ProFrac (ACDC) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section highlights that the report contains forward-looking statements, which are not historical facts and involve risks and uncertainties, with the company disclaiming any obligation to update these statements unless legally required - The report contains forward-looking statements, which are not historical facts and involve risks and uncertainties; the company disclaims any obligation to update these statements unless legally required[7][9][12] - Key areas of forward-looking statements include business strategy, future growth, industry conditions, profitability, cash flows, capital expenditures, market for products/services, competition, government regulations, and general economic conditions[10] - Risks and uncertainties include the ability to integrate acquisitions, economic growth uncertainty, commodity price fluctuations, geopolitical conditions, inflation, competitive conditions, and regulatory changes[11][13] PART I - Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for ProFrac Holding Corp., including the balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items Condensed Consolidated Balance Sheets - Cash and cash equivalents increased from $14.8 million at December 31, 2024, to $26.0 million at June 30, 2025[16] - Inventories decreased from $201.1 million to $180.9 million, while accounts receivable increased from $312.7 million to $333.8 million[16] Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | % Change | | :----------------------------------- | :----------------------- | :-------------------------- | :---------------- | :------- | | ASSETS | | | | | | Total current assets | $580.3 | $574.1 | $6.2 | 1.1% | | Property, plant, and equipment (net) | $1,636.0 | $1,761.2 | $(125.2) | -7.1% | | Total assets | $2,830.7 | $2,988.1 | $(157.4) | -5.3% | | LIABILITIES & EQUITY | | | | | | Total current liabilities | $640.1 | $660.0 | $(19.9) | -3.0% | | Total liabilities | $1,812.4 | $1,848.5 | $(36.1) | -2.0% | | Total stockholders' equity | $952.2 | $1,076.1 | $(123.9) | -11.5% | Condensed Consolidated Statements of Operations - Goodwill impairment of $67.7 million was recorded in the six months ended June 30, 2024, with no impairment in 2025[18] Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :----------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total revenues | $501.9 | $579.4 | $(77.5) | -13.4% | | Total operating costs and expenses | $556.2 | $628.6 | $(72.4) | -11.5% | | Operating loss | $(54.3) | $(49.2) | $(5.1) | 10.4% | | Loss before income taxes | $(99.1) | $(89.3) | $(9.8) | 11.0% | | Net loss | $(103.5) | $(65.6) | $(37.9) | 57.8% | | Net loss attributable to ProFrac Holding Corp. | $(105.9) | $(66.7) | $(39.2) | 58.8% | | Loss per Class A common share (basic and diluted) | $(0.67) | $(0.42) | $(0.25) | 59.5% | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :----------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total revenues | $1,102.2 | $1,160.9 | $(58.7) | -5.1% | | Total operating costs and expenses | $1,140.5 | $1,170.2 | $(29.7) | -2.5% | | Operating loss | $(38.3) | $(9.3) | $(29.0) | 311.8% | | Loss before income taxes | $(114.2) | $(86.0) | $(28.2) | 32.8% | | Net loss | $(118.9) | $(62.6) | $(56.3) | 89.9% | | Net loss attributable to ProFrac Holding Corp. | $(123.4) | $(64.9) | $(58.5) | 90.1% | | Loss per Class A common share (basic and diluted) | $(0.79) | $(0.42) | $(0.37) | 88.1% | Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Comprehensive Income (Three Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :----------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Net loss | $(103.5) | $(65.6) | $(37.9) | 57.8% | | Foreign currency translation adjustments | $0.0 | $0.4 | $(0.4) | -100.0% | | Comprehensive loss | $(103.5) | $(65.2) | $(38.3) | 58.7% | | Comprehensive loss attributable to ProFrac Holding Corp. | $(105.9) | $(66.8) | $(39.1) | 58.5% | Condensed Consolidated Statements of Comprehensive Income (Six Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :----------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Net loss | $(118.9) | $(62.6) | $(56.3) | 89.9% | | Foreign currency translation adjustments | $0.1 | $0.4 | $(0.3) | -75.0% | | Comprehensive loss | $(118.8) | $(62.2) | $(56.6) | 91.0% | | Comprehensive loss attributable to ProFrac Holding Corp. | $(123.3) | $(65.0) | $(58.3) | 89.7% | Condensed Consolidated Statements of Changes in Equity - Total stockholders' equity decreased from $1,076.1 million at December 31, 2024, to $952.2 million at June 30, 2025, primarily due to net loss and adjustments related to convertible preferred stock[24] Changes in Stockholders' Equity (December 31, 2024 to June 30, 2025) | Metric | Balance, Dec 31, 2024 (millions) | Net Income (Loss) (millions) | Stock-based Compensation (millions) | Other Changes (millions) | Balance, Jun 30, 2025 (millions) | | :----------------------------------- | :----------------------------- | :--------------------------- | :---------------------------------- | :----------------------- | :----------------------------- | | Class A Common Stock (Amount) | $1.5 | $0.0 | $0.0 | $0.0 | $1.5 | | Additional Paid-in Capital | $1,241.2 | $0.0 | $1.4 | $(6.7) | $1,235.9 | | Accumulated Deficit | $(235.9) | $(123.4) | $0.0 | $(2.6) | $(361.9) | | Accumulated Other Comprehensive Income | $0.1 | $0.0 | $0.0 | $(0.2) | $0.0 | | Noncontrolling Interests | $69.2 | $4.5 | $0.5 | $2.5 | $76.7 | | Total Stockholders' Equity | $1,076.1 | $(118.9) | $1.9 | $(6.9) | $952.2 | Condensed Consolidated Statements of Cash Flows - The decrease in cash from operating activities was primarily due to lower earnings in 2025[135] - The significant decrease in cash used in investing activities was mainly due to decreased capital expenditures and fewer acquisitions in 2025 compared to 2024[136] - Cash used in financing activities in 2025 contrasts with cash provided in 2024, primarily due to increased borrowings to fund acquisitions in 2024[137] Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :----------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Net cash provided by operating activities | $139.1 | $192.6 | $(53.5) | -27.8% | | Net cash used in investing activities | $(97.9) | $(284.8) | $186.9 | -65.6% | | Net cash provided by (used in) financing activities | $(30.0) | $90.9 | $(120.9) | -133.0% | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $11.2 | $(1.3) | $12.5 | -961.5% | | Cash, cash equivalents, and restricted cash end of period | $26.0 | $24.0 | $2.0 | 8.3% | Notes to Unaudited Condensed Consolidated Financial Statements 1. Organization and Description of Business - ProFrac Holding Corp. is a vertically integrated energy services holding company providing hydraulic fracturing, proppant production, and manufacturing services to North American oil and natural gas E&P companies[32] - The company operates in three segments: Stimulation Services, Proppant Production, and Manufacturing[33] - The business is concentrated in the U.S. oilfield services industry, which is cyclical and highly dependent on oil and natural gas prices[38] - The company adopted FASB ASU 2023-07, Segment Reporting, retrospectively for fiscal year 2024, enhancing segment expense disclosures[39] 2. Supplemental Balance Sheet Information Inventories (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (millions) | December 31, 2024 (millions) | | :---------------------- | :----------------------- | :-------------------------- | | Raw materials and supplies | $7.2 | $16.2 | | Work in process | $18.0 | $19.7 | | Finished products and parts | $155.7 | $165.2 | | Total | $180.9 | $201.1 | Accrued Expenses (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (millions) | December 31, 2024 (millions) | | :-------------------------- | :----------------------- | :-------------------------- | | Employee compensation and benefits | $30.4 | $22.9 | | Sales, use, and property taxes | $15.5 | $21.0 | | Insurance | $15.7 | $13.2 | | Interest | $7.4 | $6.1 | | Income taxes | $4.8 | $1.9 | | Other | $3.2 | $2.1 | | Total accrued expenses | $77.0 | $67.2 | Other Current Liabilities (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (millions) | December 31, 2024 (millions) | | :-------------------------- | :----------------------- | :-------------------------- | | Acquired unfavorable contracts | $0.0 | $7.6 | | Accrued supply commitment charges | $12.6 | $12.6 | | Munger make-whole liability | $0.0 | $8.6 | | Accrued legal contingencies | $5.5 | $7.1 | | Deferred revenue | $1.4 | $7.4 | | Tax receivable agreement obligation | $3.4 | $3.3 | | Other | $10.1 | $10.0 | | Total other current liabilities | $33.0 | $56.6 | 3. Business Combinations and Dispositions - In June 2025, the company disposed of its EKU Power Drives subsidiary in the Manufacturing Segment, recording a $10.5 million loss[45] - In 2024, the company completed several acquisitions: BPC (hydraulic fracturing equipment) for $39.8 million in April, AST (pressure pumping services) for $174.0 million in June, and NRG (hydraulic fracturing equipment and software) for $6.0 million in June[46][47][48] Pro Forma Revenues and Net Loss (as if 2024 acquisitions occurred Jan 1, 2023) | Metric | Three Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2024 (millions) | | :------- | :---------------------------------------- | :--------------------------------------- | | Revenues | $643.1 | $1,324.9 | | Net loss | $(69.4) | $(64.6) | 4. Debt - On June 30, 2025, ProFrac Holdings II, LLC issued $20.0 million of Senior Secured Floating Rate Notes due 2029 to Wilks Brothers, LLC, with commitments for an additional $40.0 million in the second half of 2025[52] - The Alpine 2023 Term Loan was amended on June 26, 2025, reducing amortization payments and deferring the Total Net Leverage Ratio covenant testing to March 31, 2027[54] - As of June 30, 2025, the company was in compliance with covenants for the 2029 Senior Notes and ABL Credit Facility, with $87.3 million remaining availability under the ABL[55][56] Consolidated Debt (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | | :----------------------------------- | :----------------------- | :-------------------------- | | Total principal amount | $1,110.0 | $1,138.9 | | Less: unamortized debt discounts, premiums, and issuance costs | $(25.8) | $(29.9) | | Less: current portion of long-term debt | $(136.0) | $(164.6) | | Total long-term debt, net | $948.2 | $944.4 | 5. Revenue from Contracts with Customers - The company recognized amortization of acquired unfavorable contracts as revenue: $1.9 million (Q2 2025) and $7.6 million (YTD Q2 2025), down from $10.9 million and $27.4 million in the respective 2024 periods; as of June 30, 2025, off-market contract liabilities were zero[62] - As of June 30, 2025, the aggregate transaction price allocated to unsatisfied performance obligations for Proppant Production contracts was $24.3 million, expected to be recognized as revenue through 2027[63] 6. Other Operating Expense, Net - The significant increase in other operating expense, net, for Q2 and YTD 2025 was driven by a $12.8 million provision for credit losses related to an insolvent customer and increased transaction costs for strategic initiatives[68][123] - Litigation expenses decreased in 2025 compared to 2024, while losses on disposal of assets increased[65] Other Operating Expense, Net (Three and Six Months Ended June 30) | Category | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :----------------------------------- | :----------------- | :----------------- | :------------------- | :------------------- | | Litigation expenses and accruals | $2.8 | $9.2 | $4.4 | $14.0 | | Provision for credit losses | $12.8 | $0.0 | $12.8 | $0.0 | | Gain on insurance recoveries | $0.0 | $(3.2) | $0.0 | $(3.2) | | Transaction costs | $3.3 | $0.0 | $3.5 | $0.0 | | Lease termination | $0.8 | $0.0 | $0.8 | $0.0 | | Severance charges | $0.4 | $1.1 | $0.4 | $1.8 | | (Gain) loss on disposal of assets | $5.2 | $0.3 | $8.6 | $(1.1) | | Supply commitment charge | $0.0 | $0.0 | $0.0 | $0.2 | | Total | $25.3 | $7.4 | $30.5 | $11.7 | 7. Income Taxes - The effective tax rate for the six months ended June 30, 2025, was negative 4.1%, compared with 27.2% in the same period in 2024[70] - The 2025 tax provision included a $4 million discrete expense from a book-tax difference on the sale of gas conditioning equipment to Flotek[71] - The 2024 tax provision included a $27.4 million discrete benefit from the release of a valuation allowance on deferred tax assets due to the AST acquisition[72] - The recently enacted One Big Beautiful Bill Act (OBBBA) will be evaluated for impact in Q3 2025, but effects are expected to be immaterial due to the valuation allowance on net deferred tax assets[73] 8. Earnings Per Share - Loss per Class A common share increased significantly in both the three and six months ended June 30, 2025, compared to the same periods in 2024, reflecting higher net losses[74] Loss per Class A Common Share (Basic and Diluted) | Period | Q2 2025 | Q2 2024 | YTD Q2 2025 | YTD Q2 2024 | | :----------------------------------- | :------ | :------ | :---------- | :---------- | | Net loss attributable to ProFrac Holding Corp. (millions) | $(105.9) | $(66.7) | $(123.4) | $(64.9) | | Adjust Series A preferred stock to redemption value (millions) | $(1.3) | $(1.2) | $(2.6) | $(2.4) | | Net loss used for EPS (millions) | $(107.2) | $(67.9) | $(126.0) | $(67.3) | | Weighted average Class A common shares (millions) | 160.2 | 160.0 | 160.2 | 159.7 | | Basic and diluted EPS | $(0.67) | $(0.42) | $(0.79) | $(0.42) | 9. Commitments and Contingencies - As of June 30, 2025, the company had purchase commitments of $30.9 million for hydraulic fracturing equipment components in 2025[75] - The company is involved in various legal actions and administrative proceedings in the ordinary course of business, but management believes the ultimate liability will not materially adversely affect its financial position or liquidity[76][77] 10. Variable Interest Entity - ProFrac Holding Corp. consolidates Flotek Industries, Inc. as a Variable Interest Entity (VIE) because it has the power to appoint a majority of Flotek's board of directors through a contractual relationship, despite owning 50.4% of its common stock[79] - As of June 30, 2025, Flotek's consolidated assets were $78.2 million and liabilities were $52.9 million, with Flotek's assets only usable to settle its own obligations[80] 11. Fair Value Measurements - The Munger make-whole provision liability, measured at Level 3 fair value, was $8.6 million at December 31, 2024, and zero at June 30, 2025, due to settlement[81][82] - The carrying amounts of most financial instruments (cash, receivables, payables) approximate fair value due to their short-term nature or variable interest rates for debt[83][84] 12. Business Segments - The company operates in three reportable segments: Stimulation Services, Proppant Production, and Manufacturing, with an 'Other' category primarily including Flotek and Livewire Power, LLC[85] - Segment performance is assessed based on Adjusted EBITDA, which excludes interest, taxes, DDA, stock-based compensation, and other specific charges[86] - Stimulation Services revenue decreased due to fewer active fleets and lower pricing, while Proppant Production saw increased Q2 revenue due to higher pricing from a shift to wellsite pricing[110][111] - Manufacturing revenue increased year-to-date due to higher intercompany demand and acquisitions (BPC, NRG); Other segment revenue increased due to Flotek, including contract shortfall revenue[113][114] Adjusted EBITDA by Segment (Three Months Ended June 30) | Segment | Q2 2025 (millions) | Q2 2024 (millions) | Change (millions) | % Change | | :-------------------- | :----------------- | :----------------- | :---------------- | :------- | | Stimulation Services | $51.1 | $107.3 | $(56.2) | -52.4% | | Proppant Production | $14.8 | $25.7 | $(10.9) | -42.4% | | Manufacturing | $7.3 | $0.1 | $7.2 | 7200.0% | | Other | $8.4 | $4.4 | $4.0 | 90.9% | | Eliminations | $(3.0) | $(1.9) | $(1.1) | 57.9% | | Total Adjusted EBITDA | $78.6 | $135.6 | $(57.0) | -42.0% | Adjusted EBITDA by Segment (Six Months Ended June 30) | Segment | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | Change (millions) | % Change | | :-------------------- | :--------------------- | :--------------------- | :---------------- | :------- | | Stimulation Services | $155.7 | $232.5 | $(76.8) | -33.0% | | Proppant Production | $33.1 | $54.1 | $(21.0) | -38.8% | | Manufacturing | $11.3 | $4.5 | $6.8 | 151.1% | | Other | $16.1 | $8.0 | $8.1 | 101.3% | | Eliminations | $(8.1) | $(3.6) | $(4.5) | 125.0% | | Total Adjusted EBITDA | $208.1 | $295.5 | $(87.4) | -29.6% | 13. Related Party Transactions - The company engages in various transactions with entities controlled by or affiliated with the Wilks Parties (founders and principal stockholders), including logistics, financing, administrative support, pressure pumping services, equipment rental/sales, leasing, construction, earthworks, and aviation[34][93][96] - Accounts receivable from related parties, primarily Flying A, increased from $16.1 million at December 31, 2024, to $18.9 million at June 30, 2025[97] - Accounts payable to related parties, primarily Logistix IQ, increased from $18.1 million at December 31, 2024, to $30.0 million at June 30, 2025[97] Revenue from Related Parties (Three and Six Months Ended June 30) | Related Party | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :-------------- | :----------------- | :----------------- | :--------------------- | :--------------------- | | Flying A | $3.1 | $6.5 | $5.0 | $11.7 | | Total | $3.1 | $6.5 | $5.0 | $11.7 | Expenditures with Related Parties (Three and Six Months Ended June 30) | Related Party | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :---------------- | :----------------- | :----------------- | :--------------------- | :--------------------- | | Logistix IQ | $15.0 | $20.4 | $58.1 | $41.7 | | Wilks Brothers | $2.0 | $2.6 | $4.0 | $4.7 | | Related Lessors | $3.8 | $3.1 | $7.6 | $6.3 | | Wilks Earthworks | $6.8 | $4.5 | $12.4 | $6.1 | | Equify Financial | $4.6 | $2.6 | $9.2 | $4.7 | | Total | $36.4 | $35.6 | $96.8 | $66.2 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key developments, recent trends, and detailed analysis of revenues, costs, and liquidity across its business segments OVERVIEW - ProFrac is a vertically integrated energy services company focused on hydraulic fracturing, proppant production, and manufacturing for North American unconventional oil and natural gas resources[99] - The company operates through three reportable segments: Stimulation Services, Proppant Production, and Manufacturing[100] Summary Financial Results - Net loss in 2024 included a $67.7 million pre-tax goodwill impairment charge[105] - Total principal amount of long-term debt decreased by $28.9 million from December 31, 2024, to June 30, 2025[105] Summary Financial Results (Three and Six Months Ended June 30) | Metric | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :----------------------------------- | :----------------- | :----------------- | :--------------------- | :--------------------- | | Total revenue | $501.9 | $579.4 | $1,102.2 | $1,160.9 | | Net loss attributable to ProFrac Holding Corp. | $(105.9) | $(66.7) | $(123.4) | $(64.9) | | Cash provided by operating activities (YTD) | N/A | N/A | $139.1 | $192.6 | | Total principal amount of long-term debt (period end) | $1,110.0 | N/A | $1,110.0 | N/A | 2025 Developments - In April 2025, Flotek acquired gas conditioning equipment from the Stimulation Services segment for $107.5 million, with a six-year leaseback, providing ownership exposure to a scalable gas quality business[102] - In June 2025, the company issued $20.0 million of Senior Secured Floating Rate Notes due 2029 to Wilks Brothers, LLC, with commitments for an additional $40.0 million later in 2025, to fund capital expenditures and general corporate purposes[103] - The Alpine 2023 Term Loan was amended in June 2025 to reduce amortization payments and defer the Total Net Leverage Ratio covenant testing until March 31, 2027[104][106] - In June 2025, the EKU Power Drives subsidiary in the Manufacturing Segment was disposed of, resulting in a $10.5 million loss[106] Recent Trends and Outlook - The business is highly dependent on E&P companies' expenditures, which are influenced by oil and natural gas prices[107] - Oil and natural gas commodity prices decreased in Q2 2025, leading to reduced customer activity and a decline in the company's Q2 results compared to Q1[107][108] - The company expects Q3 results to decline relative to Q2 but is encouraged by increasing customer engagement for 2026 planning[108] RESULTS OF OPERATIONS Revenues - Stimulation Services revenues decreased by 15% (Q2) and 6% (YTD) due to fewer active fleets and lower average pricing[110] - Proppant Production revenues increased 12% in Q2 due to higher average pricing from a shift to wellsite pricing, but decreased 2% YTD due to lower Q1 pricing[111] - Manufacturing revenues were flat in Q2 but increased 22% YTD, driven by increased intercompany demand in Q1 and contributions from BPC and NRG acquisitions[113] - Other revenues increased significantly (37% in Q2, 42% YTD) primarily due to increased revenue for Flotek, including contract shortfall revenue from the Stimulation Services segment[114] Revenues by Reportable Segment (Three and Six Months Ended June 30) | Segment | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :-------------------- | :----------------- | :----------------- | :--------------------- | :--------------------- | | Stimulation Services | $432.0 | $505.6 | $956.5 | $1,022.9 | | Proppant Production | $77.5 | $69.5 | $144.8 | $147.2 | | Manufacturing | $55.8 | $55.9 | $121.6 | $99.4 | | Other | $65.0 | $47.6 | $127.2 | $89.3 | | Eliminations | $(128.4) | $(99.2) | $(247.9) | $(197.9) | | Total revenues | $501.9 | $579.4 | $1,102.2 | $1,160.9 | Cost of Revenues - Stimulation Services cost of revenues decreased in Q2 due to fewer active fleets but increased YTD due to higher active fleets in Q1, including intercompany supply commitment charges from Flotek[115] - Proppant Production cost of revenues increased significantly (56% in Q2, 27% YTD) due to increased costs supporting the shift to wellsite pricing for intercompany sales[116] - Manufacturing cost of revenues decreased in Q2 due to lower intercompany volumes but increased YTD due to higher Q1 volumes and acquisition contributions[117] - Other cost of revenues increased (33% in Q2, 40% YTD) primarily due to increased product sales at Flotek[118] Cost of Revenues (Exclusive of DDA) by Reportable Segment (Three and Six Months Ended June 30) | Segment | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :-------------------- | :----------------- | :----------------- | :--------------------- | :--------------------- | | Stimulation Services | $350.2 | $367.7 | $738.0 | $730.5 | | Proppant Production | $57.6 | $37.0 | $100.8 | $79.1 | | Manufacturing | $43.6 | $49.0 | $98.9 | $82.8 | | Other | $48.7 | $36.7 | $96.2 | $68.7 | | Eliminations | $(125.4) | $(97.3) | $(239.8) | $(194.3) | | Total cost of revenues | $374.7 | $393.1 | $794.1 | $766.8 | Selling, General and Administrative - Total SG&A decreased 5% in Q2 due to lower labor costs from cost control measures and decreased stock-based compensation[119] - Total SG&A was flat YTD, with increased labor and facility costs from 2024 acquisitions (BPC, AST, NRG) offset by decreased stock-based compensation[119] Selling, General and Administrative Expenses (Three and Six Months Ended June 30) | Category | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :----------------------------------- | :----------------- | :----------------- | :--------------------- | :--------------------- | | SG&A, excluding stock-based compensation | $49.4 | $51.2 | $101.9 | $99.7 | | Stock-based compensation | $2.0 | $2.9 | $3.1 | $5.0 | | Total SG&A | $51.4 | $54.1 | $105.0 | $104.7 | Depreciation, Depletion, and Amortization - Depreciation, depletion, and amortization increased by $1.3 million in Q2 2025 but decreased by $5.5 million YTD 2025 compared to the same periods in 2024[120] Acquisition and Integration Costs - Acquisition and integration costs significantly decreased in 2025 compared to 2024, reflecting fewer acquisition activities[121] Acquisition and Integration Costs (Three and Six Months Ended June 30) | Period | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :----- | :----------------- | :----------------- | :--------------------- | :--------------------- | | Costs | $0.1 | $2.9 | $0.2 | $3.1 | Other Operating Expense, Net - The increase in other operating expense, net, was primarily due to a $12.8 million provision for credit losses related to an insolvent customer and $3.3 million in transaction costs for strategic initiatives in 2025[123] - Litigation expenses decreased, while losses on disposal of assets increased in 2025[122] Other Operating Expense, Net (Three and Six Months Ended June 30) | Category | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :----------------------------------- | :----------------- | :----------------- | :------------------- | :------------------- | | Litigation expenses and accruals | $2.8 | $9.2 | $4.4 | $14.0 | | Provision for credit losses | $12.8 | $0.0 | $12.8 | $0.0 | | Gain on insurance recoveries | $0.0 | $(3.2) | $0.0 | $(3.2) | | Transaction costs | $3.3 | $0.0 | $3.5 | $0.0 | | Lease termination | $0.8 | $0.0 | $0.8 | $0.0 | | Severance charges | $0.4 | $1.1 | $0.4 | $1.8 | | (Gain) loss on disposal of assets | $5.2 | $0.3 | $8.6 | $(1.1) | | Supply commitment charge | $0.0 | $0.0 | $0.0 | $0.2 | | Total | $25.3 | $7.4 | $30.5 | $11.7 | Interest Expense, Net - Interest expense, net, decreased in both periods due to lower average interest rates in 2025[125] Interest Expense, Net (Three and Six Months Ended June 30) | Period | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :----- | :----------------- | :----------------- | :--------------------- | :--------------------- | | Interest expense, net | $35.1 | $39.6 | $71.0 | $77.2 | Other (Expense) Income, Net - The shift to net expense in 2025 was primarily due to a $10.5 million loss on disposal of EKU Power Drives in Q2 2025, partially offset by a decrease in the fair value of the Munger make-whole provision in Q1 2025[126] Other (Expense) Income, Net (Three and Six Months Ended June 30) | Period | Q2 2025 (millions) | Q2 2024 (millions) | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :----- | :----------------- | :----------------- | :--------------------- | :--------------------- | | Other (expense) income, net | $(9.7) | $(0.5) | $(4.9) | $1.3 | Income Taxes - The 2025 tax provision included a $4 million discrete expense related to a book-tax difference on the sale of gas conditioning equipment to Flotek[128] - The 2024 tax provision included a $27.4 million discrete benefit from the release of a valuation allowance on deferred tax assets due to the AST acquisition[129] Income Taxes (Six Months Ended June 30) | Metric | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :-------------------- | :--------------------- | :--------------------- | | Income tax (expense) benefit | $(4.7) | $23.4 | | Effective tax rate | -4.1% | 27.2% | LIQUIDITY AND CAPITAL RESOURCES Sources of Liquidity - Primary liquidity sources are cash flows from operations, availability under the revolving credit facility, and commitments for an additional $40.0 million of 2029 Senior Notes in H2 2025[131] - As of June 30, 2025, total liquidity was $108.3 million, comprising $21.0 million in cash (excluding Flotek) and $87.3 million available under the revolving credit facility[133] - The company expects sufficient liquidity for capital expenditures, obligations, and debt covenant compliance for at least the next 12 months, though Alpine's forthcoming debt covenant (March 31, 2027) is being monitored[134] Cash Flows - Operating cash flow decreased due to lower earnings in 2025, despite a slight increase in cash from changes in net working capital[135] - Investing activities used less cash in 2025 due to decreased capital expenditures and fewer acquisitions compared to 2024[136] - Financing activities shifted from providing cash in 2024 to using cash in 2025, primarily due to increased borrowings for acquisitions in 2024[137] Cash Flows (Six Months Ended June 30) | Activity | YTD Q2 2025 (millions) | YTD Q2 2024 (millions) | | :-------------------- | :--------------------- | :--------------------- | | Operating activities | $139.1 | $192.6 | | Investing activities | $(97.9) | $(284.8) | | Financing activities | $(30.0) | $90.9 | | Net change in cash | $11.2 | $(1.3) | Cash Requirements - Material cash requirements include debt service obligations, capital expenditures, purchase commitments, tax receivable agreement payments, and potential acquisitions[139] - As of June 30, 2025, total long-term debt outstanding was $1,110.0 million, with $136.0 million due in the next twelve months[140] - Estimated capital expenditures for full-year 2025 range from $125 million to $145 million for maintenance and an additional $50 million to $80 million for growth initiatives[144] - Purchase commitments for hydraulic fracturing equipment components totaled $30.9 million for 2025[146] - Estimated tax receivable agreement obligations are $86.4 million, with $3.4 million due in the next twelve months[147] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, particularly interest rate risk on its variable-rate debt - The company is subject to interest rate risk on its variable-rate debt[151] - A 1% increase in interest rates on variable-rate debt as of June 30, 2025, would increase annual interest payments by approximately $10.6 million[151] - No derivative instruments were held that materially increased exposure to market risks for interest rates, foreign currency rates, commodity prices, or other market price risks[151] Item 4. Controls and Procedures This section details management's evaluation of the effectiveness of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures - Management, including the Executive Chairman and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[152] Limitations on Controls and Procedures - Management acknowledges that disclosure controls and procedures provide only reasonable, not absolute, assurance and are subject to inherent limitations, including the cost-benefit relationship and potential deterioration over time[153] Changes in Internal Control over Financial Reporting - There were no material changes in internal control over financial reporting during the three months ended June 30, 2025[154] PART II - Other Information Item 1. Legal Proceedings This section refers to the detailed discussion of legal proceedings and contingencies provided in the notes to the financial statements - Information regarding legal proceedings is incorporated by reference from Note 9, 'Commitments and Contingencies,' in the unaudited condensed consolidated financial statements[156] Item 1A. Risk Factors This section states that there have been no material changes to the significant risk factors previously disclosed in the company's Annual Report - No material changes have occurred in the significant risk factors affecting the business, results of operations, or liquidity since the Annual Report on Form 10-K for the year ended December 31, 2024[157] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms that there were no unregistered sales of equity securities during the reporting period - The company had no sales of unregistered equity securities during the period covered by this Quarterly Report[158] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the reporting period[159] Item 4. Mine Safety Disclosures This section directs to Exhibit 95 for information regarding mine safety violations and regulatory matters - Mine safety violations and other regulatory matters are disclosed in Exhibit 95 to this Quarterly Report, as required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K[160] Item 5. Other Information This section reports on securities trading plans by directors and executive officers - None of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[161] Item 6. Exhibits This section lists all exhibits filed or furnished with the Quarterly Report on Form 10-Q - The report includes various exhibits, such as the Second Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Indenture documents, and certifications from principal executive and financial officers[163] - Key exhibits include Amendment No. 3 to Term Loan Credit Agreement and Amendment No. 1 to Guarantee Agreement (Exhibit 10.1) and a Purchase Agreement for Senior Secured Floating Rate Notes (Exhibit 10.2)[163] SIGNATURES - The report was duly signed on behalf of ProFrac Holding Corp. on August 7, 2025, by Matthew D. Wilks, Executive Chairman and Director (Principal Executive Officer), and Austin Harbour, Chief Financial Officer (Principal Financial Officer)[166][168]