ProFrac Holding Corp.: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of our financial condition and results of operations should be in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included in this Quarterly Report, as well as our Annual Report.

Overview

We are a vertically integrated and innovation-driven energy services holding company providing hydraulic fracturing, proppant production, other completion services and other complementary products and services to leading upstream oil and natural gas companies engaged in the exploration and production ("E&P") of North American unconventional oil and natural gas resources.

We operate in three reportable business segments: Stimulation Services, Proppant Production and Manufacturing. Our Stimulation Services segment, which primarily relates to ProFrac LLC, owns and operates a fleet of mobile hydraulic fracturing units and other auxiliary equipment that generates revenue by providing stimulation services to our customers. Our Proppant Production segment, which primarily relates to Alpine, provides proppant to oilfield service providers and E&P companies. Our Manufacturing segment sells products such as high horsepower pumps, valves, piping, swivels, large-bore manifold systems, and fluid ends.

Summary Financial Results

• Total revenue for the three and six months ended June 30, 2025 was $501.9 million and $1,102.2 million, respectively, which represented decreases of $77.5 million and $58.7 million from the same periods in 2024.
• Net loss attributable to ProFrac Holding Corp. for the three and six months ended June 30, 2025 was $105.9 million and $123.4 million, respectively, which represented increases in net loss of $39.2 million and $58.5 million from the same periods in 2024. The net losses in 2024 included a pretax goodwill impairment charge of $67.7 million.
• Cash provided by operating activities for the six months ended June 30, 2025, was $139.1 million, a decrease of $53.5 million from the same period in 2024.
• Total principal amount of long-term debt was $1,110.0 million at June 30, 2025, a decrease of $28.9 million from December 31, 2024.

2025 Developments

In April 2025, Flotek acquired certain gas conditioning equipment from our Stimulation Services segment for total consideration of $107.5 million and our Stimulation Services segment leased these assets back from Flotek for a six year term. We believe this Flotek partnership provides ownership exposure to a highly-scalable gas quality and asset integrity business. The effects of this sale-leaseback transaction have been eliminated from our unaudited condensed consolidated financial statements.

In June 2025, we entered into a purchase agreement with Beal Bank USA and Wilks Brothers, LLC, which is a Wilks Party, whereby we have agreed to issue and sell $60.0 million aggregate principal amount of Senior Secured Floating Rate Notes due 2029 in a private placement. An aggregate of $20.0 million of new notes was purchased by Wilks Brothers, LLC on June 30, 2025. An additional $20.0 million aggregate principal amount of new notes will be purchased by Wilks Brothers, LLC and Beal Bank, USA on September 30, 2025, and an additional $20.0 million aggregate principal amount of new notes will be purchased by Beal Bank, USA on December 15, 2025. ProFrac Holdings II, LLC has the option to defer the September 30, 2025 issuance to December 15, 2025 or to cancel such additional issuances. Such additional issuances are subject to certain customary closing conditions. The net proceeds from the issuance of the new notes will be used to fund capital expenditures with any remaining proceeds used for general corporate purposes.

In June 2025, we amended the Alpine 2023 Term Loan. Under the terms of the amendment, the amortization payments required to be made on June 30, 2025, September 30, 2025 and December 31, 2025 were reduced from $15.0 million to $5.0 million and we will pay an exit fee of $3.4 million when the term loan is repaid. Additionally, the Alpine 2023 Term Loan contained a covenant commencing with the fiscal quarter ending March 31, 2026, requiring Alpine not to exceed a maximum

Total Net Leverage Ratio (as defined in the Alpine Term Loan Credit Agreement) of 2.00 to 1.00. This covenant was amended to commence testing compliance with the Total Net Leverage Ratio with the fiscal quarter ending on March 31, 2027.

In June 2025, we disposed of our EKU Power Drives subsidiary in our Manufacturing Segment. We recorded a loss of $10.5 million in connection with this disposal.

Recent Trends and Outlook

Our business depends on the willingness of E&P companies to make expenditures to explore for, develop, and produce oil and natural gas in the United States. The willingness of E&P companies to undertake these activities is predominantly influenced by current and expected future prices for oil and natural gas. Beginning in April 2025, oil and natural gas commodity prices decreased from their respective averages in the first quarter of 2025 with increased volatility.

As a result, some of our customers reduced their activity levels in the second quarter of 2025 and our results of operations correspondingly declined in the second quarter compared with the first quarter. We currently expect our results of operations in the third quarter to decline relative to the second quarter. While we have limited visibility for future demand for our products and services, we are encouraged by increasing customer engagement around 2026 planning.

We also actively monitor the effects of inflation and tariffs on our business; however, the potential effects of inflation and tariffs on our business remain uncertain at this time.

Results of Operations

Revenues

Revenues by reportable segment are as follows:

Stimulation Services. Stimulation Services revenues for the three and six months ended June 30, 2025 decreased $73.6 million and $66.4 million, or 15% and 6%, respectively, from the same periods in 2024. The decreases were primarily due to a decrease in average active fleets and lower average pricing for our services in the second quarter of 2025 compared to the same period in 2024.

Proppant Production. Proppant Production revenues for the three and six months ended June 30, 2025 increased $8.0 million and decreased $2.4 million, or 12% and 2%, respectively, from the same periods in 2024. The increase in the second quarter was primarily due to higher average pricing for our proppant in the second quarter of 2025 compared to the same period last year, which was due to a shift in intercompany sales mix from mine-gate pricing to wellsite pricing in the second quarter of 2025. The decrease for the first six months of 2025 was due to lower average pricing for our proppant in the first quarter of 2025 compared to the same period last year.

Revenue recognized for the amortization of acquired off-market contracts for the three and six months ended June 30, 2025 were $1.9 million and $7.6 million, respectively, compared to $10.9 million and $27.4 million in the same periods in 2024. Refer to Item 8 "Financial Statements and Supplementary Data" in our Annual Report for information about our acquired contract liabilities. During the three and six months ended June 30, 2025, approximately 58% and 48%, respectively, of the Proppant Production segment's revenues were intercompany, compared with 23% and 27% in the same periods in 2024.

Manufacturing. Manufacturing revenues for the three and six months ended June 30, 2025 decreased by $0.1 million and increased $22.2 million, or 0% and 22% respectively from the same periods in 2024. The decrease in the second quarter was due to decreased intercompany demand for manufacturing products in the second quarter of 2025. The increase for the first six months of 2025 was due to increased intercompany demand for manufacturing products in the first quarter of 2025. Additionally, the acquisition of BPC and NRG contributed revenue starting in April 2024 and June 2024, respectively. During the three and six months ended June 30, 2025, approximately 78% and 83%, respectively, of the Manufacturing segment's revenues were intercompany, compared with 74% and 76% in the same periods in 2024.

Other. Other revenues for the three and six months ended June 30, 2025 increased by $17.4 million and $37.9 million from the same periods in 2024. This increase was primarily due to increased revenue for Flotek. Flotek recorded contract shortfall revenue of $7.7 million and $8.4 million for the three months ended June 30, 2025 and 2024, respectively, and $15.2 million and 17.1 million for the six months ended June 30, 2025 and 2024, respectively, related to contract shortfalls with the Stimulation Services segment. During the three and six months ended June 30, 2025, approximately 61% and 61%, respectively, of other revenues were intercompany, compared with 62% and 65% in the same periods in 2024.

Cost of Revenues

Cost of revenues by reportable segment is as follows:

Stimulation Services. Stimulation Services cost of revenues for the three and six months ended June 30, 2025 decreased by $17.5 million and increased $7.5 million, or 5% and 1%, respectively, from the same periods in 2024. The decrease in the second quarter was primarily due to a decrease in average active fleets in the second quarter of 2025 compared to the same period last year. The second quarter decrease was offset by an increase in average active fleets in the first quarter of 2025 compared to the same period last year. Cost of revenues for this segment included intercompany supply commitment charges of $7.7 million and $8.7 million for the three months ended June 30, 2025 and 2024, respectively, and $15.2 million and $17.1 million for the six months ended June 30, 2025 and 2024, respectively, because the Stimulation Services segment did not purchase the minimum contractual commitment of chemistry products from Flotek.

Proppant Production. Proppant Production cost of revenues for the three and six months ended June 30, 2025 increased by $20.6 million and $21.7 million, or 56% and 27%, respectively, from the same periods in 2024. These increases were primarily due to increased costs to support the shift in intercompany sales mix from mine-gate pricing to wellsite pricing in the second quarter of 2025.

Manufacturing. Manufacturing cost of revenues for the three and six months ended June 30, 2025 decreased by $5.4 million and increased by $16.1 million, or 11% or 19%, respectively, from the same periods in 2024. The decrease in the second quarter was due to decreased volumes of products sold to intercompany customers in the second quarter of 2025. The increase for the first six months of 2025 was due to increased volumes of products sold to intercompany customers in the first quarter of 2025. Additionally, the acquisition of BPC and NRG contributed costs beginning in April 2024 and June 2024, respectively.

Other. Other cost of revenues for the three and six months ended June 30, 2025 increased by $12.0 million and $27.5 million, or 33% and 40%, respectively, from the same periods in 2024. These increases were primarily due to increased product sales at Flotek.

Selling, General and Administrative

Selling, general and administrative expenses are comprised of the following:

Selling, general and administrative expenses for the three and six months ended June 30, 2025 decreased by $2.7 million and increased by $0.3 million, or 5% and 0% respectively, from the same periods in 2024. The decrease in the second quarter was partially due to lower labor costs resulting from cost control measures. The increase for the first six months of 2025 was further due to increased labor and facility costs related to our acquisitions of BPC, AST and NRG in the second quarter of 2024. Additionally, the changes for both periods were partially due to decreased stock-based compensation.

Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization for the three and six months ended June 30, 2025 increased by $1.3 million and decreased by $5.5 million, respectively, from the same periods in 2024.

Acquisition and Integration Costs

Acquisition and integration costs primarily relate to professional fees, severance and other costs associated with our acquisition and integration activities. For the three and six months ended June 30, 2025, these costs were $0.1 million and $0.2 million, respectively, compared with $2.9 million and $3.1 million in the same periods in 2024.

Other Operating Expense, Net

The following table summarizes our other operating expenses, net:

Litigation expenses and accruals for legal contingencies generally represent legal and professional fees incurred in litigation as well as estimates for loss contingencies with regards to certain vendor disputes and litigation matters. In the periods presented, substantially all of these costs represent litigation costs incurred in connection with certain patent infringement lawsuits.

Provision for credit losses primarily related to a revised estimate of the payments to be received from an insolvent customer.

The transaction costs for the three and six months ended June 30, 2025 represent legal and professional fees incurred for strategic initiatives.

Severance charges relate to the departure of certain highly-compensated employees.

(Gain) loss on disposal of assets, net consists of gains and losses on the sale of excess property, early equipment disposals and other asset dispositions.

Supply commitment charges for the three and six months ended June 30, 2024, represent charges related to contractual inventory purchase commitments to certain proppant suppliers.

Interest Expense, Net

Interest expense, net of interest income, for the three and six months ended June 30, 2025 was $35.1 million and $71.0 million, respectively, compared to $39.6 million and $77.2 million in the same periods in 2024. These decreases were due to lower average interest rates in 2025.

Other (Expense) Income, Net

For the three and six months ended June 30, 2025, we recognized other expense, net of $9.7 million and $4.9 million, respectively, compared with a other expense, net of $0.5 million and other income, net of $1.3 million in the same periods in 2024. The net changes in these amounts were primarily due to the $10.5 million loss on disposal of EKU Power Drives in the second quarter of 2025, which was partially offset by a decrease in the fair value of our Munger make-whole provision in the first quarter of 2025.

Income Taxes

Income taxes were an expense of $4.7 million and a benefit of $23.4 million for the six months ended June 30, 2025 and 2024, respectively. Our effective tax rate for the six months ended June 30, 2025 was 4.1%, compared with 27.2% in the same period in 2024.

For the six months ended June 30, 2025, our income tax provision included a discrete expense of approximately $4 million related to a book-tax difference on the sale of certain gas conditioning equipment to Flotek. Excluding this discrete item, the difference between our effective tax rate and the federal statutory rate related to changes in the valuation allowance on our net deferred tax assets.

For the six months ended June 30, 2024, our income tax provision included a discrete benefit of $27.4 million related to the release of a portion of the valuation allowance on our net deferred tax assets. This discrete item was caused by the assumption of a $27.4 million deferred tax liability in our acquisition of AST, which made it more likely than not that we would be able to utilize a corresponding amount of our deferred tax assets. Excluding this discrete item, the difference between our effective tax rate and the federal statutory rate related to changes in the valuation allowance on our net deferred tax assets.

On July 4, 2025, the OBBBA was signed into law. The OBBBA contains, among other provisions, certain changes to U.S. federal income tax laws. The accounting for changes in tax rates and tax law are required to be recognized in the period in which the legislation is enacted. As such, we will continue to evaluate this legislation and will record any related adjustments in the third quarter of 2025.

Liquidity and Capital Resources

Sources of Liquidity

Our primary sources of liquidity are cash flows from operations and availability under our revolving credit facility. Additionally, we have obtained commitments to purchase an additional $40.0 million of 2029 Senior Notes, at the Company's option, in the second half of 2025. While Flotek is included in our unaudited condensed consolidated financial statements, we do not have the ability to access or use Flotek’s cash or liquidity in our operations and, accordingly, have excluded Flotek’s cash and other sources of liquidity from the following discussion of our liquidity and capital resources. See "Note 10. Variable Interest Entity" in the notes to our unaudited condensed consolidated financial statements for discussion of our ownership of Flotek.

Our Alpine 2023 Term Loan requires us to segregate collateral associated with Alpine and limits our ability to use Alpine's cash or assets to satisfy our obligations or the obligations of our other subsidiaries. We also have limited ability to provide Alpine with liquidity to satisfy its obligations. Refer to our Annual Report and "Note 4. Debt" in the notes to our unaudited condensed consolidated financial statements for more information regarding the Alpine 2023 Term Loan.

At June 30, 2025, we had $21.0 million of cash and cash equivalents, excluding Flotek, and $87.3 million available for borrowings under our revolving credit facility, which resulted in a total liquidity position of $108.3 million. Refer to our Annual Report for more information regarding our revolving credit facility.

We believe that our cash and cash equivalents, cash provided by operations, the availability under our revolving credit facility, and the commitments to purchase additional 2029 Senior Notes will be sufficient to fund our capital expenditures, satisfy our obligations, and remain in compliance with our existing debt covenants for at least the next 12 months. Alpine is closely monitoring its forthcoming debt covenant compliance obligation that commences in the fiscal quarter ending March 31, 2027. While there can be no assurance, Alpine believes that it will be able to meet, modify, or further defer this debt covenant. See “Note 4. Debt” in the notes to our unaudited condensed consolidated financial statements for more information about this forthcoming debt covenant.

Cash Flows

Cash flows provided by (used in) each type of activity were as follows:

Operating Activities. Net cash provided by operating activities was $139.1 million and $192.6 million for the six months ended June 30, 2025 and 2024, respectively. Cash flows from operating activities consist of net income or loss adjusted for non-cash items and changes in net working capital. Net income or loss adjusted for non-cash items for the six months ended June 30, 2025 resulted in a cash increase of $120.5 million compared with a cash increase of $175.6 million in the same period of 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 increase of $18.6 million compared with a cash increase of $17.0 million in the same period in 2024. The cash increase in 2025 was primarily due to our increased accounts payable balance, which was partially offset by a decrease in cash due to our increased accounts receivable balance.

Investing Activities. Net cash used in investing activities was $97.9 million and $284.8 million for the six months ended June 30, 2025 and 2024, respectively. This change was primarily due to decreased capital expenditures in 2025 and our acquisitions in 2024.

Financing Activities. Net cash used in financing activities was $30.0 million for the six months ended June 30, 2025, compared with cash provided by financing activities of $90.9 million for the same period in 2024. This change was primarily due to increased borrowings to fund our acquisitions in 2024.

Cash Requirements

Our material cash requirements have consisted of, and we anticipate will continue to consist of the following:

• debt service obligations, including interest and principal;
• capital expenditures;
• purchase commitments;
• tax receivable agreement payments, and
• acquisitions of strategic businesses.

Debt Service Obligations

As of June 30, 2025 we have $1,110.0 million in aggregate principal amount of long-term debt outstanding, with $136.0 million coming due over the next twelve months. For additional information about our long-term debt, see "Note 4. Debt" in the notes to our unaudited condensed consolidated financial statements and Item 8 "Financial Statements and Supplementary Data" in our Annual Report.

Both the 2029 Senior Notes and the ABL Credit Facility contain certain customary representations and warranties and affirmative and negative covenants. As of June 30, 2025, we were in compliance with these covenants and expect to be compliant for at least the next twelve months.

The Alpine 2023 Term Loan contains a covenant commencing with the fiscal quarter ending March 31, 2027, requiring Alpine not to exceed a maximum Total Net Leverage Ratio (as defined in the Alpine Term Loan Credit Agreement) of 2.00 to 1.00. This ratio is generally the consolidated total debt of Alpine divided by Alpine's adjusted EBITDA. Alpine is closely monitoring its forthcoming compliance obligations with this covenant. While there can be no assurance, Alpine believes that it will be able to meet, modify, or further defer this debt covenant.

Capital Expenditures

The nature of our capital expenditures consists of a base level of investment required to support our current operations and amounts related to growth and company initiatives.

During the six months ended June 30, 2025 our capital expenditures were $99.0 million, consisting of maintenance capital expenditures for our hydraulic fracturing fleet, upgrades to legacy pumps, expenditures to maintain efficient operations at our sand mines, and investments in next generation technology.

For the full year of 2025, we estimate capital expenditures will range from $125 million to $145 million in maintenance related expenditures and an additional $50 million to $80 million for growth initiatives. Growth initiatives in 2025 relate to upgrades to our hydraulic fracturing fleet, investments in next generation technology and sand mine improvements.

We continually evaluate our capital expenditures and the amount that we ultimately spend will depend on a number of factors, including customer demand for fleets and expected industry activity levels.

Purchase Commitments

As of June 30, 2025, we had purchase commitments of $30.9 million in 2025 for hydraulic fracturing equipment components.

Tax Receivable Agreement

As of June 30, 2025 we have $86.4 million of estimated tax receivable agreement obligations, with an estimated $3.4 million coming due over the next twelve months. This obligation will generally be paid under the tax receivable agreement as the Company realizes actual cash tax savings from the tax benefits covered by the tax receivable agreement in future tax years. We do not expect a significant increase in the estimate of this liability in future periods. For additional information about our tax receivable agreement, please see Item 8 "Financial Statements and Supplementary Data" in our Annual Report.

Acquisitions of Strategic Businesses

Our growth strategy includes potential acquisitions and other strategic transactions. From time to time we enter into non-binding letters of intent as well as binding agreements to make investments or acquisitions. These arrangements may provide for purchase consideration including cash, notes payable by us, equity or some combination, the use of which could impact our liquidity needs. These letters of intent typically are subject to the completion of satisfactory due diligence, the negotiation and resolution of significant business and legal issues, the negotiation, documentation and completion of mutually satisfactory definitive agreements among the parties, the consent of our lenders, our ability to finance any cash payment at closing, and approval of our board of directors. Any binding agreements we may enter typically include customary closing conditions. We cannot guarantee that any such actual or potential transaction will be completed on acceptable terms, if at all.

We have historically funded our acquisitions through issuances of our equity securities, borrowings under our credit agreements, and issuance of debt securities. For any future acquisitions, we may utilize borrowings under our revolving credit facility and various financing sources available to us, including the issuance of equity or debt securities through public offerings or private placements, to fund these acquisitions. Our ability to complete future offerings of equity or debt securities and the timing and terms of these offerings will depend on various factors including prevailing market conditions and our financial condition.

At June 30, 2025, we held no derivative instruments that materially increased our exposure to market risks for interest rates, foreign currency rates, commodity prices or other market price risks. We are subject to interest rate risk on our variable-rate debt. A 1% increase in interest rates on our variable-rate debt as of June 30, 2025, would increase the annual interest payments for this debt by approximately $10.6 million.

Evaluation of Disclosure Controls and Procedures

In accordance with Exchange Act Rule 13a-15, we carried out an evaluation, under the supervision and with the participation of management, including our Executive Chairman (our principal executive officer) and our Chief Financial Officer (our principal financial officer), of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Executive Chairman and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2025 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Executive Chairman and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Limitations on Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in the significant risk factors that may affect our business, results of operations or liquidity as described in Item 1A "Risk Factors" in our Annual Report.