# Liberty Energy Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Liberty Energy Inc.](/companies/lbrt.md) (CIK 1694028)
- Form: 10-Q
- Filed: 2024-10-17
- Accepted by EDGAR: Oct 17, 2024, 16:08 ET
- Period: 2024-09-30
- Accession: 0001694028-24-000112
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1694028/000169402824000112/lbrt-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1694028/000169402824000112/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $1.14bn | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $3.37bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $840.3m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $2.46bn | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $107.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $364.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $8.6m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $24.2m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $22.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $81.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $73.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $264.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.44 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.55 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.45 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.59 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 168,595,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 169,947,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $652.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $447.5m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $35.3m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $99.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $23.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $922.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $3.27bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $748.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $1.30bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $123.0m | us-gaap:LongTermDebtNoncurrent |

## Management's discussion and analysis

As filed, 34,855 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs, and expected performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in “Cautionary Note Regarding Forward-Looking Statements,” the Annual Report under the heading “Item 1A. Risk Factors,” and in “Part II – Other Information, Item 1A. Risk Factors” included herein. We assume no obligation to update any of these forward-looking statements.*

### Overview

The Company, together with its subsidiaries, is a leading integrated energy services and technology company focused on providing innovative hydraulic fracturing services and related technologies to onshore oil and natural gas E&P companies. We offer customers hydraulic fracturing services, together with complementary services including wireline services, proppant delivery solutions, field gas processing and treating, CNG delivery, data analytics, related goods (including our sand mine operations), and technologies to facilitate lower emission completions, thereby helping our customers reduce their emissions profile. We have grown from one active hydraulic fracturing fleet in December 2011 to over 40 active fleets as of September 30, 2024. We provide our services primarily in the Permian Basin, the Williston Basin, the Eagle Ford Shale, the Haynesville Shale, the Appalachian Basin (Marcellus Shale and Utica Shale), the Western Canadian Sedimentary Basin, the DJ Basin, and the Anadarko Basin. Our operations also extend to a few smaller shale basins, including the Uinta Basin, the Powder River Basin, and the San Juan Basin, as well as to two sand mines in the Permian Basin.

In early 2023, the Company launched Liberty Power Innovations LLC (“LPI”), an integrated alternative fuel and power solutions provider for remote applications. LPI provides CNG supply, field gas processing and treating, and well site fueling and logistics. LPI was formed with the initial focus on supporting the Company’s transition towards our next generation digiFleets℠ and dual fuel fleets, as CNG fueling services are limited in the market, yet critical to maintaining highly efficient well site operations. Currently, LPI is primarily focused on supporting an industry transition to natural gas fueled technologies, serving as a key enabler of the next step of cost and emissions reductions in the oilfield.

We believe technical innovation and strong relationships with our customer and supplier bases distinguish us from our competitors and are the foundations of our business. We expect that E&P companies will continue to focus on technological innovation as completion complexity and fracture intensity of horizontal wells increases, particularly as customers are increasingly focused on reducing emissions from their completions operations. We remain proactive in developing innovative solutions to industry challenges, including developing: (i) our databases of U.S. unconventional wells to which we apply our proprietary multi-variable statistical analysis technologies to provide differential insight into fracture design optimization; (ii) our Liberty Quiet Fleet® design which significantly reduces noise levels compared to conventional hydraulic fracturing fleets; (iii) hydraulic fracturing fluid systems tailored to the specific reservoir properties in the basins in which we operate; (iv) our dual fuel dynamic gas blending (“DGB”) fleets that allow our engines to run diesel or a combination of diesel and natural gas, to optimize fuel use, reduce emissions and lower costs; (v) our digiFleets℠, comprising of digiFrac℠ and digiPrime℠ pumps and other complementary equipment (together “digiTechnologies℠”), our innovative, purpose-built electric and hybrid frac pumps that have approximately 25% lower CO2e emission profile than the Tier IV DGB; (vi) our wet sand handling technology which eliminates the need to dry sand, enabling the deployment of mobile mines nearer to wellsites; and (vii) the launch of LPI to support the transition to our digiFleets as well as the transition to lower costs and emissions in the oilfield. In addition, our integrated supply chain includes proppant, chemicals, equipment, natural gas fueling services, logistics and integrated software which we believe promotes wellsite efficiency and leads to more pumping hours and higher productivity throughout the year to better service our customers. In order to achieve our technological objectives, we carefully manage our liquidity and debt position to promote operational flexibility and invest in the business throughout the full commodity cycle in the regions we operate.

### Recent Trends and Outlook

The oil markets reflect uncertainty across the global economy, OPEC+ production plans, Chinese economic growth, and Middle East geopolitical dynamics. However, global demand for oil is expected to grow by approximately one million barrels of oil per day in 2024 and is forecasted to do the same again in 2025. While global oil production may be in a surplus in 2025, oil prices are expected to remain relatively rangebound and supportive of North American E&P activity.

With respect to natural gas markets, producer curtailments and domestic power generation demand have led to recent increases in natural gas prices after storage congestion concerns eased. However, higher prices may not be sustained should they incentivize reversal of curtailments. The commissioning of LNG export facilities in the U.S. and Canada is expected to stimulate gas activity in 2025 and support natural gas demand.

Elevated uncertainty in energy markets has further left operators reluctant to accelerate completions activity in advance of the new year. Completions activity is expected to increase in early 2025 to support flattish E&P oil & gas production targets. Since late 2023, U.S. crude oil production has been relatively flat and would likely decline if current completions activity levels persist. Frac industry dynamics are poised to improve in 2025 from today’s levels.

Soft year end frac activity levels are pressuring prices in the near term to levels that are inconsistent with the anticipated market demand and supply of horsepower in 2025. It is important that service prices support investment, especially given aging equipment, industry underinvestment in next generation technologies, and growing fleet sizes.

During the third quarter of 2024, the posted WTI price traded at an average of $76.43 per barrel (“Bbl”), as compared to the third quarter of 2023 average of $82.25 per Bbl, and the second quarter of 2024 average of $81.81 per Bbl. In addition, the average domestic onshore rig count for the United States and Canada was 772 rigs reported in the third quarter of 2024, down from the third quarter of 2023 of 817, but up from the second quarter of 2024 of 716, according to a report from Baker Hughes.

### Results of Operations

### Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023

*(in thousands)*

| Description | Three months ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $1,138,578 | $1,215,905 | $(77,327) |
| Cost of services, excluding depreciation, depletion, and amortization shown separately | 840,274 | 850,247 | (9,973) |
| General and administrative | 58,614 | 55,040 | 3,574 |
| Transaction and other costs | — | 202 | (202) |
| Depreciation, depletion, and amortization | 126,395 | 108,997 | 17,398 |
| Loss (gain) on disposal of assets | 6,017 | (3,808) | 9,825 |
| Operating income | 107,278 | 205,227 | (97,949) |
| Other expense, net | 11,316 | 6,776 | 4,540 |
| Net income before income taxes | 95,962 | 198,451 | (102,489) |
| Income tax expense | 22,158 | 49,843 | (27,685) |
| Net income | 73,804 | 148,608 | (74,804) |

### Revenue

Our revenue decreased $77.3 million, or 6.4%, to $1.1 billion for the three months ended September 30, 2024 compared to $1.2 billion for the three months ended September 30, 2023. The decrease in revenue was attributable to a decrease in service and materials pricing, partially offset by higher activity levels primarily from increased fleet efficiency.

### Cost of Services

Cost of services (excluding depreciation, depletion, and amortization) decreased $10.0 million, or 1.2%, to $840.3 million for the three months ended September 30, 2024 compared to $850.2 million for the three months ended September 30, 2023. The decrease in expense was primarily related to decreases in materials costs and lower repairs and maintenance costs, partially offset by increased personnel costs related to higher activity levels discussed above.

### General and Administrative

General and administrative expenses increased $3.6 million, or 6.5%, to $58.6 million for the three months ended September 30, 2024 compared to $55.0 million for the three months ended September 30, 2023. The increase was primarily attributable to increased corporate costs to support our additional service offerings, partially offset by a decrease in cash incentive and stock-based compensation expense due to lower operating results compared to the prior year period.

### Transaction and Other Costs

Transaction and other costs decreased $0.2 million, or 100.0%, as the Company did not incur such costs for the three months ended September 30, 2024 compared to $0.2 million for the three months ended September 30, 2023. The costs incurred during the three months ended September 30, 2023 primarily consisted of due diligence work for the Siren Acquisition. See Note 2—Significant Accounting Policies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for further details.

### Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization expense increased $17.4 million, or 16.0%, to $126.4 million for the three months ended September 30, 2024 compared to $109.0 million for the three months ended September 30, 2023. The increase during the three months ended September 30, 2024 was due to additional equipment placed in service since the prior year period, including equipment related to the deployment of our digiTechnologiesSM.

### Loss (gain) on Disposal of Assets

The Company recorded a loss on disposal of assets of $6.0 million for the three months ended September 30, 2024 compared to a gain of $3.8 million for the three months ended September 30, 2023. The loss for the three months ended September 30, 2024 related to the disposal of used older technology field equipment that was no longer operational. The gain for the three months ended September 30, 2023 primarily related to sales of used field equipment and light duty trucks in a strong used vehicle and equipment market.

### Other Expense, net

Other expense, net increased by $4.5 million, or 67.0%, to $11.3 million for the three months ended September 30, 2024 compared to $6.8 million for the three months ended September 30, 2023. Other expense, net is comprised of unrealized loss on investments, net, interest expense, net, and interest income—related party. The Company recorded an unrealized loss on investments, net of $2.7 million related to two equity investments measured at fair value during the three months ended September 30, 2024, compared to $0 for the three months ended September 30, 2023. Interest expense, net increased $1.3 million as a result of the addition of finance lease liabilities, refer to “Liquidity and Capital Resources” below for further discussion of the Company’s finance leases. Additionally, interest income—related party decreased $0.5 million related to a note receivable agreement executed in December 2022, amended in August 2023, and fully collected in March 2024.

### Income Tax Expense

The Company recognized income tax expense of $22.2 million for the three months ended September 30, 2024, an effective rate of 23.1%, compared to $49.8 million for the three months ended September 30, 2023, an effective rate of 25.1%. The decrease in income tax expense was primarily attributable to the decrease in net income before income taxes.

### Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023

*(in thousands)*

| Description | Nine months ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $3,371,587 | $3,672,970 | $(301,383) |
| Cost of services, excluding depreciation, depletion, and amortization shown separately | 2,458,752 | 2,572,119 | (113,367) |
| General and administrative | 169,300 | 166,110 | 3,190 |
| Transaction and other costs | — | 1,804 | (1,804) |
| Depreciation, depletion, and amortization | 372,886 | 303,093 | 69,793 |
| Loss (gain) on disposal of assets | 6,105 | (6,981) | 13,086 |
| Operating income | 364,544 | 636,825 | (272,281) |
| Other expense, net | 19,241 | 21,142 | (1,901) |
| Net income before income taxes | 345,303 | 615,683 | (270,380) |
| Income tax expense | 81,186 | 151,658 | (70,472) |
| Net income | 264,117 | 464,025 | (199,908) |
| Less: Net income attributable to non-controlling interests | — | 91 | (91) |
| Net income attributable to Liberty Energy Inc. stockholders | $264,117 | $463,934 | $(199,817) |

### Revenue

Our revenue decreased $301.4 million, or 8.2%, to $3.4 billion for the nine months ended September 30, 2024 compared to $3.7 billion for the nine months ended September 30, 2023. The decrease in revenue was attributable to a decrease in service and materials pricing, partially offset by higher activity levels primarily from increased fleet efficiency.

### Cost of Services

Cost of services (excluding depreciation, depletion, and amortization) decreased $113.4 million, or 4.4%, to $2.5 billion for the nine months ended September 30, 2024 compared to $2.6 billion for the nine months ended September 30, 2023. The decrease in expense was primarily related to decreases in materials costs and lower repairs and maintenance costs, partially offset by increased personnel costs related to higher activity levels discussed above.

### General and Administrative

General and administrative expenses increased $3.2 million, or 1.9%, to $169.3 million for the nine months ended September 30, 2024 compared to $166.1 million for the nine months ended September 30, 2023. The increase was primarily attributable to increased corporate costs to support our additional service offerings, partially offset by a decrease in cash incentive and stock-based compensation expense due to lower operating results compared to the prior year period.

### Transaction and Other Costs

Transaction and other costs decreased $1.8 million, or 100.0%, as the Company did not incur such costs for the nine months ended September 30, 2024 compared to $1.8 million for the nine months ended September 30, 2023. The costs incurred during the nine months ended September 30, 2023 primarily consisted of due diligence work for the Siren Acquisition. See Note 2—Significant Accounting Policies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for further details.

### Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization expense increased $69.8 million, or 23.0%, to $372.9 million for the nine months ended September 30, 2024 compared to $303.1 million for the nine months ended September 30, 2023. The increase in the nine months ended September 30, 2024 was due to additional equipment placed in service since the prior year period, including equipment related to the deployment of our digiTechnologiesSM.

### Loss (gain) on disposal of assets

The Company recognized a loss on disposal of assets of $6.1 million for the nine months ended September 30, 2024 compared to a gain of $7.0 million for the nine months ended September 30, 2023. The loss for the nine months ended September 30, 2024 related to the disposal of used older technology field equipment that was no longer operational. The gain for the nine months ended September 30, 2023 primarily related to sales of used field equipment and light duty trucks in a strong used vehicle and equipment market.

### Other Expense, net

Other expense, net decreased by $1.9 million to $19.2 million for the nine months ended September 30, 2024 compared to $21.1 million for the nine months ended September 30, 2023. Other expense, net is comprised of unrealized gain on investments, net, interest expense, net, and interest income—related party. The Company recorded an unrealized gain on investments, net of $4.5 million related to two equity investments measured at fair value during the nine months ended September 30, 2024, compared to $0 for the nine months ended September 30, 2023. Interest expense, net increased $1.8 million as a result of the addition of finance lease liabilities, refer to “Liquidity and Capital Resources” below for further discussion of the Company’s finance leases. Additionally, interest income—related party decreased $0.8 million related to a note receivable agreement executed in December 2022, amended in August 2023, and fully collected in March 2024.

### Income Tax Expense

The Company recognized income tax expense of $81.2 million for the nine months ended September 30, 2024, an effective rate of 23.5%, compared to $151.7 million for the nine months ended September 30, 2023, an effective rate of 24.6%. The decrease in income tax expense was primarily attributable to the decrease in net income before income taxes.

### Comparison of Non-GAAP Financial Measures

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income before interest, income taxes, and depreciation, depletion, and amortization. We define Adjusted EBITDA as EBITDA adjusted to eliminate the effects of items such as non-cash stock-based compensation, new fleet or new basin start-up costs, fleet lay-down costs, gain or loss on the disposal of assets, bad debt reserves, transaction and other costs, the gain or loss on remeasurement of liability under our tax receivable agreements, the unrealized gain or loss on investments, net, and other non-recurring expenses that management does not consider in assessing ongoing performance.

Our board of directors, management, investors, and lenders use EBITDA and Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation, depletion, and amortization) and other items that impact the comparability of financial results from period to period. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.

### Note Regarding Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance and results of operations. Net income is the GAAP financial measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net income, which is the most directly comparable GAAP financial measure for the periods presented:

### Three and Nine Months Ended September 30, 2024, Compared to Three and Nine Months Ended September 30, 2023: EBITDA and Adjusted EBITDA

*(in thousands)*

| Description | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net income | $73,804 | $148,608 | $(74,804) | $264,117 | $464,025 | $(199,908) |
| Depreciation, depletion, and amortization | 126,395 | 108,997 | 17,398 | 372,886 | 303,093 | 69,793 |
| Interest expense, net | 8,589 | 6,776 | 1,813 | 23,715 | 21,142 | 2,573 |
| Income tax expense | 22,158 | 49,843 | (27,685) | 81,186 | 151,658 | (70,472) |
| EBITDA | $230,946 | $314,224 | $(83,278) | $741,904 | $939,918 | $(198,014) |
| Stock-based compensation expense | 8,121 | 8,595 | (474) | 22,318 | 23,738 | (1,420) |
| Loss (gain) on disposal of assets | 6,017 | (3,808) | 9,825 | 6,105 | (6,981) | 13,086 |
| Unrealized loss (gain) on investments, net | 2,727 | — | 2,727 | (4,474) | — | (4,474) |
| Transaction and other costs | — | 202 | (202) | — | 1,804 | (1,804) |
| Fleet start-up and lay-down costs | — | — | — | — | 2,082 | (2,082) |
| Adjusted EBITDA | $247,811 | $319,213 | $(71,402) | $765,853 | $960,561 | $(194,708) |

EBITDA was $230.9 million for the three months ended September 30, 2024 compared to $314.2 million for the three months ended September 30, 2023. Adjusted EBITDA was $247.8 million for the three months ended September 30, 2024 compared to $319.2 million for the three months ended September 30, 2023. The decreases in EBITDA and Adjusted EBITDA primarily resulted from lower pricing and partially offset by changes in activity levels as described above under the captions *Revenue, Cost of Services*, and *General and Administrative for the Three Months Ended September 30, 2024, Compared to the Three Months Ended September 30, 2023.*

EBITDA was $741.9 million for the nine months ended September 30, 2024 compared to $939.9 million for the nine months ended September 30, 2023. Adjusted EBITDA was $765.9 million for the nine months ended September 30, 2024 compared to $960.6 million for the nine months ended September 30, 2023. The decreases in EBITDA and Adjusted EBITDA primarily resulted from lower pricing and partially offset by changes in activity levels as described above under the captions *Revenue, Cost of Services*, and *General and Administrative for the Nine Months Ended September 30, 2024, Compared to the Nine Months Ended September 30, 2023.*

### Liquidity and Capital Resources

### Overview

Our primary sources of liquidity consist of cash flows from operations and borrowings under our ABL Facility (as defined below). We expect to fund operations and organic growth with these sources. We monitor the availability and cost of capital resources such as equity, debt, and lease financings that could be leveraged for current or future financial obligations including those related to acquisitions, capital expenditures, working capital, and other liquidity requirements. We may incur additional indebtedness or issue equity in order to meet our capital expenditure activities and liquidity requirements, as well as to fund growth opportunities that we pursue, including via acquisition. Our primary uses of capital have been capital expenditures to support organic growth and funding ongoing operations, including maintenance and fleet upgrades, as well as the repurchases of, and dividends on, shares of our Class A Common Stock.

Cash and cash equivalents decreased by $13.8 million to $23.0 million as of September 30, 2024 compared to $36.8 million as of December 31, 2023, while working capital excluding cash and current liabilities under lease arrangements decreased $101.5 million.

As of September 30, 2024, the Company had one credit agreement outstanding, a revolving line of credit up to $525.0 million (the “ABL Facility”). The ABL Facility is subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory available to finance working capital needs. As of September 30, 2024, the borrowing base was calculated to be $459.7 million, and the Company had $123.0 million outstanding, in addition to letters of credit in the amount of $7.4 million, with $329.3 million of remaining availability.

The ABL Facility contains covenants that restrict our ability to take certain actions. As of September 30, 2024, we were in compliance with all debt covenants.

See Note 7—Debt to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for further details.

We have no material off balance sheet arrangements as of September 30, 2024, except for purchase commitments under supply agreements as disclosed above under Note 14—Commitments & Contingencies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report. As such, we are not materially exposed to any other financing, liquidity, market, or credit risk that could arise if we had engaged in such financing arrangements.

### Share Repurchase Program

Under our share repurchase program, the Company is authorized to repurchase up to $750.0 million of outstanding Class A Common Stock through and including July 31, 2026. Shares may be repurchased from time to time for cash in open market transactions, through block trades, in privately negotiated transactions, through derivative transactions, or by other means in accordance with applicable federal securities laws. The timing and the amount of repurchases will be determined by the Company at its discretion based on an evaluation of market conditions, capital allocation alternatives and other factors. The share repurchase program does not require us to purchase any dollar amount or number of shares of our Class A Common Stock and may be modified, suspended, extended or terminated at any time without prior notice. The Company expects to fund any repurchases by using cash on hand, borrowings under the ABL Facility, and expected free cash flow to be generated through the duration of the share repurchase program. During the three and nine months ended September 30, 2024, the Company repurchased and retired shares of Class A Common Stock for $39.4 million and $99.1 million, respectively, under the share repurchase program.

### Cash Flows

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

*(in thousands)*

| Description | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net cash provided by operating activities | $652,082 | $719,841 | $(67,759) |
| Net cash used in investing activities | (454,965) | (528,435) | 73,470 |
| Net cash used in financing activities | (210,804) | (208,340) | (2,464) |

### Analysis of Cash Flow Changes Between the Nine Months Ended September 30, 2024 and 2023

*Operating Activities*. Net cash provided by operating activities was $652.1 million for the nine months ended September 30, 2024, compared to $719.8 million for the nine months ended September 30, 2023. The $67.8 million decrease in cash from operating activities is primarily attributable to a $301.4 million decrease in revenues, offset by a $179.9 million decrease in cash operating expenses, interest expense, net, and income tax, and a $10.6 million decrease in cash from changes in working capital for the nine months ended September 30, 2024, compared to a $64.3 million decrease in cash from changes in working capital for the nine months ended September 30, 2023.

*Investing Activities*. Net cash used in investing activities was $455.0 million for the nine months ended September 30, 2024, compared to $528.4 million for the nine months ended September 30, 2023. Cash used in investing activities was lower during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 primarily due to the Siren Acquisition, modestly higher capital spending in the prior year period, and lower proceeds from asset sales, partially offset by equity investments in the current year period. The Company purchased Siren Energy for $75.7 million in cash, net of cash received, during the nine months ended September 30, 2023. Refer to Note 2—Significant Accounting Policies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information related to the acquisition. Investments in equipment, including the new digiTechnologiesSM suite and capitalized maintenance of existing equipment decreased $17.7 million, from $465.2 million for the nine months ended September 30, 2023 to $447.5 million for the nine months ended September 30, 2024. Proceeds from asset sales decreased $13.8 million, from $22.4 million to $8.6 million as the Company benefited from strong used vehicle and equipment markets in the prior period. Finally, during the nine months ended September 30, 2024, the Company spent $16.1 million for equity investments in Tamboran Resources Corporation, Empire Energy Group Ltd., and Falcon Oil & Gas Ltd, compared to $10.0 million for an equity investment in Oklo Inc. during the nine months ended September 30, 2023.

*Financing Activities*. Net cash used in financing activities was $210.8 million for the nine months ended September 30, 2024, compared to net cash used in financing activities of $208.3 million for the nine months ended September 30, 2023. The $2.5 million increase in cash used in financing activities was primarily due to a $24.0 million increase in cash paid for finance leases, a $10.4 million increase in cash tax withholding on restricted stock unit vestings, and a $9.3 million increase in dividends paid, combined with net repayment of borrowings of $17.0 million during the current year period compared to $3.3 million in net borrowings during the prior year, offset by a $64.9 million decrease in share repurchases for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

### Cash Requirements

Our material cash commitments consist primarily of obligations under long-term debt on the ABL Facility, TRAs, finance and operating leases for property and equipment, cash used to pay for repurchases of, and dividends on, shares of our Class A Common Stock, and purchase obligations as part of normal operations. Certain amounts included in our contractual obligations as of September 30, 2024 are based on our estimates and assumptions about these obligations, including pricing, volumes, and duration. We have no material off balance sheet arrangements as of September 30, 2024, except for purchase commitments under supply agreements of $36.6 million payable within 2024, and $13.0 million payable thereafter. See Note 14—Commitments & Contingencies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for information regarding scheduled contractual obligations. During the three and nine months ended September 30, 2024, the Company expanded its equipment lease facilities resulting in the addition of $47.5 million and $129.0 million, respectively, in new finance lease obligations. The term on these new leases range from three to five years.

There have been no other material changes to cash requirements since the year ended December 31, 2023.

### Income Taxes

The Company is a corporation and is subject to U.S. federal, state, and local income tax. The Company is also subject to Canada and Australia federal and provincial income tax on its foreign operations.

The effective global income tax rate applicable to the Company for the nine months ended September 30, 2024 was 23.5% compared to 24.6%, for the period ended September 30, 2023. The Company’s effective tax rate is greater than the statutory federal income tax rate of 21.0% due to the Company’s Canadian operations, state income taxes in the states the Company operates, as well as nondeductible executive compensation. The Company recognized an income tax expense of $22.2 million and $81.2 million during the three and nine months ended September 30, 2024, respectively, and $49.8 million and $151.7 million for the three and nine months ended September 30, 2023, respectively.

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. As of September 30, 2024 and December 31, 2023, the Company’s net deferred tax liabilities were $102.3 million.

Refer to Note 11—Income Taxes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information related to income tax expense.

### Tax Receivable Agreements

Refer to Note 11—Income Taxes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information related to tax receivable agreements.

### Critical Accounting Estimates

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions (see Note 2—Significant Accounting Policies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report and Note 2—Significant Accounting Policies and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Annual Report). A critical accounting estimate is one that requires our most difficult, subjective or complex estimates and assessments and is fundamental to our results of operations. We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

There have been no material changes in our evaluation of our critical accounting policies and estimates since our Annual Report.

## Market risk

As filed, 1,949 characters.

Our consolidated financial statements are expressed in U.S. dollars, but, effective January 1, 2021, a portion of our operations is conducted in a currency other than U.S. dollars. The Canadian dollar is the functional currency of the Company’s foreign subsidiary as it is the primary currency within the economic environment in which the subsidiary operates. Changes in the exchange rate can affect our revenues, earnings, and the carrying value of our assets and liabilities in our consolidated balance sheet, either positively or negatively. Adjustments resulting from the translation of the subsidiary’s financial statements are reported in other comprehensive income (loss). For the three and nine months ended September 30, 2024, the Company recorded a foreign currency translation gain of $1.6 million and loss of $3.8 million, respectively, to comprehensive income. For the three and nine months ended September 30, 2023, the Company recorded foreign currency translation losses of $3.1 million and $1.6 million, respectively, to comprehensive income.

During the nine months ended September 30, 2024, the Company formed a subsidiary in Australia, and will use the Australian dollar as the functional currency for such subsidiary’s operations. The Australian subsidiary does not have any material assets or liabilities as of September 30, 2024 and did not generate material revenues or expenses during the nine months ended September 30, 2024, as such there was no notable impact of changes in the Australian dollar to U.S. dollar exchange rate in the financial statements of Company as of and for the nine months ended September 30, 2024.

Other exposures to market risk have not changed materially since December 31, 2023. For quantitative and qualitative disclosures about market risk, in addition to foreign currency translation, see Part II, Item 7(a), “Quantitative and Qualitative Disclosures About Market Risk,” in the Annual Report.

## Controls and procedures

As filed, 1,610 characters.

In accordance with Rules 13a-15 and 15d-15 of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 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 rules and forms of the SEC. 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 principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

### 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) that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 588 characters.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in the Annual Report and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results.

No other risk factors were identified in addition to the risk factors set forth in the Annual Report. There have been no material changes to the risk factors in the Annual Report.

Filed Oct 17, 2024.
Source: SEC EDGAR, the filing index for accession 0001694028-24-000112. Last ingested by Listed: Nov 5, 2026, 21:03 ET. No prices; not investment advice.