10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [ ] to [ ]

Commission File Number: 001-41388

ProFrac Holding Corp.

(Exact Name of Registrant as Specified in its Charter)


Delaware		87-2424964
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
333 Shops Boulevard, Suite 301, Willow Park, Texas		76087
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (254) 776-3722

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	ACDC	The Nasdaq Global Select Market
Warrants, each 124.777 warrants exercisable for one share of Class A Common Stock at an exercise price of $717.47 per share	ACDCW	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑Yes ☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐Yes ☑No

As of May 8, 2023, the registrant had 158,996,801 shares of Class A common stock outstanding.

TABLE OF CONTENTS


		Page
Cautionary Note Regarding Forward-Looking Statements		3
PART I
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Condensed Consolidated Statements of Changes in Equity	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
SIGNATURES		33

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include those that express a belief, expectation or intention, as well as those that are not statements of historical fact. Forward-looking statements include information regarding our future plans and goals, as well as our expectations with respect to:

•

Our business strategy and future growth prospects;

•

Our industry;

•

Integration of acquired businesses;

•

Our future profitability, cash flows and liquidity;

•

Our financial strategy, budget, projections and operating results;

•

The amount, nature and timing of our capital expenditures and the impact of such expenditures on our performance;

•

The availability and terms of capital;

•

Our exploration, development and production activities;

•

The market for our existing and future products and services;

•

Competition and government regulations; and

•

General economic conditions.

These forward-looking statements may be accompanied by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “will,” “should,” “could,” “would,” “likely,” “future,” “budget,” “pursue,” “target,” “seek,” “objective,” or similar expressions that are predictions of or indicate future events or trends that do not relate to historical matters.

The forward-looking statements in this Quarterly Report speak only as of the date of this Quarterly Report, or such other date as specified herein. We disclaim any obligation to update these statements unless required by law, and we caution you not to place undue reliance on them. Forward-looking statements are not assurances of future performance and involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties include, but are not limited to, the following:

•

our ability to finance, consummate, integrate and realize the benefits expected from our past or future acquisitions, including any related synergies;

•

uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and natural gas and therefore the demand for our services;

•

the level of production of crude oil, natural gas and other hydrocarbons and the resultant market prices of crude oil, natural gas, natural gas liquids and other hydrocarbons;

•

a further decline or future decline in domestic spending by the onshore oil and natural gas industry;

•

actions by members of the Organization of Petroleum Exporting Countries, Russia and other oil-producing countries with respect to oil production levels and announcements of potential changes in such levels;

•

the political environment in oil and natural gas producing regions, including uncertainty or instability resulting from civil disorder, terrorism or war, such as the ongoing war between Russia and Ukraine, which may negatively impact our operating results;

•

changes in general economic and geopolitical conditions;

•

competitive conditions in our industry;

•

changes in the long-term supply of and demand for oil and natural gas;

•

actions taken by our customers, competitors and third-party operators;

•

a decline in demand for proppant;

•

our ability to obtain permits, approvals and authorizations from governmental and third parties, and the effects of or changes to U.S. government regulation;

•

changes in the availability and cost of capital;

•

our ability to successfully implement our business plan;

•

large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;

•

the effects of consolidation on our customers or competitors;

•

the price and availability of debt and equity financing (including changes in interest rates);

•

our ability to complete growth projects on time and on budget;

•

introduction of new drilling or completion techniques, or services using new technologies subject to patent or other intellectual property protections;

•

operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control;

•

acts of terrorism, war or political or civil unrest in the United States or elsewhere;

•

loss or corruption of our information or a cyberattack on our computer systems;

•

the price and availability of alternative fuels and energy sources;

•

federal, state and local regulation of hydraulic fracturing and other oilfield service activities, as well as exploration and production activities, including public pressure on governmental bodies and regulatory agencies to regulate our industry;

•

the availability of water resources, suitable proppant and chemicals in sufficient quantities for use in hydraulic fracturing fluids;

•

the effects of existing and future laws and governmental regulations (or the interpretation thereof) on us and our customers;

•

the severity and duration of widespread health events and related economic repercussions on the oil and gas industry and on demand for oil and gas; and

•

the effects of future litigation.

Our forward-looking statements speak only as of the date they were made and, except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements because of new information, future events or other factors. All of our forward-looking information involves risks and uncertainties that could cause actual results to differ materially from the results expected. Although it is not possible to identify all factors, these risks and uncertainties include the risk factors and the timing of any of the risk factors identified in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 (the "Annual Report").

PART I

ITEM 1. FINANCIAL STATEMENTS

ProFrac Holding Corp.

Condensed Consolidated Balance Sheets

(in millions, except per share amounts)

(Unaudited)


	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	69.9	$	35.1
Accounts receivable:
Trade customers, net		593.1		535.5
Related party		4.4		2.1
Inventories		283.1		249.5
Prepaid expenses and other current assets		43.1		43.2
Total current assets		993.6		865.4
Property, plant, and equipment, net		1,909.9		1,396.4
Operating lease right-of-use assets, net		109.4		112.9
Goodwill		327.7		240.5
Intangible assets, net		200.0		203.1
Investments		53.0		58.6
Deferred tax assets		0.4		0.4
Other assets		46.3		56.3
Total assets	$	3,640.3	$	2,933.6

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable:
Trade creditors	$	515.0	$	339.4
Related party		40.1		24.0
Accrued expenses		130.2		115.4
Current portion of long-term debt		139.4		127.6
Current portion of operating lease liabilities		37.0		36.0
Other current liabilities		73.4		25.7
Total current liabilities		935.1		668.1
Long-term debt		1,047.6		735.0
Long-term debt—related party		61.1		62.8
Operating lease liabilities		76.7		81.0
Other liabilities		64.1		36.0
Total liabilities		2,184.6		1,582.9

Commitments and contingencies (Note 7)

Redeemable noncontrolling interest		1,254.9		2,462.9

Stockholders' equity (deficit):
Preferred stock, $0.01 par value, 50.0 shares authorized, no shares issued and outstanding		—		—
Class A common stock, $0.01 par value, 600.0 shares authorized, 54.6 and 53.9 shares issued and outstanding, respectively		0.5		0.5
Class B common stock, $0.01 par value, 400.0 shares authorized, 104.2 and 104.2 shares issued and outstanding, respectively		1.0		1.0
Additional paid-in capital		4.8		—
Retained earnings (accumulated deficit)		113.5		(1,185.9	)
Accumulated other comprehensive income		0.1		—
Total stockholders' equity (deficit) attributable to ProFrac Holding Corp.		119.9		(1,184.4	)
Noncontrolling interests		80.9		72.2
Total stockholders' equity (deficit)		200.8		(1,112.2	)
Total liabilities, redeemable noncontrolling interest, and stockholders' equity (deficit)	$	3,640.3	$	2,933.6

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ProFrac Holding Corp.

Condensed Consolidated Statements of Operations

(in millions, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Revenues	$	851.7		$	345.0

Operating costs and expenses:
Cost of revenues, exclusive of depreciation, depletion and amortization		541.7			236.5
Selling, general, and administrative		76.3			21.0
Depreciation, depletion and amortization		110.3			44.6
Acquisition and integration costs		12.3			13.0
Other operating expense (income), net		4.4			(0.1	)
Total operating costs and expenses		745.0			315.0

Operating income		106.7			30.0

Other (expense) income:
Interest expense, net		(34.9	)		(9.3	)
Gain (loss) on extinguishment of debt		4.1			(8.3	)
Other (expense) income, net		(9.4	)		8.2
Income before income taxes		66.5			20.6
Income tax expense		(6.7	)		(0.6	)
Net income		59.8			20.0
Less: net income attributable to ProFrac Predecessor		—			(19.6	)
Less: net loss (income) attributable to noncontrolling interests		4.2			(0.4	)
Less: net income attributable to redeemable noncontrolling interests		(42.0	)		—
Net income attributable to ProFrac Holding Corp.	$	22.0		$	—

Earnings per Class A common share (basic and diluted)	$	0.40

Weighted average Class A common shares outstanding:
Basic		54.5
Diluted		54.9

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ProFrac Holding Corp.

Condensed Consolidated Statement of Comprehensive Income

(in millions)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Net income	$	59.8		$	20.0
Foreign currency translation adjustments		0.3			(0.1	)
Comprehensive income		60.1			19.9
Less: comprehensive income attributable to ProFrac Predecessor		—			(19.5	)
Less: comprehensive loss (income) attributable to noncontrolling interest		4.1			(0.4	)
Less: comprehensive income attributable to redeemable noncontrolling interest		(42.1	)		—
Comprehensive income attributable to ProFrac Holding Corp.	$	22.1		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ProFrac Holding Corp.

Condensed Consolidated Statements of Changes in Equity

(in millions)

(Unaudited)


	Class A Common Stock				Class B Common Stock				Additional Paid-in			(Accumulated Deficit) Retained			Accumulated Other Comprehensive		Noncontrolling			Total Stockholders' (Deficit)
	Shares		Amount		Shares		Amount		Capital			Earnings			Income		Interests			Equity
Balance, December 31, 2022		53.9	$	0.5		104.2	$	1.0	$	—		$	(1,185.9	)	$	—	$	72.2		$	(1,112.2	)
Class A shares issued to acquire Producers		0.4		—		—		—		6.2			—			—		—			6.2
Class A shares issued to acquire Performance Proppants		0.3		—		—		—		3.4			—			—		—			3.4
Net income		—		—		—		—		—			22.0			—		(4.2	)		17.8
Stock-based compensation		—		—		—		—		0.9			—			—		0.1			1.0
Stock-based compensation related to deemed contribution		—		—		—		—		3.5			—			—		—			3.5
Conversion of Flotek notes to Flotek common stock		—		—		—		—		—			—			—		12.7			12.7
Foreign currency translation adjustments		—		—		—		—		—			—			0.1		0.1			0.2
Adjustment of redeemable noncontrolling interest to redemption amount		—		—		—		—		(9.2	)		1,277.4			—		—			1,268.2
Balance, March 31, 2023		54.6	$	0.5		104.2	$	1.0	$	4.8		$	113.5		$	0.1	$	80.9		$	200.8


	Members'			Accumulated Other Comprehensive			Noncontrolling		Total Members'
	Equity			Income			Interests		Equity
Balance, December 31, 2021	$	147.0		$	0.1		$	1.0	$	148.1
Net income		19.6			—			0.4		20.0
Member contributions		5.0			—			—		5.0
Deemed distribution		(3.7	)		—			—		(3.7	)
THRC Holdings related equity		72.9			—			—		72.9
Foreign currency translation		—			(0.1	)		—		(0.1	)
Balance, March 31, 2022	$	240.8		$	—		$	1.4	$	242.2

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ProFrac Holding Corp.

Condensed Consolidated Statements of Cash Flows

(in millions)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net income	$	59.8		$	20.0
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization		110.3			44.6
Amortization of acquired contract liabilities		(8.1	)		—
Stock-based compensation		13.1			—
Loss (gain) on disposal of assets, net		1.5			(0.2	)
Non-cash (gain) loss on extinguishment of debt		(4.1	)		4.3
Amortization of debt issuance costs		6.1			1.4
Acquisition earnout adjustment		(3.0	)		—
Unrealized loss (gain) on investments, net		9.7			(8.1	)
Other non-cash items, net		0.1			—
Changes in operating assets and liabilities:
Accounts receivable		(41.9	)		(46.8	)
Inventories		(24.7	)		(19.0	)
Prepaid expenses and other assets		(1.8	)		(9.9	)
Accounts payable		136.5			29.8
Accrued expenses		(3.1	)		22.5
Deferred revenues and other liabilities		(16.9	)		5.1
Net cash provided by operating activities		233.5			43.7

Cash flows from investing activities:
Acquisitions, net of cash acquired		(443.6	)		(279.0	)
Investment in property, plant & equipment		(83.2	)		(41.5	)
Proceeds from sale of assets		1.0			45.6
Investment in unconsolidated affiliate		—			(45.9	)
Initial investment in Flotek		—			(10.0	)
Other investments		—			(3.9	)
Net cash used in investing activities		(525.8	)		(334.7	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		320.0			560.3
Repayments of long-term debt		(18.2	)		(227.8	)
Borrowings from revolving credit agreements		406.7			97.9
Repayments to revolving credit agreements		(363.0	)		(96.2	)
Payment of debt issuance costs		(18.4	)		(22.9	)
Member contribution		—			5.0
Net cash provided by financing activities		327.1			316.3

Net increase in cash, cash equivalents, and restricted cash		34.8