1. ORGANIZATION AND DESCRIPTION OF BUSINESS

ProFrac Holding Corp. (“ProFrac Corp.”) and its consolidated subsidiaries, including ProFrac Holdings, LLC (“ProFrac LLC”), is a vertically integrated and innovation-driven energy services company providing hydraulic fracturing, completion services and other complementary products and services to leading upstream oil and gas companies engaged in the exploration and production (“E&P”) of North American unconventional oil and natural gas resources. The Company operates in three business segments: stimulation services, proppant production, and manufacturing.

Mr. Dan Wilks and Mr. Farris Wilks are brothers and are the founders and principal stockholders of the Company. Their sons, Mr. Matthew D. Wilks and Mr. Johnathan Ladd Wilks are the Company’s Executive Chairman and Chief Executive Officer, respectively. In the normal course of business, we enter into transactions with related parties where Mr. Dan Wilks and Mr. Farris Wilks and entities owned by or affiliated with them (collectively, the "Wilks Parties") hold a controlling financial interest (see “Note 16 – Related Party Transactions”).

Company Formation

ProFrac Corp. was incorporated as a Delaware corporation on August 17, 2021, to become a holding corporation for ProFrac LLC and its subsidiaries upon completion of a corporate reorganization in conjunction with a planned initial public offering (“IPO”). On May 17, 2022, ProFrac Corp. completed its IPO and corporate reorganization and became the managing member of ProFrac LLC.

The consolidated financial statements presented herein are those of ProFrac Corp. subsequent to the corporate reorganization on May 17, 2022, and ProFrac LLC before that date. In these notes to the consolidated financial statements, ProFrac Corp. and ProFrac LLC together are also referred to as “we,” “us,” “our,” or the “Company” and ProFrac LLC is also referred to as “ProFrac Predecessor.” For all periods presented, the consolidated financial statements presented herein include the controlled subsidiaries of ProFrac LLC, which include Best Pump & Flow LP (“Best Flow”) and Alpine Silica, LLC (“Alpine”).

Prior to December 21, 2021, the Wilks Parties held a controlling interest in each of ProFrac LLC, Best Flow and Alpine. Historical periods for ProFrac Predecessor had been presented on a consolidated and combined basis given the common control ownership by the Wilks Parties. On December 21, 2021, all of the then-outstanding membership interests in Best Flow and Alpine were contributed to ProFrac LLC in exchange for membership interests in ProFrac LLC. Accordingly, the results for the year ended December 31, 2021 have been retrospectively adjusted to present the operations of ProFrac LLC, Best Flow and Alpine on a combined basis. The acquisitions of Best Flow and Alpine have been accounted for in a manner consistent with the pooling of interest method of accounting, as the transaction was a combination of entities under common control. Under this method of accounting, the consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows have been adjusted to include all activities of the commonly controlled groups for all periods in which common control existed.

Initial Public Offering

In the second quarter of 2022, ProFrac Corp. completed its IPO of 18.2 million shares of its Class A common stock, par value $0.01 per share (the "Class A Common Stock") at a public offering price of $18.00 per share, which generated combined net proceeds of $301.7 million, after deducting underwriter discounts and commissions and estimated offering costs. The Company used $72.9 million of the net proceeds to redeem the membership ownership interests from the then-existing owners of THRC FTSI Related Equity (as defined in “Note 4 – Business Combinations”) and contributed the remaining proceeds to ProFrac Holdings, LLC. The Company used the remaining proceeds to pay down $208.6 million of outstanding borrowings with the remaining proceeds to be used for general corporate uses and additional repayment of debt.

Redeemable Noncontrolling Interests

ProFrac Corp.’s only material asset is an equity interest consisting of units representing limited liability company interests in ProFrac LLC (the “Units”). As the sole managing member of ProFrac LLC, ProFrac Corp. consolidates the financial results of ProFrac LLC and its subsidiaries and reports a noncontrolling interest related to the portion of Units not owned by ProFrac Corp. Historically, the holders of Units not owned by ProFrac Corp. also held shares of ProFrac Corp.’s Class B common stock, such that a single share of Class B common stock was issued for each Unit not owned by ProFrac Corp.

Pursuant to the Third Amended and Restated Limited Liability Company Agreement of ProFrac LLC and the Second Amended and Restated Certificate of Incorporation of ProFrac Corp., certain members of ProFrac LLC had the right to cause ProFrac LLC to redeem all or a portion of each such member's Units, together with the surrender of the same number of each such member's shares of Class B common stock, for an equivalent number of shares of Class A common stock or, at the

election of our board of directors, cash. In connection with the exercise of such redemption, a corresponding number of shares of Class B common stock would be canceled. The redemption election was not considered to be within our control because the holders of Class B common stock and their affiliates controlled us through direct representation on our board of directors. As a result, we have historically presented the noncontrolling interests in ProFrac LLC as redeemable noncontrolling interests outside of permanent equity.

In April 2023, all the eligible holders of the Units (the "Redeeming Members") submitted redemption notices with respect to all of their Units, representing an aggregate of 104.2 million ProFrac LLC units (the "Redeemed Units"), together with the surrender and delivery of the same number of shares of our Class B common stock. The Redeeming Members include entities owned or affiliated with ProFrac Corp.'s controlling stockholders, Mr. Dan Wilks and Mr. Farris Wilks, as well as Mr. Matthew D. Wilks, our Executive Chairman, an entity affiliated with Mr. Johnathan L. Wilks, our Chief Executive Officer, and Mr. Coy Randle, a member of our board of directors.

In April 2023, we delivered a written notice to ProFrac LLC and the Redeeming Members setting forth our election to exercise our right to purchase directly and acquire the Redeemed Units, together with the surrender and delivery of the same number of shares of our Class B common stock from the Redeeming Members.

We subsequently acquired the Redeemed Units from the Redeeming Members by issuing an aggregate of 101.1 million shares of Class A common stock on or about April 10, 2023 and the remaining 3.1 million shares on or about April 13, 2023. The surrendered shares of Class B common stock were canceled, and no shares of our Class B common stock remain issued and outstanding. The phrase "conversion of Class B common stock to Class A common stock" used throughout this document refers to the April 2023 transactions described above.

Correction of an Immaterial Error on Previously Issued Financial Statements

During the fourth quarter of 2023, the Company identified and corrected an error in our accounting for deferred tax assets and liabilities. The source of the error related to the incorrect accounting for differences in our book value and tax basis of liabilities assumed in the acquisition of USWS in the fourth quarter of 2022. At December 31, 2022, this error understated our deferred tax assets by $65.8 million and also understated our valuation allowance of deferred tax assets by the same amount. The net effect of the error did not affect our consolidated balance sheet as of December 31, 2022, and it did not affect our consolidated statement of operations nor our consolidated statement of cash flows for the year ended December 31, 2022. Our schedule of deferred tax assets and liabilities included in “Note 11 - Income Taxes” included the understated amounts discussed above.

As a result of the conversion of our Class B common stock to Class A common stock in the second quarter of 2023, we recorded a net deferred tax liability of $74.7 million with a corresponding reduction to additional paid-in capital. At September 30, 2023, we revised our estimate of this net deferred tax liability to $74.3 million with a corresponding adjustment to additional paid-in capital. At these reporting dates, the error had not been detected and overstated these net deferred tax liabilities by $65.3 million at both June 30, 2023 and September 30, 2023. After correction of the calculation error, our estimated deferred tax liability should have been $9.4 million and $9.0 million at June 30, 2023, and September 30, 2023, respectively. See “Note 11 – Income Taxes” for discussion of the accounting for income taxes related to the conversion of our Class B common stock to Class A common stock.

We evaluated whether our previously issued consolidated financial statements for December 31, 2022, and our unaudited consolidated financial statements for June 30, 2023, and September 30, 2023, were materially misstated due to these errors. Based upon our evaluation of both quantitative and qualitative factors, we concluded that the effects of these errors were not material individually or in the aggregate to these previously reported periods. Accordingly, we have corrected our schedule of deferred tax assets and deferred tax liabilities for December 31, 2022, in “Note 11 - Income Taxes.” We will also report the corrected amounts for June 30, 2023, and September 30, 2023, when presented in future financial statements.

Concentrations of Risk

Our business activities are concentrated in the well completion services segment of the oilfield services industry in the United States. The market for these services is cyclical, and we depend on the willingness of our customers to make operating and capital expenditures to explore for, develop, and produce oil and natural gas in the United States. The willingness of our customers to undertake these activities depends largely upon prevailing industry conditions that are predominantly influenced by current and expected prices for oil and natural gas. Historically, a low commodity-price environment has caused our customers to significantly reduce their hydraulic fracturing activities and the prices they are willing to pay for those services. During these periods, these customer actions materially adversely affected our business, financial condition and results of operations.

Our customers consist primarily of E&P companies in the continental United States. For the years ended December 31, 2023 and 2022, no individual customer represented more than 10% of our consolidated revenues. For the year ended December 31, 2021, our top three customers individually represented, respectively, 15%, 10%, and 7% of our consolidated revenues. These top customers are from our stimulation services segment. The loss of any of our largest customers could have a material adverse effect on our results of operations.