we expect demand for oil and natural gas exploration and production as well as new energy platforms to continue to require more advanced technology from the energy services industry. While the ongoing uncertainties persist for reasons mentioned above, we remain cautiously optimistic that our integrated scope of products and service offerings, our differentiated technologies and a strong market presence will provide us a sustained long-term growth.

Factors Affecting the Comparability of Our Financial Condition and Results of Operations

Our historical financial condition and results of operations for the periods presented may not be comparable, both from period over period and going forward, for the following reasons:

• Selling, general and administrative expenses. We expect to incur additional selling, general and administrative expenses as a result of becoming a publicly traded company. These costs include expenses associated with our annual and quarterly reporting, tax preparation expenses, Sarbanes-Oxley (“SOX”) compliance expenses, audit fees, legal fees, directors’ and officers’ insurance, investor relations expenses, Tax Receivable Agreement administration expenses and registrar and transfer agent fees. These increases in selling, general and administrative expenses are not reflected in our historical financial statements, other than a portion of these costs incurred in 2024 in contemplation and preparation of the IPO.
• Corporate Reorganization. For periods prior to June 20, 2024, the historical consolidated financial statements presented herein are based on the operations of our accounting predecessor, Estis. For a period subsequent to June 20, 2024, the consolidated financial statements presented are based on the combined operations of the Merging Entities. As a result, the historical consolidated financial information may not provide an accurate indication of what our actual results would have been if the 2024 Business Combination had been completed at the beginning of the earliest period presented. In addition, we entered into a Tax Receivable Agreement with the TRA Participants. This agreement generally provides for the payment by us to the TRA Participants of 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize or are deemed to realize in certain circumstances as a result of certain increases in tax basis and imputed interest. We will retain the benefit of the remaining 15% of such net cash savings. For additional information regarding the Tax Receivable Agreement, see Part 1. Item 1A. Risk Factors – Risk Factors Related to our Organizational Structure in our Annual Report.
• Income Taxes. Our accounting predecessors are a collective limited liability companies that constitute as partnerships for U.S. federal income tax purposes, and therefore are not subject to U.S. federal income taxes and the provisions for income tax calculations thereof. As the IPO occurred subsequent to the last date presented in this Quarterly Report, we do not report any income tax benefit or expense attributable to us. After the IPO, we started to be taxed as a corporation under the Internal Revenue Code and subject to U.S. federal income taxes (currently at a statutory rate of 21% of pretax earnings, as adjusted by the Internal Revenue Code), as well as state and local income taxes, for our interest ownership in Flowco LLC.
• 2025 Equity and Incentive Plan. To incentivize individuals providing services to us or our affiliates, our Board of Directors adopted an omnibus 2025 Equity and Incentive Plan (the “Equity Plan”) prior to the completion of our IPO. The Equity Plan provides for the grant, from time to time, at the discretion of our Board of Directors or a committee thereof, of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, other stock awards, substitute awards and performance awards. Any individual who is our officer or employee or an officer or employee of our affiliates, and any other person who provides services to us or our affiliates, including members of our Board of Directors, will be eligible to receive awards under the Equity Plan at the discretion of our Board of Directors. From period of January 16, 2025, to March 31, 2025, we granted 674,379 restricted stock unit (“RSU”) awards, which will vest within three years, to certain of our employees, officers, and non-employee directors. Awards of RSUs to our officers and employees will vest on the third anniversary of the grant date, while awards of RSUs to our non-employee directors will vest pro rata quarterly over three years. For these awards granted during period from January 16, 2025, to March 31, 2025, we will recognize equity compensation expenses

aggregating up to $6.7 million per year, starting in 2025, over the applicable vesting terms related to these RSU issuances.

• Redeemable Non-controlling Interests. As a result of the IPO the Transactions, Flowco Holdings became the sole managing member of Flowco LLC and consolidates entities in which it has a controlling financial interest. Consequently, the financial statements for a period prior to the IPO included in this Quarterly Report has been adjusted to combine each of the previously separated Merging Entities. For a period after the IPO, the financial position and results of operations include those of Flowco Holdings and report the redeemable non-controlling interests related to the portion of LLC Interests owned by the Continuing Equity Owners. Additionally, all shares of our Class B common stock are held by the Continuing Equity Owners, thus considered as redeemable non-controlling interest owners. The redeemable non-controlling interests will only impact financial statements presentations for all periods subsequent to the IPO. The carrying amount of the redeemable non-controlling interest is equal to the greater of (1) the carrying value of the redeemable non-controlling interest adjusted each reporting period for income or loss attributable to the redeemable non-controlling interest or (2) the redemption value. The redemption value is calculated based on the arithmetic average of the volume weighted average prices of Class A common stock on the trading day immediately prior to the end of each reporting period. Remeasurements to the redemption value of the redeemable non-controlling interest are performed at each reporting period and any required adjustments are recorded as an allocation between permanent equity and temporary equity within the condensed consolidated balance sheets. The portion of the net income or loss attributable to redeemable non-controlling interest is reported as net income or loss attributable to non-controlling interests on our condensed consolidated statements of operations.

Critical Accounting Estimates

Refer to our “Critical Accounting Estimates” included in Part II, Item 7 – Management’s Discussions and Analysis included in our Annual Report for a discussion of our critical accounting estimates.

Consolidated Results of Operations

The following discussions relating to significant line items from our condensed consolidated statements of operations are based on available information and represent our analysis of significant changes or events that impact the comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items.

We currently have two operating segments: (i) Production Solutions and (ii) Natural Gas Technologies. Our corporate headquarters and certain functional departments do not earn revenues but incur costs which do not constitute business activities. Therefore, these corporate headquarters and certain functional departments do not qualify as an operating segment and have been included within corporate and other, which is also not considered a reportable segment. Corporate and other includes (i) corporate and overhead costs, and (ii) capitalized costs related to IPO and debt issuance. Corporate does not include any immaterial and aggregated operating segments. The performance of our operating segments is primarily evaluated based on revenue and segment profit or loss with respect to such segments, in addition to other measures.

three months ended March 31, 2025 Compared to three months ended March 31, 2024

Revenue – rentals. The primary driver for the increase in average active systems was related to Flogistix’ VRUs that were added to our combined fleet as part of the 2024 Business Combination within the Natural Gas Technologies segment and Estis’ organic growth in its surface equipment rental fleet within the Production Solutions segment. The average rental rates for VRUs are generally lower than the average rental rates for surface equipment. Accordingly, the weighted average rental rate of the combined fleet during the three months ended March 31, 2025, is lower than the weighted average rental rate during the three months ended March 31, 2024, which was made up exclusively of surface equipment.

Rental revenue was $97.3 million for the three months ended March 31, 2025, an increase of $51.1 million, or 111%, from $46.2 million for the three months ended March 31, 2024. This increase in rental revenue was driven by an increase of 3,053 average active systems per month from 1,416 during three months ended March 31, 2024, to 4,448 average active systems per month during three months ended March 31, 2025; and partially offset by $3,608 decrease in average monthly price from $10,911 per unit during three months ended March 31, 2024 to $7,303 per unit during three months ended March 31, 2025.

Revenue – sales. Sales revenue was $95.1 million for the three months ended March 31, 2025, an increase of $74.5 million, or 363%, from $20.5 million for the three months ended March 31, 2024. This increase in revenue was primarily due to added revenue streams in the sales revenue category, approximately $61.4 million of downhole components sales and $13.9 million of VRU sales were added to the total sales revenue in the three months ended March 31, 2025 resulting from the 2024 Business Combination. We sell our natural gas systems through intercompany transactions for further use in the Production Solutions segment as well as sales to our customers. During the three months ended March 31, 2024, Natural Gas Technologies segment had $13.6 million intercompany natural gas system sales to the Production Solutions segment as we continued to increase the volume of active systems. Due to the change in focus of sales to third parties rather than our Production Solutions segment, intercompany sales volume of natural gas systems decreased to $9.1 million in the three months ended March 31, 2025. All intercompany revenues have been eliminated in consolidation.

Cost of rentals. Rental cost was $26.9 million in the three months ended March 31, 2025, an increase of $15.9 million, or approximately 145%, from $11.0 million for the three months ended March 31, 2024. The primary driver of this increase relates to $14.1 million of costs related to Flogistix’ VRUs as part of the 2024 Business Combination within the Natural Gas Technologies segment that were not included in the three months ended March 31, 2024 along with increased costs for equipment maintenance and repair expense, due to the increased surface equipment fleet count.

Cost of sales. Sales cost was $65.6 million for the three months ended March 31, 2025, an increase of $48.6 million, or approximately 287%, from $16.9 million for the three months ended March 31, 2024. This increase was primarily attributable to $39.6 million of costs related to Flowco Productions within the Production Solution segment and $10.0 million of costs related to Flogistix within the Natural Gas Technologies segment as part of the 2024 Business Combination, partially offset by reduced sale volumes and mix of products sold from other business operations.

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended March 31, 2025 were $30.5 million, an increase of $26.0 million from $4.5 million for the three months ended March 31, 2024. This increase was primarily attributable to the added personnel, marketing, and sales expenses related to the 2024 Business Combination from the following segments: which consists of $10.4 million, $9.4 million and $5.8 million increases within the Production Solutions, Natural Gas Technologies and Corporate segments, respectively.

Depreciation and amortization. Depreciation and amortization was $34.1 million for the three months ended March 31, 2025 an increase of $22.4 million, from $11.7 million for the three months ended March 31, 2024. The increase in depreciation expense was primarily due to increased depreciation expense on machinery and equipment and increased amortization expense on intangible assets resulting from the 2024 Business Combination.

(Gain) loss on sale of equipment. Gain (loss) on sale of equipment had a swing of $0.4 million favorable from the three months ended March 31, 2024 to three months ended March 31, 2025. This favorable change was due to a net gain of $45.0 thousand resulting from sales of assets in the three months ended March 31, 2025 compared to a loss of $0.4 million from Estis' sale of assets in the three months ended March 31, 2024.

Interest expense. Interest expense was $5.4 million in the three months ended March 31, 2025 compared to interest expense of $4.8 million in the three months ended March 31, 2024. This increase in interest expense of $0.6 million was primarily due to increased average borrowings outstanding in the three months ended March 31, 2025, and higher average interest rates in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Other expense. Other expense was $0.3 million in the three months ended March 31, 2025 compared to $0.1 million in the three months ended March 31, 2024, an increase of approximately $0.2 million. The increase was primarily due to an increase in other non-operating expenses in three months ended March 31, 2025 related to IPO transactional expenses that were not present in the three months ended March 31, 2024.

Provision for income taxes. Provision for income taxes was $2.6 million the three months ended March 31, 2025, an increase of $2.5 million or approximately 1,891% increase from the three months ended March 31, 2024. After the consummation of the IPO, we became subject to U.S. federal, state, and local income taxes with respect to its allocable share of taxable income of Flowco Holdings at the prevailing corporate tax rates. The increase in provision for income taxes were due to these income tax obligations that were not present during the three months ended March 31, 2024 as we operated under Flowco LLC, a limited liability company, and was treated as a partnership for income tax purposes. Income tax provision for three months ended March 31, 2025 was $2.3 million. The remaining increase in provision for income taxes of $0.2 million was due to increased Texas margin tax.

Liquidity and Capital Resources

IPO and Subsequent Transactions

On January 15, 2025, we consummated our IPO and received $461.8 million net proceeds from the sale of 20,470,000 shares of our Class A common stock. The net proceeds from our IPO were used to purchase 20,470,000 newly issued LLC Interests directly from Flowco LLC at a price per unit equal to the IPO price per share of Class A common stock.

On August 24, 2024, we entered into a credit agreement, as amended to date, by and among Flowco MasterCo (the “Parent Borrower”), Flowco Productions, Estis Intermediate and Flogistix Intermediate, as borrowers, certain other direct and indirect subsidiaries of the Parent Borrower party thereto as guarantors, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent (as amended to date, the “Credit Agreement”). The Credit Agreement was entered into in connection with a continuation and upsize of the legacy credit facility established by a legacy credit agreement with Estis and certain of its subsidiaries as loan parties hereto (“Legacy Estis Credit Agreement”).

In connection with the IPO described above, Flowco LLC used the net proceeds received from us to: (i) redeem approximately $20.9 million of Flowco LLC interests from certain non-affiliate holders and (ii) with respect to the remainder, repay indebtedness under our Credit Agreement in the amount of $440.0 million.

Sources of Liquidity and Indebtedness

As of March 31, 2025, we had $0.7 million of cash and cash equivalents. We believe existing cash and cash equivalents and cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We have historically generated cash and fund our operations primarily from cash flows from operating activities as well as availability under our Credit Agreement. Borrowings under our Credit Agreement has a maturity date of August 20, 2029, in which all principal owed is payable upon maturity. Our interest rate is Term Secured Overnight Finance Rate (“SOFR”) for one month plus 0.1% (“Adjusted REVSOFR30”) plus a contractual applicable margin based on the Company’s calculated leverage ratio, which combined approximates 6.4% per annum at the effective date with interest due monthly. If such rate is below contractual minimums, the interest rate will be calculated based on Adjusted Term SOFR Rate, Adjusted REVSOFR30 Rate or the Adjusted Daily Simple SOFR Rate. Depending upon market conditions and other factors, we may also have the ability to issue additional equity and/or debt, as needed.

Historically, our predecessors’ primary sources of liquidity were cash flows from operations, borrowings under Estis Legacy Credit Agreement and equity provided by the Original Equity Owners. Our predecessors’ primary use of capital has been for working capital purposes, to make cash distributions to the Original Equity Owners and repay indebtedness.

As of May 9, 2025, we had $175.6 million outstanding borrowings and $547.4 million available borrowing capacity under our Credit Agreement.

Additional Liquidity Requirements

As a holding company, we have no material assets other than our ownership of LLC Interests in Flowco LLC. As such, we have no independent means of generating revenue. The Flowco LLC Agreement provides for the payment of certain distributions to the Continuing Equity Owners and to us in amounts sufficient to cover the income taxes imposed on the Company with respect to the allocation of taxable income from Flowco LLC as well as to cover our obligations under the TRA and other administrative expenses.

Regarding the ability of Flowco LLC to make distributions to us, the terms of their financing arrangements (including the Credit Facility) contain covenants that may restrict Flowco LLC or its subsidiaries from paying such distributions, subject to certain exceptions. Further, Flowco LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Flowco LLC (with certain exceptions), as applicable, exceed the fair value of its assets.

In addition, under the TRA, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the TRA. We expect the amount of the cash payments that we will be required to make under the TRA will be significant. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us.

Additionally, in the event we declare any cash dividends, we intend to cause Flowco LLC to make distributions to us in amounts sufficient to fund such cash dividends declared by us to our stockholders. Deterioration in the financial condition, earnings, or cash flow of Flowco LLC for any reason could limit or impair their ability to pay such distributions.

If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could materially affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA. In addition, if Flowco LLC does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.

See Part I – Item 1A. Risk Factors-Risks Related to our Organizational Structure and Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence included in our Annual Report.

Dividends

Our Board of Directors may elect to declare cash dividends on our Class A common stock, subject to our compliance with applicable law, and depending on, among other things, economic conditions, our financial condition, results of operations, projections, liquidity, earnings, legal requirements, and restrictions in the agreements governing our indebtedness. We currently intend to pay a dividend from available funds and future earnings on our Class A common stock. If and to the extent our Board of Directors declares cash dividends to our stockholders, we expect the dividend to be paid from cash flows from our operations. The timing, amount and financing of dividends, if any, will be subject to the discretion of our Board of Directors from time to time. As of March 31, 2025, we have not declared a cash dividend on our Class A common stock. Distributions to members or partners made by our predecessor entities, including distributions to members funded during 2024 in part by borrowings under our Credit Agreement, should not be viewed as indicative for future dividend payments with respect to our Class A common stock.

Cash Flow Analysis

The following table presents our summary cash flows for the periods presented (in thousands):

Operating activities. Net cash provided by operating activities was $42.5 million in the three months ended March 31, 2025 compared to $28.2 million in the three months ended March 31, 2024, an increase of approximately $14.3 million. Operating cash flows increased primarily due to higher net income as a direct result from additional business operations from FPS and Flogistix as it relates to the 2024 Business Combination, In addition, cash outflows associated with working capital increased $28.2 million, largely due to increases in accounts receivable, inventory, other assets, partially offset by increases in accounts payable, accrued expenses and other liabilities.

Investing activities. Net cash used in investing activities was $27.7 million and $14.7 million for the three months ended March 31, 2025 and 2024, respectively. The approximately $13.0 million increase was primarily due to an increase in purchases of property, plant and equipment during the three months ended March 31, 2025.

Financing activities. Net cash used in financing activities was $18.8 million in the three months ended March 31, 2025 compared to net cash used of $12.6 million in the three months ended March 31, 2024. The $6.2 million increase in net cash used in financing activities was primarily related to $564.8 million of payments on long-term debt, $20.9 million payments to acquire the LLC Interests from the Continuing Equity Owners, $1.7 million payments related to finance lease obligations and $2.0 million of payments related to offering costs for the IPO, partially offset by $461.8 million of IPO proceeds, $104.5 million of proceeds from long-term debt and the absence of $17.0 million of distributions to the members of Estis that occurred in the three months ended March 31, 2024.

Critical Accounting Policies and Estimates

In preparing our financial statements in conformity with U.S. GAAP, we must make decisions that impact the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgments based on our understanding and analysis of the relevant circumstances, historical experience, and business valuations. Actual amounts could differ from those estimated at the time the Consolidated Financial Statements are prepared.

Our significant accounting policies are described in Note 1-Description of the business and summary of significant accounting policies to our accompanying financial statements included elsewhere in this Quarterly Report on Form 10-Q. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition, or results of operations. There have been no material changes to the Company’s critical accounting estimates since our Annual Report, except as described below.

Income Taxes

After consummation of the IPO, we became subject to U.S. federal, state, and local income taxes with respect to its allocable share of taxable income of Flowco LLC assessed at the prevailing corporate tax rates. Flowco LLC operates as a limited liability company and is treated as a partnership for income tax purposes. Accordingly, it incurs no significant liability for federal or state income taxes since the taxable income or loss is passed through to its members.

In calculating the provision for interim income taxes, in accordance with ASC Topic 740, Income Taxes, an estimated annual effective tax rate is applied to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year. This differs from the method utilized at the end of an annual period.

For annual periods, income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In assessing the realizability of deferred tax assets, we consider whether it is more-likely-than-not that the deferred tax assets will be realized. Deferred tax assets and liabilities are calculated by applying existing tax laws and the rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the enacted rate change.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. As of March 31, 2025, there were no known items which would result in a significant accrual for uncertain tax positions.

Redeemable Non-controlling Interests

After the IPO and Reorganization Transactions, we are the sole managing member of Flowco LLC. The redeemable non-controlling interests in the condensed consolidated statements of operations for the three months ended March 31, 2025 represent the portion of earnings attributable to the economic interest in Flowco LLC held by the Continuing Equity Owners. ASR 268 requires that the carrying amount of the redeemable non-controlling interest is equal to the greater of (1) the carrying value of the redeemable non-controlling interest adjusted each reporting period for income or loss attributable to the redeemable non-controlling interest or (2) the redemption value. The redemption value is calculated based on the arithmetic average of the volume weighted average prices of Class A common stock on the trading day immediately prior to the end of each reporting period. Remeasurements to the redemption value of the redeemable non-controlling interest are performed at each reporting period and any required adjustments are recorded as an allocation between permanent equity and temporary equity within the condensed consolidated balance sheets. The portion of the net income or loss attributable to redeemable non-controlling interest is reported as net income or loss attributable to redeemable non-controlling interests on our condensed consolidated statements of operations.

The Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the redeemable non-controlling interests to equal the redemption value at the end of each reporting period.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2 – Summary of Significant Accounting Policies to our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies, and our consolidated financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if as an emerging growth company we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our systems of internal controls over financial reporting pursuant to Section 404, (ii) provide all the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Act, (iii) comply with the requirement of the PCAOB regarding the communication of critical audit matters in the auditor’s report on the financial statements, and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply until we no longer meet the requirements of being an emerging growth company. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements recently adopted and not yet adopted, see the notes to the audited consolidated financial statements included in our Annual Report.

We are exposed to market risk from changes in interest rates and inflation. These market risks arise in the normal course of business. During the three months ended March 31, 2025, there have been no material changes to the information included under Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of March 31, 2025.

Based on the evaluation of our disclosure controls and procedures, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of March 31, 2025 due to the material weakness in our internal control over financial reporting described below.

Previously Reported Material Weaknesses

As disclosed in Item 9A – Controls and Procedures, of our Annual Report, we previously identified material weaknesses in our internal control over financial reporting, which continues to exist as of March 31, 2025. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

We identified the following material weaknesses in our internal control over financial reporting:

• We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of resources with an appropriate level of accounting knowledge, experience and training to appropriately analyze, record and disclose accounting matters timely and accurately and establish effective processes and controls. Additionally, the lack of a sufficient number of professionals resulted in an inability too consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in the finance and accounting functions.

This material weakness contributed to the following additional material weaknesses:

• We did not design and maintain effective controls related to the period-end financial reporting process, including designing and maintaining formal accounting policies, procedures and controls to achieve, complete, accurate and timely financial accounting, reporting and disclosures. Additionally, we did not design and maintain effective controls over the preparation and review of account reconciliations and journal entries, including maintaining appropriate segregation of duties for all significant accounts.
• We did not design and maintain processes and controls to analyze and account for non-routine, unusual or complex transactions. Specifically, we did not design and maintain controls over the review of transactions utilizing a specialist.
• We did not design and maintain effective IT general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain:
• (i) program change management controls to ensure that program and data changes are identified, tested, authorized and implemented appropriately;
• (ii) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel;
• (iii) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored; and
• (iv) program development controls to ensure that new software development is tested, authorized and implemented appropriately.

These material weaknesses resulted in a revision to a disclosure in the consolidated financial statements as of and for the year ending December 31, 2023 and immaterial adjustments to the consolidated financial statements as of and for the years ending December 31, 2023 and 2022 and as of and for the nine-month period ended September 30, 2024. The material weaknesses also resulted in adjustments recorded prior to the issuance of the consolidated financial statements as of and for the year ending December 31, 2024 and an adjustment to a disclosure recorded prior to the issuance of the condensed consolidated financial statements as of and for the nine-month period ended September 30, 2024. Additionally, these material weaknesses could result in misstatements of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

Remediation Plans

We continue to take steps to address the material weaknesses, including the following:

• hiring, and continuing to hire, additional accounting, internal audit, and information technology personnel to establish effective processes and controls, including establishing appropriate segregation of duties;
• developing formal accounting policies, procedures and controls related to the period-end financial reporting process including designing and maintaining controls over account reconciliations, journal entries, and financial reporting and disclosures;
• designing and maintaining processes and controls to analyze and account for non-routine, unusual or complex transactions, including review of transactions utilizing a specialist; and
• enhancing information technology governance processes, including our program change management, computer operations, program development, and user access controls, enhancing role-based access, and implementing more robust information technology policies and procedures.

While we believe that these efforts will improve our internal control over financial reporting once implemented, these measures will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles.

Changes in Internal Control Over Financial Reporting

There were 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 March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed under Part I, Item 1A. Risk Factors in our Annual Report. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this Quarterly Report. Except as set forth below, there have been no material changes in the risks affecting the Company since the filing of our Annual Report.

Changes to trade policy, tariffs, and import/export regulations, and uncertainties regarding the same, may have a material adverse effect on our business, financial condition and results of operations.

Our business may be affected directly and indirectly by global trade policy. In April 2025, the Trump administration continued to push for new and significant trade policies by imposing a 10% baseline tariff on imported products with numerous U.S. global trade partners and additional individualized reciprocal tariffs on certain countries with which the U.S. has the largest trade deficits, followed by a 90-day pause in the effectiveness of some tariffs. These actions have resulted in certain retaliatory tariffs on U.S. good sold in other countries. Current uncertainties about the tariffs and their effects on trading relationships may affect costs for and availability of raw materials or contribute to inflation in the markets in which we operate and increased economic pressures on our customers. Such uncertainties have also contributed to volatility in oil and gas commodity prices, which may affect demand from our customers and ultimately reduce demand for our products and services. While we will monitor such changes and attempt to mitigate increased costs and disruptions, our ability to do so may be limited by operational and supply change constraints, including in the short term. Similarly, our ability to recover any cost increases through price adjustments may be limited by competitive pressures, customer acceptance and contractual limitations. Accordingly, both uncertainties about the tariffs as well as potential actual tariffs may affect our business, financial condition and results of operations.