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 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 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~~"emerging growth ~~company”~~company" in Rule 12b-2 of the Exchange Act.

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 ~~Exchange~~ Act). ~~Yes~~ ☐ No ☒Yes ☑No

~~At June 17, 2022,~~As of May 8, 2023, the registrant had ~~41,237,003~~158,996,801 shares of Class A common stock ~~$0.01 par value per share, and 101,133,201 shares of Class B common stock, $0.01 par value per share,~~ outstanding.

This ~~report~~Quarterly Report on Form 10-Q (the “Quarterly Report”) contains ~~forward-looking statements within the meaning of~~“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”) ~~about us and our industry~~. Forward-looking statements include those that ~~involve substantial risks and uncertainties. Statements~~express a belief, expectation or intention, as well as those that are ~~predictive in~~not statements of historical fact. Forward-looking statements include information regarding our future plans and goals, as well as our expectations with respect to:

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,” ~~“plan,~~“would,” ~~“project,~~“likely,” “future,” “budget,~~” “predict,~~” “pursue,” “target,” “seek,” “objective,~~” “believe,” “expect,” “anticipate,” “intend,” “estimate,~~” or similar expressions that are predictions of or indicate future events ~~and~~or trends ~~and~~ that do not relate to historical ~~matters identify forward-looking statements. Our~~matters.

The forward-looking statements include statements about our business strategy, our industry, our future profitability, our expected capital expenditures and the impact of such expenditures on our performance, the costs of being a publicly traded corporation and our capital programs.

~~A forward-looking statement may include a statement~~in this Quarterly Report speak only as of the ~~assumptions~~date of this Quarterly Report, or ~~bases underlying the forward-looking statement.~~such other date as specified herein. We ~~believe that~~disclaim any obligation to update these statements unless required by law, and we ~~have chosen these assumptions or bases in good faith and that they are reasonable. You are cautioned~~caution you not to place undue reliance on ~~any forward-looking statements. You should also understand that it is~~them. Forward-looking statements are not ~~possible to predict or identify all such factors~~assurances of future performance and ~~should not consider the following list to be a complete statement of all potential~~involve risks and uncertainties. ~~Factors~~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 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 ~~our~~ actual results to differ materially from the results ~~contemplated by such forward-looking statements include:~~

You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described in Part II, Item 1A of ~~this Quarterly~~our Annual Report on Form ~~10-Q and under~~10-K for the ~~heading “Risk Factors” in our prospectus, dated May 12,~~year ended December 31, 2022 ~~filed with the Securities and Exchange Commission~~ (the ~~“SEC”~~"Annual Report") pursuant to Rule 424(b) under the Securities Act on May 16, 2022 in connection with our initial public offering (the “Prospectus”), any of which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements..

We have also made certain statements in this Quarterly Report on Form 10-Q regarding our proposed acquisition of the SP Companies and USWS, described elsewhere in this report, and have set forth in this report under Part II, Item 1A, certain risk factors relating to these acquisitions and the transactions, including the financing contemplated thereby, that could adversely affect our business and prospects. The risks included above and in this report and in our other filings with the SEC are not exhaustive. Except as required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such forward-looking statement is based. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

(In thousands)

March 31,
2022

December 31,
2021

Assets

Current assets:

Cash and cash equivalents

$
28,654

$
5,376

Accounts receivable, net

298,870

161,632

Accounts receivable—related party

3,396

4,515

Prepaid expenses, and other current assets

18,726

6,213

Inventories

139,143

73,942

Total current assets

488,789

251,678

Property, plant, and equipment

1,126,602

827,865

Accumulated depreciation and depletion

(506,831
)

(464,178
)
Property, plant, and equipment, net

619,771

363,687

Operating lease right-of-use assets

79,049

—

Investments

78,296

4,244

Intangible assets, net

28,681

27,816

Other assets

19,302

17,145

Total assets

$
1,313,888

$
664,570

Liabilities and equity

Current liabilities:

Accounts payable

$
216,054

$
121,070

Accounts payable—related party

19,553

21,275

Current portion of operating lease liabilities

8,371

—

Accrued expenses

90,079

38,149

Other current liabilities

36,123

34,400

Current portion of long-term debt

47,620

31,793

Total current liabilities

417,800

246,687

Long-term debt

488,204

235,128

Long-term debt—related party

89,800

34,645

Operating lease liabilities

70,815

—

Other liabilities

902

—

Total liabilities

1,067,521

516,460

Commitments and contingencies (Note 13)

Equity

244,992

147,015

Noncontrolling interests

1,421

1,039

Accumulated other comprehensive (loss) income

(46
)

56

Total equity

246,367

148,110

Total liabilities and equity

$
1,313,888

$
664,570

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

Three Months Ended March 31,

(In thousands)

2022

2021

Revenues

$
344,980

$
149,586

Operating costs and expenses:

Cost of revenues, exclusive of depreciation, depletion and amortization

232,599

118,306

Depreciation, depletion and amortization

44,216

35,461

(Gain) loss on disposal of assets, net

(154
)

2,207

Selling, general, and administrative

34,127

13,778

Total operating costs and expenses

310,788

169,752

Operating income (loss)

34,192

(20,166
)
Other (expense) income:

Interest expense, net

(9,272
)

(6,035
)
Loss on extinguishment of debt

(8,273
)

—

Other income

8,231

187

Income (loss) before income tax provision

24,878

(26,014
)
Income tax (provision) benefit

(752
)

25

Net income (loss)

$
24,126

$
(25,989
)
Net income attributable to noncontrolling interests

(416
)

(9
)
Net income (loss) attributable to ProFrac Holdings, LLC

$
23,710

$
(25,998
)
Other comprehensive (loss) income

(136
)

6

Comprehensive income (loss)

$
23,574

$
(25,992
)
Less: Other comprehensive (loss) income attributable to noncontrolling interests

(34
)

2

Comprehensive income (loss) attributable to ProFrac Holdings, LLC

$
23,608

$
(25,994
)

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

(In thousands)

Equity

Accumulated
Other
Comprehensive
Income (Loss)

Noncontrolling
interests

Total

Balance, January 1, 2022

$
147,015

$
56

$
1,039

$
148,110

Net income

23,710

—

416

24,126

Member contributions

5,000

—

—

5,000

Deemed distribution

(3,664
)

—

—

(3,664
)
THRC related equity

72,931

—

—

72,931

Currency translation adjustments

—

(102
)

(34
)

(136
)
Balance, March 31, 2022

$
244,992

$
(46
)

$
1,421

$
246,367

(In thousands)

Equity

Accumulated
Other
Comprehensive
Income

Noncontrolling
interests

Total

Balance, January 1, 2021

$
175,027

$
—

$
1,785

$
176,812

Net (loss) income

(25,998
)

—

9

(25,989
)
Currency translation adjustments

—

6

—

6

Noncontrolling interest of acquired business

—

—

1,228

1,228

Balance, March 31, 2021

$
149,029

$
6

$
3,022

$
152,057

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

Three Months Ended March 31,

(In thousands)

2022

2021

Cash flows from operating activities:

Net income (loss)

$
24,126

$
(25,989
)
Adjustments to reconcile net loss to cash provided by operating activities:

Depreciation, depletion and amortization

44,216

35,461

(Gain) loss on disposal of assets, net

(154
)

2,207

Non-cash loss on extinguishment of debt

4,284

—

Amortization of debt issuance costs

1,371

536

Bad debt expense, net of recoveries

5

30

Non-cash investment income

(8,100
)

—

Changes in operating assets and liabilities:

Accounts receivable

(46,856
)

(8,976
)
Inventories

(22,857
)

(6,504
)
Prepaid expenses and other assets

(9,903
)

(829
)
Accounts payable

29,824

11,243

Accrued expenses

22,622

9,240

Deferred revenues and other current liabilities

5,146

(109
)
Net cash provided by operating activities

43,724

16,310

Cash flows from investing activities:

Investment in property, plant & equipment

(41,492
)

(17,357
)
Cash proceeds from sale of assets

45,622

16,730

Acquisitions, net of cash acquired

(278,990
)

(2,303
)
Investment in preferred shares of BPC

(45,952
)

—

Investments

(13,893
)

—

Net cash used in investing activities

(334,705
)

(2,930
)
Cash flows from financing activities:

Proceeds from issuance of long-term debt

658,266

6,817

Repayments of long-term debt

(324,034
)

(13,437
)
Payment of debt issuance costs

(22,913
)

—

Member contribution

5,000

—

Other

—

6

Net cash provided by (used in) financing activities

316,319

(6,614
)
Net increase in cash, cash equivalents, and restricted cash

25,338

6,766

Cash, cash equivalents, and restricted cash beginning of period

5,376

2,952

Cash, cash equivalents, and restricted cash end of period

$
30,714

$
9,718

Supplemental cash flow information:

Cash payments for interest

$
6,637

$
6,320

Cash payments for taxes

$
—

$
—

Non-cash investing and financing activities:

Capital expenditures included in accounts payable

$
25,418

$
7,837

Operating lease liabilities incurred from obtaining right-of-use-assets

$
44,959

$
—

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

Notes to ~~the consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements

(Amounts in ~~thousands,~~millions, except asper share amounts, or where otherwise noted)

New Accounting Standards to be Adopted

No new accounting pronouncements issued or effective during the ~~three-months~~three month period ended March 31, 2022, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022. The December 31, 2021, balance sheet information has been derived from the 2021 audited financial statements.

~~Table of Contents~~

~~Use of estimates~~

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities and (2) the reported amounts of revenue and expenses during the reporting period. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources.~~It is at least reasonably possible these estimates could be revised in the near term, and these revisions could be material.~~

~~Leases~~

~~The Company determines if an arrangement is a lease at inception of the arrangement. To the extent that we determine an arrangement represents a lease, we classify that lease as an operating lease~~2023 have had or a finance lease. We capitalize operating and finance leases on our consolidated balance sheets through a right-of-use (“ROU”) asset and a corresponding lease liability. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. See Note 9 – Leases for additional information.

Operating and finance lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

~~Revenue recognition~~

The Company’s products and services are sold based upon contracts with customers. The Company recognizes revenue as it satisfies performance obligations by transferring control over a service or product to a customer. Payment terms are specified in each customer agreement and are typically a specific number of days following satisfaction of the performance obligation. The following are descriptions of the principal activities of each reportable segment from which the Company generates its revenue.

~~Stimulation services.~~ We generate revenue through the provision of hydraulic fracturing services, which involves the injection of water, sand and chemicals under high pressure into formations to optimize hydrocarbon flow paths during the completion phase of wellbores. Our contracts with customers are short term in nature, typically less than four weeks, and have a single performance obligation, which is the contracted total stages, satisfied over time. Once a stage has been completed, a field ticket is created which includes charges for services performed and any inputs consumed during the service. The signing of the field ticket by a customer representative represents their acceptance of the service and agreement to the amounts to which the Company has the right to invoice and recognize as revenue. We believe that recognizing revenue based on actual stages completed, upon receipt of a signed field ticket, appropriately depicts how our hydraulic fracturing services are transferred to our customers over time.

~~Manufacturing.~~ We generate revenue through sales of equipment used to perform oilfield services. The performance obligation is satisfied and revenues are recognized at the point-in-time that control of goods are transferred to the customer, generally upon shipment from our manufacturing facility. Payment terms are specified in each customer agreement and are typically a specific number of days following satisfaction of the performance obligation.

~~Proppant production.~~ We generate revenue through the sale of frac sand to oilfield service providers and E&P companies. The performance obligation is satisfied and revenue is recognized at the point-in-time that control of the product is transferred to the customer, generally upon shipment from our facility. We charge our customers on a per-ton basis at current market prices. Payment terms are specified in each customer agreement and are typically a specific number of days following satisfaction of the performance obligation.

~~Taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and are therefore excluded from revenues in the consolidated statements of operations.~~

~~Business Combinations~~

Business combinations are accounted for under the acquisition method of accounting. Under this method, the assets acquired and liabilities assumed are recognized at their respective fair values as of the date of acquisition. The excess, if any, of the acquisition price over the fair values of the assets acquired and liabilities assumed is recorded as goodwill. For significant acquisitions, we utilize third-party appraisal firms to assist us in determining the fair values for certain assets acquired and liabilities assumed. The measurement of these fair values requires us to make significant estimates and assumptions which are inherently uncertain.

Adjustments to the fair values of assets acquired and liabilities assumed are made until we obtain all relevant information regarding the facts and circumstances that existed as of the acquisition date (the “measurement period”), not to exceed one year from the date of

~~Table of Contents~~

the acquisition. We recognize measurement-period adjustments in the period in which we determine the amounts, including the effect on earnings of any amounts we would have recorded in previous periods if the accounting had been completed at the acquisition date.

~~See Note 11 — Acquisitions and Investments for information on acquisitions completed during the historical period.~~

~~Variable Interest Entities~~

We evaluate our ownership, contractual and other interest in entities to determine if they are variable interest entities (“VIE”). We evaluate whether we have a variable interest in those entities and the nature and extent of those interests. Based on our evaluation, if we determine we are the primary beneficiary of a VIE, we consolidate the entity in our financial statements.

~~Fair value measurements~~

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date. We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases of categorization within the hierarchy upon the lowest level input that is available and significant to the fair value measurement:

•	~~Level 1: The use of quoted prices in active markets for identical assets or liabilities.~~

•	Level 2: Other than quoted prices included in Level 1, inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. At March 31, 2022, we had no Level 2 measurements.

•	Level 3: The use of significant unobservable inputs that typically require the use of management’s estimates of assumptions that market participants would use in pricing. See Note 12 — Fair Value of Financial Interests for more information on our investments using Level 3 measurements.

Our current assets and liabilities contain financial instruments, the most significant of which are trade accounts receivable and payable. We believe the carrying value of our current assets and liabilities approximate fair value. Our fair value assessment incorporates a variety of considerations, including: (i) the short-term duration of the instruments and (ii) our historical incurrence of and expectations of future bad debt expense. The book value of our floating rate debt approximates fair value because of its floating rate structure.

~~Income taxes~~

At March 31, 2022, the ProFrac Predecessor entities were organized as limited liability companies or a limited partnership and were treated as either a disregarded entity or a partnership for U.S. federal income tax purposes, whereby the ordinary business income or loss and certain deductions were passed-through and reported on the members’ income tax returns. As such, the ProFrac Predecessor was not required to account for U.S. federal income taxes in the consolidated financial statements. Certain state income-based taxes are imposed on the ProFrac Predecessor entities which are reflected as income tax expense or benefit in historical periods.

In connection with the IPO in May 2022 (see Note 15 – Subsequent Events), ProFrac Predecessor became partially owned by ProFrac Holding Corp., a U.S. Internal Revenue Code Subchapter C corporation (“C-Corporation”). ProFrac Holding Corp. is a taxable entity and will be required to account for income taxes under the asset and liability method beginning in the second quarter of 2022.

Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled pursuant to the provisions of Accounting Standards Codification (“ASC”) 740, Income Taxes. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more-likely-than-not to be realized.

~~Recently adopted accounting standards~~

On January 1, 2022, we adopted the Financial Accounting Standards Board (“FASB”) accounting standards update for “Leases,” which amended existing guidance to require lessees to recognize liabilities and ROU assets on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements.

~~Table of Contents~~

We adopted this guidance using a modified retrospective approach on January 1, 2022 using the transition method that allows a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

We have completed our process to implement this standard, and we have designed processes and internal controls necessary for adoption of this standard. We have made policy elections to (i) not capitalize short-term leases for all asset classes, (ii) not separate non-lease components from lease components for all of our existing asset classes, (iii) apply the package of practical expedients that allows us to not reassess: whether any expired or existing contracts contain leases, lease classification for any expired or existing leases and initial direct costs for existing leases and (iv) apply the practical expedient to apply hindsight in estimating lease term and impairment.

The impact of applying this standard is not expected to significantly impact our results of operations or cash flows. As of January 1, 2022, we recognized ROU assets and liabilities of approximately $35.8 million from operating leases on our consolidated balance sheet. See Note 9 - Leases for additional disclosures related to our adoption this accounting standards update.

~~New accounting standards to be adopted~~

We have not yet implemented FASB ASU No. 2016-13, Financial Instruments – Credit Losses. The ASU introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models previously used under GAAP, which generally require that a loss be incurred before it is recognized. The new standard also applies to financial assets arising from revenue transactions such as contract assets and accounts receivable.

~~Implementation is currently required for fiscal years beginning after December 15, 2022. The Company does not believe implementation will~~ have a material impact on ~~its financial statements.~~

We have not yet implemented FASB ASU No. 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes, which removes specific exceptions to the general principles in Topic 740 under GAAP. The new guidance also improves the application of income tax-related guidance and simplifies GAAP for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The new guidance will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022; however, early adoption is permitted. The Company is currently evaluating the impact of adopting the new guidance on itsour unaudited condensed consolidated financial statements.

NOTE 2. ACQUISITIONS

~~3. Restricted~~On January 3, 2023, we acquired 100% of the issued and outstanding membership interest of Producers Service Holdings LLC (“Producers”), an employee-owned pressure pumping services provider serving Appalachia and the Mid-Continent, for a total purchase consideration of $36.5 million, consisting of (i) Class A common stock valued at $12.9 million based on the acquisition date closing price of $21.40; (ii) cash consideration of $1.4 million; (iii) an estimated amount payable of $8.3 million related to our preliminary calculation of working capital adjustments; and (iv) our pre-existing investment of $13.9 million. Throughout the first quarter of 2023, we integrated Producers' operations. As a result, we track all stimulation services assets as one group and it would be impracticable to separately report Producers' revenues or pretax earnings subsequent to the acquisition.

On February 24, 2023, we acquired 100% of the issued and outstanding membership interests in (i) Performance Proppants, LLC, (ii) Red River Land Holdings, LLC, (iii) Performance Royalty, LLC, (iv) Performance Proppants International, LLC, and (v) Sunny Point Aggregates, LLC (together, “Performance Proppants”) for a total purchase consideration of $464.8 million, consisting of (i) Class A common stock valued at $6.2 million based on the acquisition date closing price of $19.67; (ii) cash consideration of $454.4 million; and (iii) the settlement of a pre-existing receivable of $4.2 million. Performance Proppants is a frac sand provider in the Haynesville basin. We recognized revenues of $22.7 million and a pretax income of $7.4 million related to the Performance Proppants acquisition during the three months ended March 31, 2023.

We accounted for these acquisitions as business combinations. The following table ~~provides a reconciliation of cash, cash equivalents,~~reflects pro forma revenues and ~~restricted cash reported within the consolidated statement of cash flows as of March 31, 2022, and December 31, 2021:~~

(In thousands)

March 31,
2022

December 31,
2021

Cash and cash equivalents

$
28,654

$
5,376

Restricted cash included in prepaid expenses and other current assets

2,060

—

Total cash, cash equivalents, and restricted cash shown in the consolidated statements
of cash flows

$
30,714

$
5,376

~~As of March 31, 2022, restricted cash included cash used as collateral for our credit card program.~~

~~4. Inventories~~

~~The following table summarizes the components of our inventories as of March 31, 2022, and December 31, 2021:~~

(In thousands)

March 31,
2022

December 31,
2021

Raw materials and supplies

$
37,081

$
13,911

Work in process

6,492

3,288

Finished products and parts

95,570

56,743

Total

$
139,143

$
73,942

~~Table of Contents~~

~~5. Property, plant, and equipment~~

~~The following table summarizes the components of our property, plant, and equipment,~~ net ~~as of March 31, 2022, and December 31, 2021:~~

(In thousands)

March 31,
2022

December 31,
2021

Machinery and equipment

$
1,018,221

$
760,829

Mining property and mine development

35,491

34,809

Office equipment, software and other

13,876

5,550

Buildings and leasehold improvements

16,091

15,947

Total

1,083,679

817,135

Less: accumulated depreciation and depletion

(506,831
)

(464,178
)
Construction in progress

42,923

10,730

Property, plant, and equipment, net

$
619,771

$
363,687

~~Depreciation expense~~income for the three months ended March 31, 2023 and 2022 as if our 2022 and ~~2021,~~2023 acquisitions had taken place on January 1, 2022. These unaudited pro forma amounts are not necessarily indicative of results that would have actually been obtained during the periods presented or that may be obtained in the future.


	Three Months Ended March 31,
(unaudited)	2023		2022
Revenues	$	882.3	$	554.8
Net income (loss)	$	67.5	$	(53.9	)

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(Amounts in millions, except per share amounts, or where otherwise noted)

The following table represents our preliminary allocation of total purchase consideration of Producers and Performance Proppants to the identifiable assets acquired and liabilities assumed based on the fair values on their acquisition dates:


	Producers		Performance Proppants		Total
Cash and cash equivalents	$	0.3	$	2.0	$	2.3
Accounts receivable		7.5		14.8		22.3
Prepaid expenses and other assets		1.1		0.6		1.7
Inventories		2.8		7.5		10.3
Property, plant and equipment		29.5		476.9		506.4
Intangible assets		—		5.6		5.6
Total identifiable assets acquired		41.2		507.4		548.6
Accounts payable		10.9		16.7		27.6
Accrued expenses		0.7		2.8		3.5
Current portion of long-term debt		0.2		1.8		2.0
Other current liabilities		—		53.8		53.8
Non-current portion of debt		0.1		0.9		1.0
Other non-current liabilities		—		42.3		42.3
Total liabilities assumed		11.9		118.3		130.2
Goodwill		7.2		75.7		82.9
Total purchase consideration	$	36.5	$	464.8	$	501.3

We used the cost approach to value the acquired property, plant and equipment. This approach adjusted estimates of replacement cost for the age, condition and utility of the associated assets. In addition, the market approach valuation technique was ~~$44.2 million and $35.5 million, respectively. Major classifications of~~used for assets that had comparable market data available. Included in Performance Proppants property, plant and equipment ~~and their respective useful lives are as follows:~~

~~Machinery and equipment~~		~~2 years—10 years~~
~~Office equipment, software, and other~~		~~3 years—7 years~~
~~Buildings and leasehold improvements~~		~~2 years—40 years~~

~~6. Intangible assets~~

~~The following table summarizes~~valuation is mineral reserves valued at $248.3 million using the ~~components~~income approach, which is predicated upon the value of ~~our~~the future cash flows that an asset will generate over its economic life. The intangible assets ~~as of March 31, 2022, and December 31, 2021:~~

March 31, 2022

December 31, 2021

(In thousands)

Gross
Book
Value

Less:
Accumulated
Amortization

Net Book
Value

Gross
Book
Value

Less:
Accumulated
Amortization

Net
Book
Value

Electric frac licenses

$
22,500

$
—

$
22,500

$
22,500

$
—

$
22,500

Acquired technology

7,144

(963
)

6,181

5,905

(589
)

5,316

Intangible assets, net

$
29,644

$
(963
)

$
28,681

$
28,405

$
(589
)

$
27,816

Intangible assets are amortized over the period the Company expects the asset to generate cash flows. As such, we amortize each electric frac license through the remaining license period, beginning when the initial fleet built under each license is placed into service, a period we estimate to be 17 years. For technology acquired during 2021, we estimated this period to be seven years. For technology acquired in 2022 related to the Performance Proppants acquisition represent customer relationships and the fair value was determined using the with-and-without method which is an income approach and considers the time needed to rebuild the customer base.

The amounts allocated to goodwill are attributable to the organized workforce and potential or expected synergies. The goodwill for Producers and Performance Proppants was recognized in the stimulation services and proppant production segments, respectively. We estimate that substantially all of ~~FTS International Inc., we estimated~~ the ~~period~~goodwill will be deductible for income tax purposes.

The amounts included in the table above are preliminary with respect to ~~be three years. Amortization expense related~~accruals and working capital adjustments and include the use of estimates based on information that was available at the time these unaudited condensed consolidated financial statements were prepared. We believe that the estimates used are reasonable; however, the estimates are subject to ~~intangible assets was $0.4 million~~change as additional information becomes available.

Long-term debt is comprised of the following:


	March 31, 2023			December 31, 2022
Third party:
Term loan	$	828.7		$	519.2
ABL credit facility		278.0			234.3
Monarch note		87.5			87.5
First Financial loan		12.9			16.6
Flotek convertible notes		—			12.7
Other		23.0			26.3
Related party:
REV Note		39.0			39.0
Equify note		22.1			23.8
Total principal amount		1,291.2			959.4
Less: unamortized debt discounts, premiums, and issuance costs		(43.1	)		(34.0	)
Less: current portion of long-term debt		(139.4	)		(127.6	)
Total long-term debt	$	1,108.7		$	797.8

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(Amounts in millions, except per share amounts, or where otherwise noted)

Term Loan Facility

During the three months ended March 31, ~~2022~~2023, we amended the term loan facility to, among other things, increase the size of the term loan facility, and ~~2021, respectively.~~

we borrowed $~~Table~~320.0 million under the facility to help fund our acquisition of ~~Contents~~Performance Proppants and for general corporate purposes.

~~7. Indebtedness~~

The ~~following table summarizes~~term loan facility requires minimum quarterly payments as well as payments based on a percentage of 25% to 50% of excess cash flow (as defined in the ~~components~~term loan facility). The applicable percentage of excess cash flow depends on our ~~debt~~leverage ratio as of the last day of the applicable fiscal quarter. During the three months ended March 31, ~~2022 and December 31, 2021:~~

March 31,

December 31,

(In thousands)

2022

2021

Old ABL Credit Facility

$
—

$
69,000

Old Term Loan

—

171,355

First Financial Loan

26,377

30,000

New ABL Credit Facility

70,706

—

New Term Loan Credit Facility

450,000

—

Backstop Note(1)

22,000

—

Closing Date Note(1)

22,000

—

Equify Bridge Note(1)

45,800

—

Best Flow Credit Facility(1)

—

7,101

Best Flow Note(1)

—

10,827

Alpine Promissory Note(1)

—

16,717

Other

11,129

1,695

Total gross debt

648,012

306,695

Less: unamortized debt issuance costs

(22,388
)

(5,129
)
Less: current portion of long-term debt

(47,620
)

(31,793
)
Total long-term debt

$
578,004

$
269,773

~~(1)~~

~~Related party debt agreements.~~

~~Old ABL Credit Facility~~

On March 14, 2018, ProFrac LLC entered into a senior secured asset-based revolving credit agreement (the “Old ABL Credit Facility”), with Barclays Bank PLC, as administrative agent and collateral agent, and the lenders party thereto. The Old ABL Credit Facility had a maturity date of March 14, 2023.

LIBOR borrowings under the Old ABL Credit Facility bear interest at the greater of LIBOR or 0.00%, plus a margin of 1.50% to 2.00%, depending on facility utilization. The interest rate was 2.75% as of December 31, 2021.

~~As of December 31, 2021, the borrowing base was $146.2 million, therefore maximum availability under the Old ABL Credit Facility was the facility maximum of $105.0 million. There were $69.0~~2023, we repaid $10.5 million of borrowings outstanding ~~and $3.1 million of letters of credit outstanding, resulting in $32.9 million of availability~~ under ~~the Old Credit Facility ABL.~~our term loan facility as a minimum quarterly payment.

~~On March 4, 2022, the Old~~ ABL Credit Facility ~~was refinanced and replaced with the New ABL Credit Facility.~~

~~Old Term Loan~~

On September 7, 2018, ProFrac LLC entered into a $180.0 million term loan agreement (“Old Term Loan”), which matures on September 15, 2023, with a group of lenders with Barclays Bank, PLC as administrative agent. Principal payments are due in quarterly installments, however due to prepayments made to date, there will be 0 required minimum amortization (other than excess cash flow prepayments) before termination of the Old Term Loan. Excess cash flow is calculated quarterly to determine any additional minimum prepayments. On June 24, 2021, ProFrac LLC and its Term Loan lenders reached an agreement to expand the facility by $40.0 million.

The Old Term Loan, as amended, requires minimum excess cash flow prepayments as follows, each due approximately 55 days after period-end: $0.0 million for the fiscal quarters ended March 31, 2021 through and including December 31, 2021, and $5.0 million for the fiscal quarters ended March 31, 2022 through and including June 30, 2023.

LIBOR borrowings under the Old Term Loan bear interest at the greater of LIBOR or 1.25%, plus a margin of 6.25% to 8.50%, depending on the total net leverage ratio as defined under the Old Term Loan. The interest rate was 9.75% as of December 31, 2021.

The Old Term Loan contained certain restrictive covenants, including a financial covenant which required ProFrac LLC to maintain a total net leverage ratio, as defined in the credit agreement, of no greater than 2.25:1.00 for the fiscal quarters ended September 30, 2019 through and including March 31, 2020, 3.50:1.00 for the fiscal quarters ended June 30, 2020 through and including March 31,

~~Table of Contents~~

2021, 3.00:1.00 for the fiscal quarter ended June 31, 2021, 2.75:1.00 for the fiscal quarter ended September 30, 2021, 2.50:1.00 for the fiscal quarter ended December 31, 2021, and 2.00:1.00 for the fiscal quarter ended March 31, 2022 and thereafter. ProFrac LLC was in compliance with all required covenants as of December 31, 2021.

In February ~~2022, ProFrac and its Old Term Loan lenders entered into an agreement to amend the Old Term Loan. The amendment expanded the facility by $48.0 million.~~

~~On March 4, 2022, the Old Term Loan was extinguished resulting in loss on debt extinguishment of $3.9 million.~~

~~First Financial Loan~~

On July 22, 2020, ProFrac LLC entered into a $35.0 million loan agreement with First Financial Bank, N.A. which had a maturity of July 22, 2025 (“Main Street Loan”). The interest rate was LIBOR plus 3.00%, floating daily. In August 2021, the loan agreement was amended to remove the covenants in place prior to the amendment. As2023, we amended the Main Street Loan contained certain restrictive covenants which required ProFrac LLC to maintain a Fixed Charge Coverage Ratio of at least 1.00:1.00, and a Maximum Leverage Ratio of 3.50:1.00. Additionally, the Main Street Loan restricted the payment of distributions or dividends, other than for the payment of taxes.

On December 22, 2021, the Main Street Loan had a balance of $32.2 million. The Main Street Loan was extinguished with a cash payment of $2.2 million and the remainder refinanced with a $30.0 million loan with First Financial Bank, N.A. (“First Financial Loan”).

The First Financial Loan has a maturity date of January 1, 2024 with an interest rate of LIBOR plus 3.5%, and the loan is to be repaid by equal payments of principal and interest beginning in February 2022. The First Financial Loan contains certain restricted covenants which require the Company to maintain a fixed charge ratio of at least 1.00:1.00 and a maximum net leverage ratio of 3.00:1.00. The Company was in compliance with all covenants as of March 31, 2022.

~~New~~ ABL ~~Credit Facility~~

On March 4, 2022, ProFrac LLC, ProFrac Holdings II, LLC (“ProFrac II LLC”), as borrower (in such capacity, the “ABL Borrower”), and certain of the ABL Borrower’s wholly owned subsidiaries as obligors, entered into a senior secured asset-based revolving credit agreement (as amended, the “New ABL Credit Facility”), with a group of lenders with JPMorgan Chase Bank N.A., as administrative agent and collateral agent. The New ABL Credit Facility provides for an asset-based revolving credit facility ~~with a borrowing base and lender commitments of $100.0~~to, among other things, increase the maximum availability to $400.0 million. ~~The New ABL Credit Facility has a borrowing base composed of certain eligible accounts receivable and eligible inventory less customary reserves, as redetermined monthly.~~

As of March 31, ~~2022,~~2023, the maximum availability under the ~~New~~ ABL ~~Credit Facility~~credit facility was the aggregate lender commitments of ~~$100.0~~$400.0 million with ~~$70.7~~$278.0 million of borrowings outstanding and ~~$9.2~~$10.5 million of letters of credit outstanding, resulting in approximately ~~$20.1~~$111.5 million of remaining availability. ~~Our New ABL Credit Facility matures on~~

Flotek Convertible Notes

In February 2023, Flotek's convertible notes matured and all $12.7 million principal amount were converted to shares of Flotek common stock, which is classified as "Noncontrolling interests" in our unaudited condensed consolidated balance sheets.

Debt Compliance

Both the ~~earlier of (i) March 4, 2027 and (ii) 91 days prior to the stated maturity of any material indebtedness (other than the First Financial Loan).~~

~~Borrowings under the New ABL Credit Facility accrue interest based on a three-tier pricing grid tied to average historical availability,~~term loan facility and the ABL Borrower may elect for loans to be based on either an Adjusted Term SOFR or a base rate, plus the applicable margin. The interest rate under our New ABL Credit Facility for (a) Adjusted Term SOFR is the applicable margin plus the fluctuating per annum rate equal to Adjusted Term SOFR (with an Adjusted Term SOFR Floor of 0.00%); and (b) Base Rate Loans are the applicable margin plus the fluctuating per annum rate equal to the greatest of the Prime Rate in effect on such day, or the NYFRB Rate in effect on such day plus 1/2% of 1% and the Adjusted Term SOFR for a one-month Interest Period as published two (2) U.S. Government Securities Business Days prior to such day (or if such day is not a Business Day, the immediately preceding Business Day), plus 1.0%. The applicable margin for Adjusted Term SOFR Loans ranges from 1.50% to 2.00% and for Base Rate Loans ranges from 0.50% to 1.00%, depending on the average daily availability over the last three months under our New ABL Credit Facility. The New ABL Credit Facility bears an unused line fee ranging from 0.250% to 0.375%, depending on the average daily availability over the last three months payable quarterly in arrears. The New ABL Credit Facility also bears customary letter of credit ~~fees. The interest rate was 4.75% as of March 31, 2022.~~

Our New ABL Credit Facility is subject to customary mandatory prepayments, including a mandatory prepayment if the aggregate unpaid principal balance of revolving loans, agent advances, swingline borrowings, unreimbursed drawings under letters of credit and the undrawn amount of outstanding letters of credit exceeds at any time the lesser of (x) the then applicable borrowing base and (y) the then total effective commitments under the New ABL Credit Facility, in an amount equal to such excess. After the occurrence and during the continuance of a Cash Dominion Period (defined in the New ABL Credit Facility as (a) any period commencing upon the date that availability shall have been less than the greater of (i) 12.5% of the Maximum Credit (which is the lesser of the maximum revolver amount in effect at such time and the borrowing base at such time) and (ii) $10.0 million for a period of 5 consecutive business days and continuing until the date on which availability shall have been at least the greater of (y) 12.5% of the Maximum Credit and (z) $10.0 million for 20 consecutive calendar days or (b) any period commencing on the occurrence of certain specified events of default, and continuing during the period that such specified event of default shall be continuing).

~~Table of Contents~~

~~Our New ABL Credit Facility contains~~facility contain certain customary representations and warranties and affirmative and negative covenants. The negative covenants include, subject to customary exceptions, limitations on indebtedness, dividends, distributions and certain other payments, investments, acquisitions, prepayments of specified junior indebtedness, amendments of specified junior indebtedness, transactions with affiliates, dispositions, mergers and consolidations, liens, restrictive agreements, sale and leaseback transactions, changes in fiscal periods and changes in line of business.

We are required by our New ABL Credit Facility to maintain minimum liquidity of $5.0 million at all times. Additionally, when availability is less than the greater of (i) 12.5% of the maximum credit (which is the lesser of the maximum revolver amount in effect at such time and the borrowing base at such time) and (ii) $10.0 million and continuing until such time as availability has been in excess of such threshold for a period of 20 consecutive calendar days, we are required by our New ABL Credit Facility to maintain a springing Fixed Charge Coverage Ratio (as defined in our New ABL Credit Facility) of at least 1.0 to 1.0, which is tested quarterly during such period. ProFrac LLC was in compliance with all covenants, and there were no existing defaults or events of default related to the New ABL Credit Facility as of March 31, 2022.

~~On April 8, 2022, the New ABL Credit Facility was amended to increase the borrowing base and lender commitments to $200.0 million. See Note 15 –Subsequent Events.~~

~~New Term Loan Credit Facility~~

On March 4, 2022, ProFrac LLC, ProFrac II, LLC, as borrower (in such capacity, the “Term Loan Borrower”), and certain of the Term Loan Borrower’s wholly owned subsidiaries as obligors, entered into a senior secured term loan credit agreement (the “New Term Loan Credit Facility”), with a group of lenders with Piper Sandler Finance LLC, as administrative agent and collateral agent. The New Term Loan Credit Facility provides for a term loan facility in an aggregate principal amount of $450.0 million. As of March 31, ~~2022, the Term Loan Borrower had $450.0 million outstanding under the New Term Loan Credit Facility. Our New Term Loan Credit Facility matures on March 4, 2025.~~

Borrowings under the New Term Loan Credit Facility accrue interest at a percentage per annum equal to (a) until October 1, 2022, (i) for SOFR Rate Loans, 8.50%, and (ii) for Base Rate Loans, 7.50% and (b) thereafter, based on a three-tier pricing grid tied to Total Net Leverage Ratio (as defined in the New Term Loan Credit Facility), and the Term Loan Borrower may elect for loans to be based on either Adjusted Term SOFR or Base Rate, plus the applicable margin. The interest rate on our New Term Loan Credit Facility for (a) SOFR Rate Loans are the applicable margin plus the fluctuating per annum rate equal to Adjusted Term SOFR (as defined in the New Term Loan Credit Facility), with a SOFR floor of 1.00% and (b) Base Rate Loans are the applicable margin plus the fluctuating per annum rate equal to the highest of (i) the federal funds rate plus 1/2 of 1%, (ii) the interest rate quoted in the print edition of ~~The Wall Street Journal, Money Rates Section, as the prime rate in effect, (iii) Adjusted Term SOFR for a one-month interest period as determined on such day, plus 1.0% and (iv) 2.00%.~~

The applicable margin for (a) SOFR Rate Loans ranges from 6.50% to 8.00% and (b) Base Rate Loans ranges from 5.50% to 7.00%, depending on the Total Net Leverage Ratio (as defined in the New Term Loan Credit Facility) as of the first day of the then-current fiscal quarter. The interest rate was 9.5% as of March 31, 2022.

Our New Term Loan Credit Facility is guaranteed by ProFrac LLC and all of the Term Loan Borrower’s material existing subsidiaries and certain direct and indirect future U.S. restricted subsidiaries of the Term Loan Borrower. Our New Term Loan Credit Facility is secured by a lien on, and security interest in, substantially all of each such guarantor’s assets.

Our New Term Loan Credit Facility is subject to quarterly amortization beginning in June 2022, though any excess cash flow payments, reduce the required amortization. Additionally, our New Term Loan Credit Facility is subject to a quarterly mandatory prepayment beginning for the calendar quarter ending on September 30, 2022 in an amount equal to the Applicable ECF Percentage (as defined in the New Term Loan Credit Facility). The Applicable ECF Percentage ranges from 50% of Excess Cash Flow (as defined in the New Term Loan Credit Facility) to 25% of Excess Cash Flow depending on the Total Net Leverage Ratio as of the last day of the applicable fiscal quarter.

Voluntary prepayments of borrowings under the New Term Loan Credit Facility are permitted at any time, in specified minimum principal amounts, subject to reimbursement of the lenders’ redeployment costs actually incurred in the case of a prepayment of SOFR Rate Loans other than on the last day of the relevant interest period. Between March 4, 2022 and March 4, 2023, certain prepayments of the New Term Loan Credit Facility are subject to a prepayment premium of 3.00% (or, in the case of any IPO Prepayment (as defined in the New Term Loan Credit Facility), 2.00%). Between March 5, 2023 and March 4, 2024, certain prepayments of the New Term Loan Credit Facility are subject to a 2.00% prepayment premium. After March 4, 2024, but prior to the Stated Termination Date (as defined in the New Term Loan Credit Facility) certain prepayments of the New Term Loan Credit Facility are subject to a 1.00% prepayment premium. NaN payment or prepayment premium shall be due on account of any payments or prepayments made on the Stated Termination Date.

~~Table of Contents~~

Our New Term Loan Credit Facility contains certain customary representations and warranties and affirmative and negative covenants. The negative covenants include, subject to customary exceptions, limitations on indebtedness, dividends, distributions and certain other payments, investments, capital expenditures, acquisitions, prepayments of specified junior indebtedness, amendments of specified junior indebtedness, transactions with affiliates, dispositions, mergers and consolidations, liens, restrictive agreements, changes in fiscal periods and changes in line of business.

We are required by our New Term Loan Credit Facility to maintain a Total Net Leverage Ratio (as defined in our New Term Loan Credit Facility) (i) of no more than 2.00 to 1.00 for the fiscal quarter ending on June 30, 2022, (ii) of no more than 1.55 to 1.00 for the fiscal quarters ending on September 30, 2022 and December 31, 2022, and (iii) of no more than 1.25 for each fiscal quarter ending on March 31, 2023 and thereafter.

~~We are required by our New Term Loan Credit Facility to maintain minimum liquidity of $30.0 million at all times.~~

Our New Term Loan Credit Facility contains customary events of default. If an event of default occurs and is continuing, the lenders may declare all loans to be immediately due and payable. Some events of default require an automatic termination of the loans and become immediately due and payable.

~~The Company was~~we were in compliance with ~~all covenants, and there were no defaults or events of default related to the New Term Loan Credit Facility, as of March 31, 2022.~~these covenants.

~~Subsequent to March 31, 2022 , the New Term Loan Facility was paid down by $143.8 million with net proceeds from the IPO.~~

~~Backstop Note~~

On March 4, 2022, ProFrac LLC borrowed $22.0 million pursuant to a subordinated promissory note with THRC Holdings, LP (“THRC Holdings”) with a stated maturity date of March 4, 2027 (the “Backstop Note”). The Backstop Note bears interest at a percentage per annum equal to 1.74%. Interest under the Backstop Note is paid on a quarterly basis and is solely payable in kind, with such interest amounts being added to the outstanding principal amount of the Backstop Note, until the date that both the New ABL Credit Facility and the New Term Loan Credit Facility shall have been terminated, after which date quarterly interest payments may be paid in kind or in cash.

~~The Backstop Note is unsecured and subordinated to the indebtedness owing under the New ABL Credit Facility and the New Term Loan Credit Facility.~~

~~In June 2022, the Backstop Note was fully paid with net proceeds from the IPO.~~

~~Closing Date Note~~

On March 4, 2022, ProFrac LLC borrowed $22.0 million pursuant to a subordinated promissory note with THRC Holdings with a stated maturity date of March 4, 2027 (the “Closing Date Note”). The Closing Date Note bears interest at a percentage per annum equal to 1.74%. Interest under the Closing Date Note is paid on a quarterly basis and is solely payable in kind, with such interest amounts being added to the outstanding principal amount of the Closing Date Note, until the date that both the New ABL Credit Facility and the New Term Loan Credit Facility shall have been terminated, after which date quarterly interest payments may be paid in kind or in cash.

~~The Closing Date Note is unsecured and subordinated to the indebtedness owing under the New ABL Credit Facility and the New Term Loan Credit Facility.~~

~~In June 2022, the Closing Date Note was fully paid with net proceeds from the IPO.~~

~~Equify Bridge Note~~

On March 4, 2022, ProFrac II LLC entered into a $45.8 million subordinated promissory note with Equify Financial with a stated maturity date of March 4, 2027 (the “Equify Bridge Note”). The Equify Bridge Note bears interest at a percentage per annum equal to 1.0%. Interest under the Equify Bridge Note is paid on a quarterly basis and is solely payable in kind, with such interest amounts being added to the outstanding principal amount of the Equify Bridge Note, until the date that both the New ABL Credit Facility and the New Term Loan Credit Facility shall have been terminated, after which date quarterly interest payments may be paid in kind or in cash. In April 2022, the Company repaid $25.0 million in principal under the Equify Bridge Note.

~~Table of Contents~~

~~The Equify Bridge Note is unsecured and subordinated to the indebtedness owing under the New ABL Credit Facility and the New Term Loan Credit Facility.~~

In April 2022, the Company repaid $25.0 million in principal under the Equify Bridge Note, resulting in an outstanding balance of $20.8 million. In June 2022, the Equify Bridge Note was fully paid with net proceeds from the IPO.

~~Best Flow Credit Facility~~

On February 4, 2019, Best Flow entered into a revolving loan credit agreement (the “Best Flow Credit Facility”), with Equify Financial, LLC (“Equify Financial”) as lender. Equify Financial is a related party. The Best Flow Credit Facility provided for a revolving credit facility in an aggregate principal amount at any time outstanding up to $9.0 million, subject to borrowing base availability. The Best Flow Credit Facility had a maturity date of February 4, 2026.

The interest rate under the Best Flow Credit Facility was the lesser of (i) the Prime Rate (as defined in the Best Flow Credit Facility) plus the applicable margin (3.50%) and (ii) the Maximum Rate (as defined in the Best Flow Credit Facility). All accrued but unpaid interest on the outstanding principal balance is due and payable monthly on the first day of each calendar month. The Best Flow Credit Facility was secured by a first lien on substantially all of the assets of Best Flow.

~~On March 4, 2022, the Best Flow Credit Facility was extinguished resulting in loss of extinguishment of debt of $0.3 million.~~

~~Best Flow Note~~

On January 28, 2021, Best Flow issued a promissory note (the “Best Flow Note”), with Equify Financial, as holder. Equify Financial is a related party. The Best Flow Note provides for a term loan in an initial aggregate principal amount equal to $13.0 million. Proceeds from the Best Flow Note were utilized to pay down $7.6 million of outstanding balances on the Best Flow Credit Facility and to pay down other equipment financing agreements for $5.4 million. The Best Flow Note matures on February 1, 2026, with a fixed interest rate of 8.0%. The principal and interest are paid in equal monthly amortizing amounts through maturity. Prepaid amounts are subject to a 0.19% prepayment premium.

~~On March 4, 2022, the Best Flow Note was extinguished resulting in loss of extinguishment of debt of $1.4 million.~~

~~Alpine Promissory Note~~

In January 2021, Alpine entered into a $21.4 million promissory note with Equify Financial (“Alpine Note”). Equify Financial is a related party. The Alpine Note amortizes monthly, had an interest rate of 8.0% and had a stated maturity date in February 2027. Alpine had $16.7 in outstanding borrowings under the Alpine Note as of March 4, 2022.

~~On March 4, 2022, the Alpine Note was extinguished resulting in loss on extinguishment of debt of $1.8 million.~~

~~Other indebtedness~~

As of March 31, 2022 and December 31, 2021, the Company had other debt agreements outstanding with unpaid principal balances of $11.1 million and $1.7 million, respectively. These were primarily comprised of various equipment financing agreements. As of March 31, 2022, $10.1 million is due October 1, 2022 at an interest rate of 5.0%.

~~The following table summarizes the principal maturity schedule for our long-term debt outstanding as of March 31, 2022:~~

2022

2023

2024

2025

2026

Thereafter

Total

First Financial loan

$
11,086

$
15,291

$
—

$
—

$
—

$
—

$
26,377

New ABL Credit Facility

—

—

—

—

—

70,706

70,706

New Term Loan Credit Facility

16,875

22,500

22,500

388,125

—

—

450,000

Backstop Note(1)

—

—

—

—

—

22,000

22,000

Closing Date Note(1)

—

—

—

—

—

22,000

22,000

Equify Bridge Note(1)

—

—

—

—

—

45,800

45,800

Other

10,223

167

166

108

79

386

11,129

Total

$
38,184

$
37,958

$
22,666

$
388,233

$
79

$
160,892

$
648,012

In connection with the IPO in May 2022 (see Note 15 – Subsequent Events), ProFrac Predecessor became partially owned by ProFrac Holding Corp., a C-Corporation. ProFrac Holding Corp. is a taxable entity and will be required to account for income taxes under the asset and liability method beginning in the second quarter of 2022.

During the quarter ended March 31, 2022, ProFrac Predecessor and its members completed the acquisition of FTSI, a C-Corporation. Through a series of transactions, ProFrac Predecessor obtained ownership of all of the assets and liabilities of FTSI, but the FTSI C-Corporation legal entity was owned by the ProFrac Predecessor members. In connection with the IPO, the FTSI C-Corporation legal entity merged with a subsidiary of ProFrac Holding Corp., which inherited the tax attributes of the FTSI legal entity.

We estimate that ProFrac Holding Corp. will have significant deferred tax assets as a result of the tax attributes it inherited from the FTSI legal entity, however, we anticipate recording a full valuation allowance on ProFrac Holding Corp.’s net deferred tax assets based on our assessment that it is more likely than not that the deferred tax asset will not be realized. A change in these assumptions could cause a decrease to the valuation allowance, which could materially impact our results of operations.

Effective January 1, 2022, we adopted the new lease accounting guidance under Accounting Standards Codification (“ASC”) Topic 842, Leases. The details of the significant changes to our accounting policies resulting from the adoption of the new lease standard are set out below. We adopted the standard using the optional modified retrospective transition method; accordingly, the comparative information as of December 31, 2021, has not been adjusted and continues to be reported under the previous lease standard. Under the new standard, assets and liabilities that arise from all leases are required to be recognized on the balance sheet for lessees. Previously, only capital leases, which are now referred to as finance leases, were recorded on the balance sheet. The adoption of this standard resulted in the recognition of approximately $35.8 million of operating lease right-of-use assets and operating lease liabilities on our consolidated balance sheet as of January 1, 2022. The adoption of this standard did not materially impact our consolidated results of operations for the three months ended March 31, 2022.

Beginning January 1, 2022, for all leases with a term in excess of 12 months, we recognized a lease liability equal to the present value of the lease payments and right-of-use asset representing our right to use the underlying asset for the lease term. For operating leases, lease expense for lease payments is recognized on a straight-line basis over the lease term and accretion of the lease liability, while finance leases (of which we have none) include both an operating expense and an interest expense component. For all leases with a term of 12 months or less, we elected the practical expedient to not recognize lease assets and liabilities. We recognize lease expense for these short-term leases on a straight-line basis over the lease term.

We are a lessee for several operating leases, related primarily to real estate and light duty vehicles. The majority of our operating leases have remaining lease terms of 10 years or less. None of our leases include options to extend the leases, nor do any include options to terminate the leases. The accounting for leases may require judgment, which includes determining the incremental borrowing rates to utilize in our net present value calculation of lease payments for lease agreements which do not provide an implicit rate.

In connection with the completion of the FTSI Acquisition (as defined below), FTSI conveyed to Wilks Development, LLC, an affiliate of ProFrac LLC, substantially all of FTSI’s owned real property, consisting primarily of FTSI’s hydraulic fracturing equipment manufacturing facilities, in exchange for cash consideration of approximately $44.4 million (the “FTSI Sale Leaseback”). We will lease such real property from Wilks Development, LLC in exchange for aggregate monthly lease payments of $51.6 million through March 2032. The cash consideration received was $3.7 million less than the carrying value of these assets. Because this sale was to an affiliate under common control, we accounted for the $3.7 million as an equity transaction recorded as a deemed distribution within our consolidated statements of changes in equity.

Our leasing activities primarily consist of operating leases for administrative offices, manufacturing and maintenance facilities along with some light duty vehicles. We do not lease any equipment on a long-term basis.

~~The following table includes other supplemental information for our operating leases:~~

~~The following table summarizes the maturity of our operating leases as of March 31, 2022:~~

In the normal course of business, the ProFrac Predecessor has entered into transactions with related parties where the Wilks (or entities they control) hold a controlling financial interest. During the three months ended March 31, 2022 and 2021, the ProFrac Predecessor had related party transactions with the following related party entities

Automatize, LLC (“Automatize”) is a logistics company that provides for the delivery of proppants on behalf of its customers, including the ProFrac Predecessor. Amounts paid to Automatize are recorded in cost of revenues, exclusive of depreciation and depletion on our consolidated statements of operations.

Cisco Logistics, LLC (“Cisco Logistics”) is a logistics company that delivers sand and equipment on behalf of its customers, including the ProFrac Predecessor. Amounts paid to Cisco Logistics are recorded in cost of revenues, exclusive of depreciation and depletion on our consolidated statements of operations.

Equify Risk Services, LLC (“Equify Risk”) is an insurance broker that negotiates and secures insurance policies on behalf of its customers, including the ProFrac Predecessor. Amounts paid to Equify Risk are recorded in selling, general and administrative expenses on our consolidated statements of operations.

Equify Financial, LLC (“Equify Financial”) is a finance company that provides equipment and other financing to its customers, including the ProFrac Predecessor. Amounts paid to Equify Financial are recorded in interest expenses on our consolidated statements of operations, and repayments of long-term debt on our consolidated statements of cash flows. See Note 7—Indebtedness for additional disclosures related to related party credit agreements.

Wilks Brothers, LLC (“Wilks Brothers”) is a management company which provides administrative support to various businesses within their portfolio. Wilks Brothers and certain entities under its control will at times incur expenses on behalf of the ProFrac

Predecessor, billing the ProFrac Predecessor for these expenses at cost as well as certain management fees. Amounts paid to Wilks Brothers are generally recorded in selling, general and administrative expenses on our consolidated statements of operations.

Interstate Explorations, LLC (“Interstate”) is an exploration and development company for which ProFrac LLC performs pressure pumping services, and from which the Company has a short-term lease for certain office space.

~~Flying A Pump Services, LLC (“Flying A”) is an oilfield services company which provides pump down and acid services, to which ProFrac LLC rents and sells equipment and frac fleet components.~~

MC Estates, LLC and the Shops at Willow Park, LLC (“Related Lessors”) own various industrial parks and office space leased by the ProFrac Predecessor. Amounts paid to Related Lessors are recorded in selling, general and administrative expenses on our consolidated statements of operations.

Wilks Construction Company, LLC (“Wilks Construction”) is a construction company that has built and made renovations to several buildings for the Company, including construction of a new sand plant. Amounts paid to Wilks Construction are recorded in capital expenditures on our consolidated statements of cash flows.

3 Twenty-Three, LLC (“3 Twenty-Three”) is a payroll administrator which performs payroll services on behalf of its customers, including the ProFrac Predecessor. Amounts paid to 3 Twenty-Three are recorded in cost of revenues, exclusive of depreciation and depletion and selling, general and administrative expenses on our consolidated statements of operations.

Carbo Ceramics Inc. (“Carbo”) is a provider of ceramic proppant which will at times purchase conventional proppant from the Company to act as a broker for its customers. Additionally, the Company will at times purchase manufactured proppant from Carbo for the stimulation services segment.

FHE (“FHE”) is a provider of production and well completion equipment used at the wellsite. Its RigLock and FracLock systems remotely connect surface equipment to the wellhead that keeps crews safer and speeds up operations while also reducing the volume of high-pressure iron. Amounts paid to FHE are recorded in capital expenditures on our consolidated statements of cash flows.

~~The following table summarizes expenditures with related parties for the three months ended March 31, 2022 and 2021:~~

~~The following table summarizes related party accounts payable as of March 31, 2022 and December 31, 2021:~~

~~The following table summarizes revenue from related parties for the three months ended March 31, 2022 and 2021:~~

~~The following table summarizes related party accounts receivable as of March 31, 2022 and December 31, 2021:~~

Additionally, in January and February of 2021, ProFrac LLC executed two agreements with one of ProFrac LLC’s members for the sale of certain lots of equipment, in exchange for $8.7 million in cash, an amount that approximates the net book value of the assets. Under these agreements, for any assets subsequently resold by the member, ProFrac LLC will reimburse the member for a certain percentage of the net loss, or conversely be entitled to a certain percentage of the net gain, at rates established in the agreements. As of March 31, 2022, the majority of the assets have been sold by the member, and ProFrac LLC’s remaining liability of approximately $0.2 million for assets that have not been resold has been recorded.

On February 4, 2022, THRC Holdings entered into a Rights Agreement with Encantor Properties LP, one of the sellers from whom the Company purchased the Munger Ranch property, under which the related party was assigned rights to $8.1 million of the $30.0 million in consideration related to the Munger purchase. As part of the IPO completed in May 2022, the sellers of Munger Ranch were issued 2,114,273 shares of Class A Common Stock in exchange for the $30.0 million consideration related to the Munger Ranch purchase. See Note 15 – Subsequent Events.

On March 4, 2022, the Company acquired the outstanding stock of FTSI for a purchase price of $405.7 million, consisting of cash consideration of $332.8 million, and THRC Holdings’ equity interest of $72.9 million (“THRC FTSI Related Equity”) (collectively the “FTSI Acquisition”).

The THRC FTSI Related Equity was the result of a transaction whereby THRC Holdings, which owned approximately 19.5% of FTSI, agreed to retain that interest in FTSI in lieu of receiving cash pursuant to the FTSI Merger Agreement. Immediately following the closing of the cash acquisition pursuant to the Agreement and Plan of Merger, dated as of October 21, 2021, by and among FTSI, ProFrac LLC and ProFrac Acquisitions, Inc. (the “FTSI Merger Agreement”), ProFrac LLC distributed the 80.5% of the FTSI equity it acquired in such merger to Farris Wilks and THRC Holdings in a manner that resulted in each of them owning 50% of FTSI (the “FTSI Distribution”), with THRC Holdings receiving a smaller share of the FTSI Distribution and instead retaining certain preferred equity in ProFrac LLC in lieu of its redemption in connection with such distribution.

We have accounted for the acquisition of FTSI using the acquisition method of accounting. We used our best estimates and assumptions to assign fair value to the tangible and intangible assets expected to be acquired and liabilities expected to be assumed at the acquisition date. The majority of the measurements of assets acquired and liabilities assumed, are based on inputs that are not observable in the market and thus represent Level 3 inputs.

~~The following table summarizes the preliminary allocation of the purchase price:~~

The allocation of the purchase price to FTSI’s net tangible assets and liabilities and identifiable intangible assets as of March 4, 2022, is preliminary and subject to revisions to the fair value calculations for the identifiable assets and liabilities. The determination and allocation of the purchase consideration are subject to change during the measurement period, up to one year from the date the acquisition closed.

For the three months ended March 31, 2022, our revenues and pretax earnings included $48.6 million and $0.1 million loss, respectively, associated with the FTSI acquired operations after the closing on March 4, 2022. In addition, FTSI Acquisition-related costs of approximately $3.7 million were incurred during the three months ended March 31, 2022, consisting of external legal and consulting fees. These costs are classified in selling, general and administrative expense in the consolidated statements of operations. Additionally, we incurred $9.3 million in severance costs in connection with the FTSI Acquisition, which are classified in selling, general and administrative expense in the consolidated statements of operations.

The following unaudited pro forma results of operations have been prepared as though the FTSI acquisition had been completed on January 1, 2021. Pro forma amounts are based on the purchase price allocation of the significant acquisition and are not necessarily indicative of the results that may be reported in the future.

On February 2, 2022, we entered into an agreement with Flotek Industries, Inc. (“Flotek”), pursuant to which Flotek will provide full downhole chemistry solutions for a minimum of 10 hydraulic fleets for three years starting on April 1, 2022, at a price of cost plus 7% (“Flotek Supply Agreement”). In exchange for entry into the Flotek Supply Agreement, we received $10 million in initial principal amount of notes that are convertible into Flotek common stock (“Convertible Notes”) and acquired an additional $10 million in principal amount of Convertible Notes in a related private offering transaction. Our equity ownership in Flotek on a fully diluted basis as a result of this investment is approximately 17%. In addition, we are permitted to designate up to2 new directors to Flotek’s board of directors.

On February 16, 2022, we and Flotek agreed to amend the Flotek Supply Agreement to increase the term to ten years and increase the scope to 30 fleets. In exchange for our entry into the amendment to the Flotek Supply Agreement (the “Flotek Supply Agreement Amendment”), Flotek agreed to issue us $50 million in initial principal amount of Convertible Notes that will be convertible into

Flotek common stock. The Flotek Supply Agreement Amendment and issuance to us of additional Flotek Convertible Notes are conditioned upon customary closing conditions including the approval of Flotek’s shareholders. In May 2022, the Flotek shareholders approved the Convertible Notes issuance and the Flotek Supply Agreement Amendment. See Note 15 – Subsequent Events. Our equity ownership in Flotek on a fully diluted basis after the consummation of these transactions is approximately 43%, and we will be permitted to designate 2 additional directors, or up to 4 new directors to Flotek’s board of directors.

The Flotek Supply Agreement Amendment includes a minimum annual volume commitment whereby we will be obligated to pay Flotek liquidated damages equal to 25% of the shortfall for such year, should we fail to meet the minimum purchase amount.

The notes issued to ProFrac accrue paid-in-kind interest at a rate of 10% per annum, have a maturity of one year, and convert into common stock of Flotek (a) at the holder’s option at any time prior to maturity, at a price of $1.088125 per share, (b) at Flotek’s option, if the volume-weighted average trading price of Flotek’s common stock equals or exceeds $2.50 for 20 trading days during a 30 consecutive trading day period, or (c) at maturity, at a price of $0.8705 (the “Convertible Notes”). We initially recognized the Convertible Notes with an initial principal balance of $20 million at $20 million.

We have designated our investment in the Convertible Notes as trading securities. Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the consolidated statements of operations. For the three months ended March 31, 2022, we recognized noncash income of $8.1 million as other (expense) income on our consolidated statements of operations related to the change in fair value of the Convertible Notes. The Company had an investment of $28.1 million in Flotek as of March 31, 2022, a Level 3 fair value measurement. See Note 12 — Fair Value of Financial Instruments for more information on our investments using Level 3 measurements.

During the year ended December 31, 2021, the Company purchased Series B-1 Preferred Units of Basin Production and Completion LLC (“BPC”), a manufacturer of equipment used in hydraulic fracturing for $4.2 million. This comprises approximately 20% of the BPC Series B Preferred Units. As of December 31, 2021, we did not exercise significant influence over this entity. As we determined this to be an equity security, we initially recorded our investment at cost, presented as “Investments” in our consolidated balance sheets as of December 31, 2021.

On February 9, 2022, the Company entered into an agreement to purchase all the series A-1 & B-1 preferred units of BPC for $46.0 million (“Basin Units Acquisition”), consisting of $40.0 million to BPC for series A-1 & B-1 preferred units and $6.0 million to selling holders of BPC series B-1 preferred units. Additionally, on February 14, 2022, the Company made a loan to FHE USA LLC, a subsidiary of BPC for $1.25 million. The loan bears interest at the rate of 5% per annum. Interest is either paid at each calendar quarter end or added to the principal balance at the election of BPC. The loan matures on February 14, 2027. The Company had an investment of $50.2 million in BPC as of March 31, 2022.

As of March 31, 2022, our investments in BPC provide the Company the ability to have significant influence, but not control over BPC’s operations. BPC's business and affairs are managed under the direction of its board of directors, which the Company does not control. Based on our evaluation, we determined that BPC is a VIE, but the Company is not the primary beneficiary of the VIE. We have elected the fair value option to account for our equity method investment in BPC. See Note 12 — Fair Value of Financial Interests for more information on our investments using Level 3 measurements.

On December 22, 2020, the Company purchased a 25% stake in EKU, an equipment manufacturer based in Germany, for $1.2 million. For the year ended December 31, 2020, we accounted for this investment using the equity method as we had significant influence over EKU, and held a voting interest of 20% or greater, but less than 50%. In January 2021, the Company obtained a controlling interest in EKU, the results of which are consolidated thereafter.

The Company obtained a 75% controlling interest in EKU in January 2021 and performed a purchase price allocation in conjunction with the consolidation of this subsidiary. We recognized net working capital of $2.5 million, property, plant and equipment of $0.4 million, intangible assets of $3.5 million and debt of $1.4 million at estimated fair value. In consolidation, we eliminated our investment in associate, recognized equity of $3.7 million for the value of our 75% interest, and noncontrolling interest of $1.2 million for the value of the minority shareholder positions. See Note 6 – Intangible Assets for additional information related to the recognized intangible assets.

The Company entered into an agreement to acquire property in West Texas (“Munger Right Agreement”) in November 2021 for a purchase price of $30.0 million. Under the Munger Right Agreement, the sellers were given the option to receive the consideration in cash, or in the event of an IPO prior to November 17, 2022, in equity, at the sellers’ election. Under the equity option, in the event the Company completes an IPO, the sellers would be entitled to 1.5% of the outstanding shares of common stock immediately following the IPO. Each seller initially elected the equity option, as such this was a non-cash transaction for the Company for the year ended December 31, 2021. The Munger Right Agreement includes a ‘Make Whole’ provision. Under the Make Whole provision, if any seller liquidates 100% of the Class A shares they are issued prior to the one-year anniversary of the IPO, then the company will pay the difference between the IPO price of the shares disposed and the disposal price of the Class A shares. As of March 31, 2022, the liability of $30.0 million is presented within Other Current Liabilities in our Balance Sheet. The acquired property was treated as an asset acquisition and not an acquisition of a business, and is presented within Property, plant, and equipment in our consolidated balance sheets as of March 31, 2022.

As part of the IPO completed in May 2022, the sellers of Munger Ranch were issued 2,114,273 shares of Class A Common Stock in exchange for the $30.0 million consideration related to the Munger Ranch purchase. See Note 15 – Subsequent Events.

The Company acquired iO-TEQ, LLC (“IOT”) in October 2021 for $2.2 million and performed a purchase price allocation at the acquisition date. We recognized net working capital of $0.2 million, property, plant and equipment of $0.1 million, intangible assets of $2.4 million and debt of $0.4 million at estimated fair value. See Note 6 – Intangible Assets for additional information related to the recognized intangible assets.

~~In December 2021, the Company entered into an agreement with Eagleton Venture, Inc. (“Eagleton”) to purchase Eagleton’s 15.172% interest in Best Flow for a purchase price of $3.9 million.~~ ~~During the three months ended March 31, 2022. Eagleton was paid $3.9 million in cash.~~

~~Assets and liabilities recorded on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values.~~

The Company’s financial instruments and investments that are carried at fair value consist mainly of Level 3 assets. Level 3 assets that are measured on a recurring basis relate to the Company’s investments in (i) Convertible Notes of Flotek, designated as trading securities and (ii) the equity method investment in BPC, for which we elected the fair value option, as described in Note 11 – Acquisitions and Investments for disclosure of the terms of these investments. The Company did 0t have any assets or liabilities measured at fair value using Level 2 of the fair value hierarchy at March 31, 2022. We had 0 Level 2 or Level 3 assets or liabilities as of December 31, 2021.

~~The following table sets forth the fair value of the Company’s financial instruments within Level 3 of the fair value hierarchy.~~

The estimated fair value of the Flotek Convertible Notes as of March 31, 2022 was valued using a Monte Carlo simulation with inputs such as the market trading price of the Flotek’s common stock, the expected volatility of the Flotek’s stock price based on historical trends, a risk-free rate of interest based on US Treasury note rates and the term of the debt, the time to liquidation based on the maturity date of the notes, and a discount rate adjusted based on the credit risk of Flotek.

~~The key inputs into the Monte Carlo simulation used to estimate the fair value the Convertible Notes as of March 31, 2022, were as follows:~~

The estimated fair value of the BPC investment as of March 31, 2022 was determined to approximate cost considering the timing of the purchase of the investment. Going forward the fair value of the investment in BPC will be estimated utilizing a combination of the market and income approaches.

The following is a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from inception to March 31, 2022:

In the ordinary course of business, we are the subject of, or party to a number of pending or threatened legal actions and administrative ~~proceedings arising in the ordinary course of our business.~~proceedings. While many of these matters involve inherent uncertainty, we believe that, other than as described below, the amount of the liability, if any, ultimately incurred with respect to proceedings or claims will not have a material adverse effect on our consolidated financial position as a whole or on our liquidity, capital resources or future annual results of operations.

U.S. Well Services Inc. and U.S. Well Services, LLC (collectively, “USWS”) v. Halliburton Company and Cimarex Energy Co. (collectively, “Halliburton”)

In April 2021, USWS filed a patent infringement suit against Halliburton in United States District Court for the Western District of Texas Waco Division. In the suit, USWS alleges willful infringement of seven U.S. patents based on Halliburton’s “All-Electric Fracturing Fleet.” The trial was previously scheduled for March 2023, but has been postponed to a date yet to be determined in August 2023 or later.

In June 2021, Halliburton filed inter partes review petitions against these USWS patents. In January 2023, the Patent Trial and Appeal Board (“PTAB”) entered final written decisions finding certain claims of these patents invalid. In March 2023, USWS filed a notice of appeal of the final written decisions invalidating certain claims of three of these patents. Other appeal deadlines remain open. In May 2022, the Western District of Texas ruled certain claims of five of the USWS patents are invalid.

In May 2022, Halliburton filed an amended answer to this patent infringement suit counterclaiming for declaratory judgment of invalidity of USWS’ patents asserted against Halliburton in this matter and willful infringement of seven of Halliburton’s U.S. patents based on USWS’ clean fleets and conventional fleets. In June 2022, USWS filed inter partes review petitions against four of Halliburton’s patents. In December 2022, the PTAB denied institution of inter partes review against these four patents.

The outcome of Halliburton’s counterclaim against us is uncertain and the ultimate resolution of it could have a material adverse effect on our unaudited condensed consolidated financial statements in the period in which the resolution is recorded.

Halliburton Energy Services, Inc., Halliburton US Technologies, Inc., and Halliburton Group Technologies, Inc. (collectively, “Halliburton”) v. U.S. Well Services, LLC (“USWS”)

In September 2022, Halliburton filed two patent infringement suits against USWS in United States District Court for the Western District of Texas Waco Division. In the first lawsuit, Halliburton alleges willful infringement of three of its previously asserted patents as well as five additional U.S. patents. In the second lawsuit, Halliburton alleges willful infringement of two of its previously asserted patents as well as five additional U.S. patents. Both lawsuits allege infringement based on all of USWS and ProFrac LLC's fleets. The two lawsuits are scheduled together and set for trial in May 2024.

In January 2023, USWS filed amended answers to these patent infringement suits counterclaiming for declaratory judgment of invalidity of Halliburton’s patents asserted against USWS in this matter and willful infringement of two additional USWS’ U.S. patents based on Halliburton’s “All-Electric Fracturing Fleet.” In February 2023, Halliburton filed inter partes review petitions against these USWS patents.

The outcomes of these cases are uncertain and the ultimate resolution of them could have a material adverse effect on our unaudited condensed consolidated financial statements in the period in which the resolution is recorded.

Patterson v. FTS International Manufacturing, LLC and FTS International Services, LLC (collectively, “FTS”):

On June 24, 2015, Joshua Patterson filed a lawsuit ~~against the Company~~ in the 115th Judicial District Court of Upshur County, Texas, alleging, among other things, that ~~the Company~~FTS was negligent with respect to an automobile accident in 2013. Mr. Patterson sought monetary relief of more than $1$1.0 million. On July 19, 2018, a jury returned a verdict of approximately ~~$100~~$100.0 million, including punitive damages, against ~~the Company.~~FTS. The trial court reduced the judgment to approximately $33.0 million on November 12, ~~2018, to approximately $33 million. The Company’s~~2018. FTS's insurance carriers appealed and the Twelfth Court of Appeals reversed the verdict in its entirety on August 26, 2020, remanding the case for a new trial. ~~The Company’s insurance carriers are currently appealing one of~~This litigation was settled in the ~~appellate findings with the Texas Supreme Court. No new trial date has been set. While the outcome of this case is uncertain, the Company has~~three months ended March 31, 2023. We had previously met ~~its~~our insurance deductible for this matter and ~~we do not expect~~ the ~~ultimate resolution~~settlement of this case ~~to have a material adverse~~had no effect on our unaudited condensed consolidated financial statements.

~~Lonestar Prospects, Ltd. d/b/a Vista Sand v.~~We estimate and provide for potential losses that may arise out of legal proceedings and claims to the extent that such losses are probable and can be reasonably estimated. Significant judgment is required in making these estimates and our final liabilities may ultimately be materially different from these estimates. When preparing our estimates, we consider, among other factors, the progress of each legal proceeding and claim, our experience and the experience of others in similar legal proceedings and claims, and the opinions and views of legal counsel. Legal costs related to litigation contingencies are expensed as incurred.

In connection with our initial public offering, ProFrac ~~Services, LLC~~: ~~ProFrac Services, LLC (“ProFrac Services”)~~Corp. entered into a ~~Master Purchase Agreement For Products And/Or Services~~tax receivable agreement (the “TRA”) with ~~Lonestar Prospects, Ltd. d/b/~~certain holders of limited liability company interests in ProFrac LLC (the “TRA Holders”). The TRA generally provides for payment by ProFrac Corp. to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that ProFrac Corp. actually realizes (or is deemed to realize in certain circumstances) as a ~~Vista Sand (“Vista”)~~result of (i) certain increases in tax basis that occur as a result of ProFrac Corp.'s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s ProFrac LLC units in connection with the initial public offering or the exercise of the Redemption Right (as defined in the TRA) or the Call Right (as defined in the TRA), ~~dated November 27, 2017 (the “Vista MSA”),~~and (ii) imputed interest deemed to be paid by ProFrac Corp. as ~~amended~~a result of, and additional tax basis arising from, any payments ProFrac Corp. makes under the TRA.

Payments will generally be made under the TRA as ProFrac Corp. realizes actual cash tax savings from the tax benefits covered by the ~~First Addendum~~TRA. However, if ProFrac Corp. experiences a Change of Control (as defined in the TRA) or the TRA otherwise terminates early, ProFrac Corp.'s obligations under the TRA would accelerate and ProFrac Corp. would be required to ~~Vista MSA~~make an immediate payment equal to the present value of the anticipated future payments to be made by it under the TRA. For example, if a Change in Control or other early termination event had occurred on March 31, 2023, we estimate the payment could have ranged up to more than $270 million. There can be no assurance that we will be able to satisfy our obligations under the TRA.

We account for amounts payable under the TRA when we determine that a liability is probable and the First Amendment to Vista MSA, both of which are dated June 10, 2018 (collectively, the “Vista Agreement”). Under the terms of the Vista Agreement, ProFrac Services agreed to purchase certain quantities of sand from Vista. Vista filed a complaint against ProFrac Services in the United States Bankruptcy Court for the Northern District of Texas on March 15, 2021, in which it alleges that ProFrac Services breached the terms of the Vista Agreement by failing to purchase the required amount of sand or pay for the underpurchased amounts as required by the Vista Agreement. Vista is seeking damages of approximately $8.31 million. Vista and ProFrac Services have entered into a mutually agreed upon Scheduling Order signed by the Court on February 12, 2022. Trial docket call for this matter is currently scheduled for September 6, 2022.

When deemed necessary, we establish reserves for certain legal proceedings. The establishment of a reserve is based on an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, it is reasonably ~~possible we could incur additional losses with respect to those matters in which reserves have been established.~~estimable. As of March 31, 2023, the liability from the TRA was $3.3 million.

Recurring Measurements

Our assets and liabilities measured at fair value on a recurring basis consist of the following:


	Fair Value Measurements Using
	Level 1		Level 2		Level 3
As of March 31, 2023:
Assets - investment in BPC	$	—	$	—	$	48.1

Liabilities:
Earnout payments	$	—	$	—	$	3.6
Munger make-whole provision		—		—		4.2
Warrants		0.5		—		—
Total	$	0.5	$	—	$	7.8

As of December 31, 2022:
Assets - investment in BPC	$	—	$	—	$	53.6

Liabilities:
Earnout payments	$	—	$	—	$	6.6
Munger make-whole provision		—		—		0.4
Warrants		1.1		—		—
Total	$	1.1	$	—	$	7.0

We have elected the fair value option to account for our investment in Basin Production and Completion LLC ("BPC"). The significant unobservable inputs used in the fair value measurement, which was valued using the income approach and the market approach, are forecasted results and a weighted average cost of capital.

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(Amounts in millions, except per share amounts, or where otherwise noted)

The fair value of the earnout payments was estimated using a Black-Scholes model, adjusted for the capped amount of the earnout. The fair value was discounted using a company specific credit spread to account for the counterparty credit risk in making the payment. The significant unobservable inputs used in the fair value measurement are the risk-free rate, credit spread of the acquirer, discount rate, forecasted results and volatility.

The fair value of the Munger make-whole provision was estimated using a Black-Scholes model. The significant unobservable inputs used in the fair value measurement are the risk-free rate and volatility.

The following is a reconciliation of our recurring Level 3 fair value measurements:


	Three Months Ended March 31,
	2023			2022
Balance at beginning of period	$	46.6		$	—
Acquisition of Flotek convertible notes		—			20.0
Acquisition of investment in BPC		—			46.0
Transfer of Investment in BPC to Level 3 fair value measurement		—			4.2
Change in fair value of Level 3 fair value measurements		(6.3	)		8.1
Balance at end of period	$	40.3		$	78.3

Nonrecurring Measurements

We have certain assets and liabilities that are not measured at fair value on an ongoing basis but were subjected to fair value adjustments at the time of acquisition. These include long-lived assets and liabilities acquired through our business combination activities, the fair values of which were determined using applicable valuation models based on significant unobservable inputs classified as level 3 in the fair value hierarchy. See Note 2 for additional information.

Financial Instruments

The estimated fair values of our financial instruments have been determined at discrete points in time based on relevant market information. Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, certain investments, accounts payable, accrued expenses and long-term debt. The carrying amounts of our financial instruments other than long-term debt approximate fair value because of the short-term nature of the items.

The carrying amounts of our term loan facility and ABL credit facility approximate fair value due to the variable interest rate. The fair value of our fixed rate debt, which includes the Monarch note, the REV note and the Equify note was as follows:


	March 31, 2023		December 31, 2022
Principal amount of fixed rate debt	$	148.6	$	150.3
Fair value of fixed rate debt	$	146.1	$	142.5

NOTE 14. BUSINESS SEGMENTS

We manage our business segments primarily on the type of product or services provided. We have three reportable segments which we operate within the United States of America: stimulation services, proppant production and manufacturing. Amounts in the other category reflect our ~~assessment of the then current status of litigation.~~

~~14. Segment information~~

~~Our~~ business ~~has 3~~activities that are not separately reportable, segments: Stimulation services, Manufacturing and Proppant production. Each reportable segment represents a separate business unit that operated as a standalone company prior to the reorganization of the Company in December 2021. Following the reorganization, each reportable segment continues to have distinct management and prepares discrete financial informationwhich primarily includes Flotek for the segment (consistent with when each operated as a standalone business). FTSI is part of our stimulation services segment. Our chief operating decision makers review the discrete segment financial information, including Adjusted EBITDA as the measure of profitability,periods presented.

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(Amounts in millions, except per share amounts, or where otherwise noted)

We evaluate the performance of our segments ~~and make resource allocation decisions.~~

We account for intersegment transactions as if the transactions were with third parties, that is, at estimated current market prices. For the three months ended March 31, 2022 and 2021, intersegment revenues for the manufacturing segment were 84% and 86%, respectively. For the three months ended March 31, 2022 and 2021, intersegment revenues for the proppant production segment were 69% and 29%, respectively.

~~The performance of our segments is evaluated primarily~~based on Adjusted EBITDA. We define Adjusted EBITDA as our net income (loss), before (i) interest expense, net, (ii) income ~~tax provision,~~taxes, (iii) depreciation, depletion and amortization, (iv) ~~loss~~(loss) gain on disposal of assets, (v) stock-based compensation, and ~~(v)~~(vi) other ~~unusual or non-recurring~~ charges, such as reorganization costs, stock compensation expense and other costs related to our initial public offering, ~~non-recurring supply commitment charges,~~ certain ~~bad debt expense and~~credit losses, gain (loss) on extinguishment of ~~debt.~~debt, unrealized gain (loss) on investments, acquisition and integration expenses, litigation expenses and accruals for legal contingencies and acquisition earnout adjustments.

~~Segment~~Summarized financial information ~~and a reconciliation of~~for our reportable segments is as follows:


	Stimulation Services		Proppant Production		Manufacturing		Other			Eliminations			Total
Three months ended March 31, 2023:
Revenue
External customers	$	786.7	$	50.0	$	3.4	$	11.6		$	—		$	851.7
Intercompany		3.5		32.2		63.7		37.6			(137.0	)		—
Total Revenue	$	790.2	$	82.2	$	67.1	$	49.2		$	(137.0	)	$	851.7

Adjusted EBITDA	$	205.7	$	41.3	$	8.0	$	(7.9	)	$	—		$	247.1

Three months ended March 31, 2022:
Revenue
External customers	$	335.9	$	3.9	$	5.2	$	—		$	—		$	345.0
Intercompany		0.3		8.5		26.8		—			(35.6	)		—
Total Revenue	$	336.2	$	12.4	$	32.0	$	—		$	(35.6	)	$	345.0

Adjusted EBITDA	$	73.6	$	7.9	$	6.1	$	—		$	—		$	87.6

The following table reconciles total Adjusted EBITDA ~~for~~to net income:


	Three Months Ended March 31,
	2023			2022
Adjusted EBITDA	$	247.1		$	87.6
Interest expense, net		(34.9	)		(9.3	)
Depreciation, depletion and amortization		(110.3	)		(44.6	)
Income taxes		(6.7	)		(0.6	)
(Loss) gain on disposal of assets, net		(1.5	)		0.2
Gain (loss) on extinguishment of debt		4.1			(8.3	)
Acquisition earnout adjustment		3.0			—
Stock-based compensation		(2.9	)		—
Stock-based compensation related to deemed contributions		(10.2	)		—
Provision for credit losses, net of recoveries		(0.1	)		—
Reorganization costs		—			(0.1	)
Acquisition and integration costs		(12.3	)		(13.0	)
Litigation expenses and accruals for legal contingencies		(5.8	)		—
Unrealized (loss) gain on investments, net		(9.7	)		8.1
Net income	$	59.8		$	20.0

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(Amounts in millions, except per share amounts, or where otherwise noted)

Segments assets are comprised of the following:


	March 31, 2023			December 31, 2022
Total assets:
Stimulation Services	$	2,761.3		$	2,647.9
Proppant Production		1,097.7			477.1
Manufacturing		160.9			140.5
Other		192.8			193.7
Total segment assets		4,212.7			3,459.2
Eliminations		(572.4	)		(525.6	)
Total assets	$	3,640.3		$	2,933.6

NOTE 15. RELATED PARTY TRANSACTIONS

In the normal course of business, we have entered into transactions with related parties where Messrs. Dan Wilks and Farris Wilks and entities owned by or affiliated with them (collectively, the "Wilks Parties") hold a controlling financial interest. During the three months ended March 31, 2023 and 2022, we had related party transactions with the following related party entities:

•

Automatize, LLC (“Automatize”) is a logistics broker that facilitates the last-mile delivery of proppants on behalf of its customers. Amounts paid to Automatize include costs passed through to third-party trucking companies and ~~2021~~a commission retained by Automatize. These payments are recorded in cost of revenues, exclusive of depreciation and depletion in our unaudited condensed consolidated statements of operations.

•

Cisco Logistics, LLC (“Cisco Logistics”) is a logistics company that delivers sand and equipment on behalf of its customers. Amounts paid to Cisco Logistics are recorded in cost of revenues, exclusive of depreciation and depletion in our unaudited condensed consolidated statements of operations.

•

Equify Financial, LLC (“Equify Financial”) is a finance company that provides equipment and other financing to its customers. Amounts paid to Equify Financial are recorded in interest expense in our unaudited condensed consolidated statements of operations.

•

Wilks Brothers, LLC (“Wilks Brothers”) is a management company which provides administrative support to various businesses within its portfolio. Wilks Brothers and certain entities under its control will at times incur expenses on behalf of us, billing us for these expenses at cost as ~~follows:~~

well as certain management fees. Amounts paid to Wilks Brothers are generally recorded in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.

Three Months Ended March 31,

(In thousands)

2022

2021

Revenues

Stimulation services

$
336,155

$
143,703

Manufacturing

32,006

14,657

Proppant production

12,408

5,589

Total segments

380,569

163,949

Eliminations

(35,589
)

(14,363
)
Total

$
344,980

$
149,586

Adjusted EBITDA

Stimulation services

$
73,569

$
12,953

Manufacturing

10,022

2,330

Proppant production

7,885

2,406

Adjusted EBITDA for reportable segments

91,476

17,689

Interest expense, net

(9,272
)

(6,035
)
Depreciation, depletion and amortization

(44,216
)

(35,461
)
Income tax benefit (provision)

(752
)

25

(Gain) loss on disposal of assets, net

154

(2,207
)
Loss on extinguishment of debt

(8,273
)

—

Bad debt expense, net of recoveries

(5
)

—

Loss on foreign currency transactions

(12
)

—

Reorganization costs

(55
)

—

Acquisition related expenses

(13,019
)

—

Investment income

8,100

—

Net income (loss)

$
24,126

$
(25,989
)
•

Interstate Explorations, LLC (“Interstate”) is an exploration and development company for which we perform pressure pumping services, and from which we have a short-term lease for certain office space.

•

Flying A Pump Services, LLC (“Flying A”) is an oilfield services company which provides pressure pumping, acid and cementing services, to which we rent and sell equipment and frac fleet components.

•

MC Estates, LLC, The Shops at Willow Park, and FTSI Industrial, LLC (collectively, the “Related Lessors”) own various industrial parks and office space leased by us. Amounts paid to the Related Lessors are recorded in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.

•

Wilks Construction Company, LLC (“Wilks Construction”) is a construction company that has built and made renovations to several buildings for us, including construction of a new sand plant. Amounts paid to Wilks Construction are recorded as capital expenditures.

2521

~~Table~~ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(Amounts in millions, except per share amounts, or where otherwise noted)

•

3 Twenty-Three, LLC (“3 Twenty-Three”) is a payroll administrator which performs payroll services on behalf of ~~Contents~~its customers, including us. Amounts paid to 3 Twenty-Three are recorded in cost of revenues, exclusive of depreciation and depletion and selling, general and administrative expenses in our unaudited condensed consolidated statements of operations.

•

Wilks Earthworks, LLC ("Wilks Earthworks") is an oilfield services company providing mining, wet and dry loading, hauling and other equipment to its customers, including us.

•

Carbo Ceramics Inc. (“Carbo”) is a provider of ceramic proppant which will at times purchase conventional proppant from us to act as a broker for its customers. Additionally, we will at times purchase manufactured proppant from Carbo for the stimulation services segment.

•

FHE USA LLC (“FHE”) is a provider of production and well completion equipment used at the wellsite. Amounts paid to FHE are recorded as capital expenditures.

The following table summarizes revenue from related parties:


	Three Months Ended March 31,
	2023		2022
Flying A	$	1.5	$	1.4
Carbo		0.7		0.2
Total	$	2.2	$	1.6

The following table summarizes expenditures with related parties:


	Three Months Ended March 31,
	2023		2022
Automatize	$	43.3	$	14.3
FHE		0.9		3.2
Wilks Brothers		6.3		0.3
Related Lessors		2.5		1.2
Wilks Construction		4.9		0.9
Wilks Earthworks		1.5		—
Equify Financial		2.2		0.8
3 Twenty-Three		—		0.2
Carbo		0.7		—
Total	$	62.3	$	20.9

The following table summarizes accounts receivable–related party:


	March 31, 2023		December 31, 2022
Flying A	$	3.2	$	1.5
Carbo		0.8		0.1
Interstate		0.4		0.3
Other		—		0.2
Total accounts receivable—related party	$	4.4	$	2.1

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

~~Segment information~~(Amounts in millions, except per share amounts, or where otherwise noted)

The following table summarizes accounts payable–related party:


	March 31, 2023		December 31, 2022
Automatize	$	21.7	$	8.8
Wilks Brothers		8.7		7.1
Wilks Construction		8.4		7.9
Wilks Earthworks		0.7		—
Carbo		0.6		0.2
Total accounts payable—related party	$	40.1	$	24.0

On January 11, 2023, our board of directors approved the appointment of Mr. Coy Randle, our then Chief Operating Officer, to our board of directors. Additionally, Mr. Randle entered into a consulting agreement with us, effective as of ~~March 31, 2022~~January 13, 2023, pursuant to which Mr. Randle agreed to provide us with general operational advice for an annual fee of $0.2 million. Pursuant to the consulting agreement, we will also pay healthcare insurance premiums on behalf of Mr. Randle and ~~December 31, 2021 is as follows:~~will allow Mr. Randle to use a company vehicle for the duration of the consulting agreement. The consulting agreement has a term of one (1) year and will renew automatically for one (1) additional year unless either party notifies the other in writing at least sixty (60) days prior to the initial one (1) year termination date.

NOTE 16. SUBSEQUENT EVENTS

(In thousands)

March 31,
2022

December 31,
2021

Total assets

Stimulation services

$
1,213,208

$
510,579

Manufacturing

104,124

77,968

Proppant production

107,628

100,294

Total segment assets

1,424,960

688,841

Eliminations

(111,072
)

(24,271
)
Total

$
1,313,888

$
664,570

~~15. Subsequent events~~

~~The following events occurred after March 31, 2022:~~

~~On May 12, 2022,~~In April 2023, all of the eligible holders of ProFrac ~~Holding Corp. completed its IPO~~LLC units (the "Redeeming Members") submitted redemption notices with respect to all of ~~16,000,000~~their ProFrac LLC 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 ~~its~~our Class B common stock. The Redeeming Members include entities owned or affiliated with the Wilks Brothers, as well as Matthew D. Wilks, our Executive Chairman, an entity affiliated with Johnathan L. Wilks, our Chief Executive Officer, and 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 ~~par value $0.01 per share (the "Class A Common Stock") at a public offering price of $18.00 per share. On June 6, 2022, an over-allotment option was exercised resulting in an additional 2,228,153~~on or about April 10, 2023 and the remaining 3.1 million shares on or about April 13, 2023. The surrendered shares of Class ~~A Common Stock being priced at $18.00 per share. The IPO~~B common stock were canceled, and exercise of the over-allotment option generated combined net proceeds of $303.9 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 described in Note 11 – Acquisitions and Investments) and contributed the remaining proceeds to ProFrac LLC. The Company used the remaining proceeds (i) to pay down $143.8 million of the outstanding borrowings under the New Term Loan Credit Facility (as defined herein) (ii) to fully pay the $22.0 million of the outstanding borrowings of the Backstop Note (as defined herein) (iii) pay down $22.0 million of the outstanding borrowings of the Closing Date Note (as defined herein) (iv) to pay down $20.8 million of the outstanding borrowings of the Equify Bridge Note (as defined herein) and (v) with the remaining proceeds to be used for general corporate uses and additional repayment of debt.

On April 8, 2022, the New ABL Credit Facility was amended to add the $100.0 million incremental facility, increasing the maximum revolver amount and lender commitments to $200.0 million. In connection with increasing the maximum revolver amount, certain thresholds in the following definitions and/or provisions were revised proportionately to account for such increase in the maximum revolver amount: the definition of Cash Dominion Period, the definition of Collateral Reporting Period, the definition of Covenant Trigger Period, the definition of Specified Conditions and the Minimum Liquidity covenant. All other terms and conditions of the New ABL Credit Facility remained substantially unchanged. As of April 30, 2022, the maximum availability under the New ABL Credit Facility was the aggregate lender commitments of $200.0 million with $110.7 million of borrowings outstanding and $9.2 million of letters of credit outstanding, resulting in approximately $80.1 million of remaining availability.

On May 17, 2022, ProFrac Services, LLC (“ProFrac Services”) and Flotek Chemistry, LLC (“Flotek Chemistry”), entered into an amendment (the “Amendment”) to the Flotek Supply Agreement between Flotek Chemistry and ProFrac Services dated February 2, 2022 pursuant to which ProFrac Services will purchase certain products and services from Flotek Chemistry.

The Amendment was entered into in connection with the closing of transactions (the “Closing”) contemplated by that certain Securities Purchase Agreement, dated as of February 16, 2022, between Flotek and ProFrac Holdings, LLC, an affiliate of the Company (“ProFrac Holdings”). Concurrent with the Closing, (i) the term of the Flotek Supply agreement is increased to ten years and the scope increased to 30 fleets (ii) Flotek issued $50,000,000 in aggregate principal amount of 10% convertible PIK notes to ProFrac Holdings and (iii) Flotek and ProFrac Holdings entered into a registration rights agreement with respect to the resale ofno shares of our Class B common stock ~~of Flotek acquired by ProFrac Holdings or its affiliates.~~

~~On May 12, 2022, as part of the IPO completed in May 2022, the sellers of Munger Ranch were issued 2,114,273 shares of Class A Common Stock as consideration for the Munger Ranch purchase.~~

On May 3, 2022, Wilks Brothers, (the “Service Provider”) and ProFrac II LLC entered into a shared services agreement (the “Shared Services Agreement”), pursuant to which the Service Provider will provide certain consulting, technical and administrative services to ProFrac II LLC. In exchange for such services, ProFrac II LLC will pay to the Service Provider an aggregate annual retainer fee equal to $7.0 million payable in quarterly installments. The Shared Services Agreement will continue for a period of three years from its execution date, and then automatically be extended for additional ~~one-year~~ terms unless the Service Provider or ProFrac II LLC provides 90 days prior written notice of its desire not to automatically extend the term. The Shared Services Agreement may only be assigned by a party with the other party’s consent. Farris C. Wilks and Dan H. Wilks own the Service Provider.

~~Table of Contents~~

On May 2, 2022, the Company adopted the Long Term Incentive Plan (“LTIP”) for the benefit of employees, directors and consultants of the Company and its affiliates. The LTIP provides for the grant of all or any of the following types of awards: (1) incentive stock options qualified as such under U.S. federal income tax laws; (2) stock options that do not qualify as incentive stock options; (3) stock appreciation rights; (4) restricted stock awards; (5) restricted stock units; (6) bonus stock; (7) dividend equivalents; (8) other stock-based awards; (9) cash awards; and (10) substitute awards. Subject to adjustment in accordance with the terms of the LTIP, 3,120,708 shares of Class A Common Stock have been reserved for issuance pursuant to awards under the LTIP. If an award under the LTIP is forfeited, settled for cash or expires without the actual delivery of shares, any shares subject to such award will again be available for new awards under the LTIP. The LTIP will be administered by the board’s compensation committee or the board, as applicable. As of June 21, 2022, an aggregate of 509,467 restricted stock units with respect to 509,467 shares of Class A Common Stock wereremain issued and ~~outstanding under the LTIP.~~

On June 16, 2022, ProFrac II LLC entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) by and among ProFrac II LLC, FoxRock Ranch Holding Company, LLC (“SP Seller”), SP Silica of Monahans, LLC (“SP Monahans”) and SP Silica Sales, LLC (“SP Sales and, together with SP Monahans, the “SP Companies”). Pursuant to the Purchase Agreement, at the Closing (as defined in the Purchase Agreement), upon the terms and subject to the conditions set forth in the Purchase Agreement, ProFrac II LLC has agreed to purchase from SP Seller 100% of the issued and outstanding membership interests of each of the SP Companies for a purchase price of $90,000,000 in cash, subject to certain customary working capital, indebtedness and other adjustments at the time of the closing (the “SPS Acquisition”). The closing of the transactions contemplated by the Purchase Agreement is to take place on the third business day after the satisfaction or waiver of all conditions to the obligations of the parties to consummate such transactions. In connection with the closing of the SPS Acquisition, ProFrac II LLC would acquire, among other things, an in-basin frac sand facility and related mining operations in the Permian Basin.

On June 17, 2022, ProFrac II LLC, a wholly-owned subsidiary of ProFrac Holdings, and Flotek entered into a Securities Purchase Agreement (the “Flotek SPA”). In connection with the closing of the Flotek SPA on June 21, 2022, Flotek issued and sold to ProFrac II LLC certain pre-funded warrants of Flotek, each exercisable into one share of Flotek common stock, on the terms and subject to the conditions set forth therein. Pursuant to the Flotek SPA, at the closing, Flotek issued and sold to ProFrac II LLC pre-funded warrants (the “Flotek Warrants”) to purchase from Flotek up to a total of 13,104,839 shares of Flotek common stock (the “Warrant Shares”) at any time and at an exercise price equal to $0.0001 per share (subject to adjustment in accordance with the terms of the Flotek Warrant), in exchange for the payment by ProFrac II LLC to Flotek of $19,500,000 in cash. ProFrac II LLC and its affiliates may not receive any voting or consent rights in respect of the Flotek Warrants or the underlying shares unless and until (i) Flotek has obtained approval from a majority of its shareholders excluding ProFrac II LLC and its affiliates and (ii) ProFrac II LLC has paid an additional $4,500,000 to Flotek.

As previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2022 (the “USWS Merger 8-K”), on June 21, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, U.S. Well Services, Inc., a Delaware corporation (“USWS”), and Thunderclap Merger Sub I, Inc., a Delaware corporation and an indirect subsidiary of the Company (“Merger Sub”). The Merger Agreement provides for, among other things, the merger of Merger Sub Inc. with and into USWS, with USWS surviving the merger as the surviving corporation and an indirect subsidiary of the Company (the “Merger”). outstanding.The acquisition is expected to be completed in the fourth quarter of 2022, subject to the satisfaction of customary closing conditions, including the approval of USWS stockholders, as described further below and in the ~~USWS Merger 8-K~~.

~~Based on the closing price of the Company’s Class A Common Stock (as reported on the Nasdaq Global Select Market) of $21.49 per share on June 21, 2022, the last trading day prior~~This redemption may have tax consequences for us including, but not limited to, ~~announcement of the Merger Agreement, the transaction represents~~ ~~aggregate stock consideration of approximately $93 million~~increasing our effective tax rate and ~~a consideration per share of~~ ~~Class A Common Stock of USWS, par value $0.0001 per share (the “USWS Common Stock”)~~ of ~~$1.21.~~ ~~After~~ giving ~~effect~~rise to ~~the conversions of certain securities of USWS, as~~ ~~described in the USWS Merger 8-K, the total stock consideration payable to USWS stockholders and holders of USWS equity awards, based on the~~ ~~Company’s Class A Common Stock~~ ~~June 21, 2022 closing price, would be approximately $270 million~~.

~~Dan Wilks and Farris Wilks, together with certain of their affiliates, (collectively, the “Wilks Parties”) collectively hold a controlling interest in~~ ~~the Company. Certain Wilks Parties also own certain securities of USWS. Upon the consummation of the Merger, the Wilks Parties will receive an aggregate of 4,112,407 shares of~~ ~~the Company’s Class A~~ ~~Common Stock as merger consideration (assuming, solely for the purpose of this calculation, a hypothetical closing date of October 31, 2022), which, based on the~~ ~~Company’s Class A~~ ~~Common Stock June 21, 2022 closing price, would be approximately $88.4 million.~~

~~Table of Contents~~

~~date of the execution of the Merger Agreement and the consummation of the Merger, (c) that~~ ~~the Company~~ ~~use~~ commercially reasonable efforts to obtain and consummate a financing to fund the repayment in connection with the closing of the Merger of certain indebtedness of USWS and its subsidiaries as promptly as reasonably possible following the date of the Merger Agreement, (d) that USWS reasonably cooperate with such financing efforts and (e) providing for the Company and USWS to cooperate in the preparation, and obtaining the effectiveness of, the Registration Statement (as defined in the Merger Agreement) to be used in connection with the Merger.

USWS further agreed (a) to amend the terms of certain USWS securities, and to use commercially reasonable efforts to amend certain USWS equity awards, each as described in the USWS Merger 8-K, (b) not to solicit proposals relating to alterative business combination transactions or, subject to certain exceptions, enter into discussions or an agreement concerning or provide confidential information in connection with any proposals for alternative business combination transactions and (c) as soon as practicable following the date of the Merger Agreement convene and hold a special meeting of the holders of ~~USWS Common Stock~~ ~~for the purposes of obtaining the approval of the stockholders of USWS.~~

The consummation of the Merger is subject to customary conditions, including, among others, (a) receipt of the approval of the stockholders of USWS, (b) the absence of any applicable law or order prohibiting the consummation of the Merger or the issuance of Company stock in connection with the Merger, (c) the expiration or termination of the HSR Act waiting period, (d) the effectiveness of the registration statement in connection with the Merger, (e) approval of the issuance of Company stock in connection with the Merger for listing on Nasdaq, (f) subject to certain exceptions, the accuracy of the representations and warranties of each party, (g) the performance in all material respects of each party of its obligations under the ~~Merger Agreement and (h)~~TRA. We are currently evaluating the ~~absence of a material adverse effect~~impact on ~~the Company and USWS.~~our unaudited condensed consolidated financial statements.

~~The Merger Agreement contains certain termination rights for both~~ ~~the Company~~ 23~~and USWS and further provides that, upon termination of the Merger Agreement under specified circumstances, USWS may be required to pay~~ ~~the Company~~ ~~a termination fee of $8,000,000 or reimburse ProFrac for certain expenses in an amount up to $3,000,000, in each case, depending on the termination event.~~

ProFrac Holding Corp. (the “Company”) was formed on August 17, 2021, pursuant to the laws of the State of Delaware to become a holding company for ProFrac Holdings, LLC and certain other affiliates.

This balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America. Separate statements of operations, statements of changes in stockholder’s equity and statements of cash flows have not been presented because the Company has had no business transactions or activities through March 31, 2022.

On May 12, 2022, ProFrac Holding Corp. completed its IPO of 16,000,000 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. On June 6, 2022, an over-allotment option was exercised resulting in an additional 2,228,153 shares of Class A Common Stock being priced at $18.00 per share. The IPO and exercise of the over-allotment option generated combined net proceeds of $303.9 million, after deducting underwriter discounts and commissions and estimated offering costs. The Company contributed $72.9 million of the net proceeds to ProFrac Holdings, LLC (“ProFrac Holdings”) that was used to redeem certain membership ownership interests related to ProFrac Holdings’s acquisition of FTS International, Inc. The Company contributed $208.6 million to ProFrac Holdings that was used to repay certain indebtedness, and the Company contributed the remaining proceeds to ProFrac Holdings to be used for general corporate purposes and additional repayment of debt. As a result of the IPO and related corporate restructuring, the Company became the managing member of ProFrac Holdings.

On May 17, 2022, ProFrac Services, LLC (“ProFrac Services”), a wholly-owned subsidiary of ProFrac Holdings, and Flotek Chemistry, LLC (“Flotek Chemistry”), entered into an amendment (the “Amendment”) to the Flotek Supply Agreement between Flotek Chemistry and ProFrac Services dated February 2, 2022 pursuant to which ProFrac Services will purchase certain products and services from Flotek Chemistry.

The Amendment was entered into in connection with the closing of transactions (the “Closing”) contemplated by that certain Securities Purchase Agreement, dated as of February 16, 2022, between Flotek and ProFrac Holdings. Concurrent with the Closing, (i) the term of the Flotek Supply agreement is increased to ten years and the scope increased to 30 fleets (ii) Flotek issued $50,000,000 in aggregate principal amount of 10% convertible PIK notes to ProFrac Holdings and (iii) Flotek and ProFrac Holdings entered into a registration rights agreement with respect to the resale of shares of common stock of Flotek acquired by ProFrac Holdings or its affiliates.

ProFrac Holdings entered into an agreement to acquire property in West Texas (“Munger Right Agreement”) in November 2021 for a purchase price of $30.0 million. Under the Munger Right Agreement, the sellers were given the option to receive the consideration in cash, or in the event of an IPO of the Company prior to November 17, 2022, in equity, at the sellers’ election. Under the equity option, in the event the Company completes an IPO, the sellers would be entitled to 1.5% of the outstanding shares of common stock immediately following the IPO. Each seller initially elected the equity option. As part of the IPO completed in May 2022, the sellers of Munger Ranch were issued 2,114,273 shares of Class A Common Stock in exchange for the $30.0 million consideration related to the Munger Ranch purchase.

~~June 21, 2022, an aggregate of 509,467 restricted stock units with respect to 509,467 shares of Class A Common Stock were issued and outstanding under the LTIP.~~

As previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2022 (the “USWS Merger 8-K”), on June 21, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, U.S. Well Services, Inc., a Delaware corporation (“USWS”), and Thunderclap Merger Sub I, Inc., a Delaware corporation and an indirect subsidiary of the Company (“Merger Sub”). The Merger Agreement provides for, among other things, the merger of Merger Sub Inc. with and into USWS, with USWS surviving the merger as the surviving corporation and an indirect subsidiary of the Company (the “Merger”). The acquisition is expected to be completed in the fourth quarter of 2022, subject to the satisfaction of customary closing conditions, including the approval of USWS stockholders, as described further below and in the USWS Merger 8-K.

Based on the closing price of the Company’s Class A Common Stock (as reported on the Nasdaq Global Select Market) of $21.49 per share on June 21, 2022, the last trading day prior to announcement of the Merger Agreement, the transaction represents aggregate stock consideration of approximately $93 million and a consideration per share of Class A Common Stock of USWS, par value $0.0001 per share (the “USWS Common Stock”) of $1.21. After giving effect to the conversions of certain securities of USWS, as described in the USWS Merger 8-K, the total stock consideration payable to USWS stockholders and holders of USWS equity awards, based on the Company’s Class A Common Stock June 21, 2022 closing price, would be approximately $270 million.

Dan Wilks and Farris Wilks, together with certain of their affiliates, (collectively, the “Wilks Parties”) collectively hold a controlling interest in the Company. Certain Wilks Parties also own certain securities of USWS. Upon the consummation of the Merger, the Wilks Parties will receive an aggregate of 4,112,407 shares of the Company’s Class A Common Stock as merger consideration (assuming, solely for the purpose of this calculation, a hypothetical closing date of October 31, 2022), which, based on the Company’s Class A Common Stock June 21, 2022 closing price, would be approximately $88.4 million.

The parties to the Merger Agreement made representations, warranties and covenants that are customary for transactions of this nature. The representations and warranties of the respective parties to the Merger Agreement will not survive the closing of the Merger. The Merger Agreement includes customary covenants of the parties, including, among others, covenants (a) for the Parties to conduct their respective businesses in the ordinary course during the interim period between the date of the execution of the Merger Agreement and the consummation of the Merger, (b) that the Parties not engage in certain kinds of transactions during the interim period between the date of the execution of the Merger Agreement and the consummation of the Merger, (c) that the Company use commercially reasonable efforts to obtain and consummate a financing to fund the repayment in connection with the closing of the Merger of certain indebtedness of USWS and its subsidiaries as promptly as reasonably possible following the date of the Merger Agreement, (d) that USWS reasonably cooperate with such financing efforts and (e) providing for the Company and USWS to

~~cooperate in the preparation, and obtaining the effectiveness of, the Registration Statement (as defined in the Merger Agreement) to be used in connection with the Merger.~~

USWS further agreed (a) to amend the terms of certain USWS securities, and to use commercially reasonable efforts to amend certain USWS equity awards, each as described in the USWS Merger 8-K, (b) not to solicit proposals relating to alterative business combination transactions or, subject to certain exceptions, enter into discussions or an agreement concerning or provide confidential information in connection with any proposals for alternative business combination transactions and (c) as soon as practicable following the date of the Merger Agreement convene and hold a special meeting of the holders of USWS Common Stock for the purposes of obtaining the approval of the stockholders of USWS.

The consummation of the Merger is subject to customary conditions, including, among others, (a) receipt of the approval of the stockholders of USWS, (b) the absence of any applicable law or order prohibiting the consummation of the Merger or the issuance of Company stock in connection with the Merger, (c) the expiration or termination of the HSR Act waiting period, (d) the effectiveness of the registration statement in connection with the Merger, (e) approval of the issuance of Company stock in connection with the Merger for listing on Nasdaq, (f) subject to certain exceptions, the accuracy of the representations and warranties of each party, (g) the performance in all material respects of each party of its obligations under the Merger Agreement and (h) the absence of a material adverse effect on the Company and USWS.

The Merger Agreement contains certain termination rights for both the Company and USWS and further provides that, upon termination of the Merger Agreement under specified circumstances, USWS may be required to pay the Company a termination fee of $8,000,000 or reimburse ProFrac for certain expenses in an amount up to $3,000,000, in each case, depending on the termination event.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~Management’s~~The following discussion and analysis of our financial condition and results of operations

On May 12, 2022, we completed our initial public offering (“IPO”) of 16,000,000 shares of our Class A Common Stock at a public offering price of $18.00 per share. On June 6, 2022, an over-allotment option was exercised resulting should be in an additional 2,228,153 shares of Class A Common Stock being priced at $18.00 per share. The IPO and exercise of the over-allotment option generated combined net proceeds of $303.9 million, after deducting underwriter discounts and commissions and estimated offering costs.

~~In connection~~conjunction with our ~~IPO, we entered into the transactions described in our Current Report on Form 8-K filed with the SEC on May 18, 2022.~~

Pursuant to a master reorganization agreement (the “Master Reorganization Agreement”) dated May 12, 2022, by and among the Company, ProFrac Holdings, LLC (“ProFrac LLC”) and certain other holders of common units of ProFrac LLC, the Company and ProFrac LLC completed certain restructuring transactions (the “Corporate Reorganization”). As part of the Corporate Reorganization:

For additional information regarding the Corporate Reorganization and the Master Reorganization Agreement, please see “Corporate Reorganization” in our Prospectus and “Master Reorganization Agreement” in Item 1.01 of our Current Report on Form 8-K filed with the SEC on May 18, 2022, respectively.

On March 4, 2022, the Company acquired the outstanding stock of FTSI International, Inc. (“FTSI”) for a purchase price of $405.7 million, consisting of cash consideration of $332.8 million, and certain equity interests of $72.9 million (“THRC FTSI Related Equity”) (collectively the “FTSI Acquisition”).

~~Company (the “Merger”).~~ ~~The acquisition is expected to be completed in the fourth quarter of 2022, subject to the satisfaction of customary closing conditions, including the approval of USWS stockholders, as described in the~~ ~~USWS Merger 8-K.~~

~~See Note 15 – Subsequent Events in the notes to our~~unaudited condensed consolidated financial statements ~~for additional discussion~~and the related ~~to the Merger~~.

Our predecessor consists of ProFrac LLC and its subsidiaries, Best Flow and Alpine (which we refer to as “ProFrac Predecessor”) on a consolidated basis. Historical periods for ProFrac Predecessor had been presented on a consolidated and combined basis given the common control ownership by the Wilks. 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. Unless otherwise indicated, the historical consolidated financial informationnotes thereto included in this Quarterly Report, on Form 10-Q presents the historical financial information of ProFrac Predecessor. Historical consolidated financial information is not indicative of the results that may be expected in any future periods.as well as our Annual Report.

We are a ~~growth-oriented,~~technology-focused, vertically integrated ~~and innovation-driven~~ energy services company providing ~~hydraulic fracturing, completion~~well stimulation services, proppants production and other complementary products and services to ~~leading upstream~~ oil and gas companies engaged in ~~the~~ E&P of ~~North American~~ unconventional oil and natural gas ~~resources. Founded in 2016, ProFrac was built to be~~resources throughout the go-to service provider for E&P companies’ most demanding hydraulic fracturing needs. We are focused on employing new technologies to significantly reduce “greenhouse gas” emissions and increase efficiency in what has historically been an emissions-intensive component of the unconventional E&P development process.United States. We believe we are among the ~~technical~~largest well stimulation services providers in the United States. We operate throughout nearly all major unconventional oil and operational capabilities of our fleets ideally position us to capture increased demand resulting from the market recovery and our customers’ shifting preferences favoring the sustainable development of natural resources.

~~Our operations are focused on the leading unconventional regions~~gas basins in the United States ~~where we have cultivated deep~~ and ~~longstanding~~our scale and geographical footprint provide us with both operating leverage as well as exposure to a diversified customer ~~relationships with some of those regions’ most active E&P companies.~~ and commodity mix.

We operate in three reportable business segments: stimulation services, manufacturing and proppant production. ~~We believe we are one of the largest providers of hydraulic fracturing services in North America, with installed capacity of 34 conventional fleets, of which, as of March 31, 2022, 31 were active.~~

The global public health crisis associated with the COVID-19 pandemic had an unprecedented effect on demand for energy, crude oil prices and global economic activity. In 2020, the combined effect of COVID-19 and the disruptions to the energy industry led to a rapid and significant decline in WTI crude oil prices and Henry Hub natural gas prices. In response to the significant drop in commodity prices, E&P companies acted swiftly to reduce capital budgets and drilling and completion activity. Reduced demand for services compounded by constrained capital access forced the acceleration of the attrition cycle for pressure pumping equipment as older equipment requiring higher repair and maintenance spending were used for spare parts or scrapped.

Difficult industry conditions allowed us to strengthen our industry leadership position by implementing targeted and forward-looking initiatives. First, we utilized our in-house repair and maintenance yards to maintain and ensure ongoing operational integrity of our equipment without cannibalization, retaining the quality and reliability of our fleet. Second, we successfully completed in-house research and development regarding advanced power end and fluid ends designs, leading to substantially longer life of our expendables and reduced repair and maintenance costs. Third, we added over 140 dual fuel kits to our Tier IV engines, in order to position ourselves as a market leading provider of low carbon emission solutions. Fourth, we completed the acquisition of EKU, a provider of idle reduction technologies and other equipment engineering and controls that further reduce the carbon footprint of our fleet. Finally, we strategically invested in businesses providing ancillary products and services, such as our investments in West Munger, Flotek and FHE, which provides us with greater supply chain control and mitigates disruptions that have previously impacted the operations of our competitors and customers.

Drilling and completion activities for oil and gas are heavily influenced by oil and gas prices. In 2022, geopolitical tensions in Eastern Europe related to Russia’s invasion of Ukraine have resulted in significant supply disruptions as a broad coalition of countries have responded with sanctions and/or import bans associated with Russian oil and natural gas. This has resulted in significant tightening in the market as reflected by higher commodity prices, with oil and gas prices reaching decade highs. As a result of the FTSI Acquisition, our operations have diversified exposure to both natural gas and oil producing areas. Natural gas and oil prices have increased substantially compared to year-end 2020 prices and have also surpassed year-end 2019 (pre-COVID-19) levels.

While commodity prices have returned to and exceeded pre-pandemic levels, the pandemic has nonetheless led to supply chain disruptions worldwide. Tariffs, access to employees, increased shipping rates and raw material shortages are plaguing markets. Our supply chain is either vertically integrated or predominantly U.S. based, mitigating our exposure to global disruptions and price increases and allowing us to continue to maintain attractive margins. As our operations are predominantly U.S. based, we have no direct exposure to Russia and Ukraine. We have realized indirect impacts that may have occurred as a result of the crisis, such as modest increases in the costs of certain raw materials and components we purchase for use in our manufacturing processes. However, given the inflationary climate in the United States and globally, we are unable to determine the extent to which such increased commodity prices are the result of the crisis in Ukraine or a result of other factors. Despite these increases, we have experienced improved results of operations due to increased utilization of our fleets and increased prices for our products and services which have permitted us to maintain and increase our margins notwithstanding such cost increases.

The oil and gas industry is currently undergoing significant realignment of operating practices with a focus on reducing impacts to the environment. Many E&P companies are implementing carbon tracking and reduction initiatives and are expecting oilfield service providers to deliver products and services that utilize the most advanced and environmentally friendly technologies. We believe that companies in the pressure pumping industry with the most technologically advanced fleets and lowest carbon footprint will likely see significant growth in market share at the expense of companies with less advanced equipment. We have embraced tangible initiatives that help to protect the environment and improve our environment and communities making it part of our organizational culture since early in the life of the company. We have and intend to continue to invest in a number of industry leading advanced technologies that reduce carbon emissions while increasing profitability. We are currently upgrading five to ten engines per month from Tier II to Tier IV DGB. In June, 2021 we entered into an agreement with USWS under which we have the ability to acquire up to 20 licenses to construct electric-powered hydraulic fracturing fleets utilizing Clean Fleet® technology. We believe that these initiatives and commitment to lower emissions will help us lead the energy transition of the frac industry towards cleaner and sustainable business.

~~We operate three business segments:~~ stimulation services ~~manufacturing~~segment owns and ~~proppant production.~~

~~Stimulation services.~~ ~~We own and operate~~operates a fleet of mobile hydraulic fracturing units and other auxiliary equipment that generates revenue by providing stimulation services to our customers. ~~We also provide personnel~~Our proppant production segment provides proppant to oilfield service providers and services that are tailored to meet each of our customers’ needs. We generally do not have long-term written contractual arrangements with our customers other than standard master service agreements, which include general contractual terms between our customers and us. We charge our customers on a per-job basis, in which we set pricing terms after receiving full specifications for the requested job, including the lateral length of the customer’s wellbore, the number of frac stages per well, the amount of proppant employed and other specifications of the job. Well stimulation contains complementary services that we often provide to our customers, including sand and associated logistics, chemicals and fuel. These complementary services are provided through various contractual arrangements based on our customers’ needs.

~~Manufacturing.~~ ~~We primarily generate revenue through sales of~~E&P companies. Our manufacturing segment sells highly engineered, tight tolerance machined, assembled, and factory tested products such as high horsepower pumps, valves, piping, swivels, large-bore manifold systems, seats, and fluid ends. ~~As of March 31,~~

Before our corporate reorganization on May 17, 2022, ~~we operate facilities in Cisco, Aledo and Fort Worth, Texas, including an ISO 9001 2015 certified OEM manufacturing facility, in which we manufacture and refurbish many~~our unaudited condensed consolidated financial statements presented herein consisted of the ~~components used by~~accounts of the Predecessors. Subsequent to May 17, 2022, our ~~fleets, including pumps, fluid ends, power ends, flow iron~~unaudited condensed consolidated financial statements presented herein include our accounts and other consumables and an engine and transmission rebuild facility that is licensed to provide warranty repairs on our transmissions. Additionally, we provide iron inspection, iron recertification, pump refurbishment, fluid end refurbishment, pump function testing, paint, scrap, and lube system change services. We charge our customers for equipment based on a per-order basis, in which we set pricing terms after receiving full specifications for the requested equipment. We charge our customers for our services based on the parts and labor incurred. For the three months ended March 31, 2022 and 2021, approximately 84% and 86%, respectively,those of our ~~manufacturing segment’s revenue was intersegment revenue.~~subsidiaries that are wholly-owned, controlled by us or a VIE where we are the primary beneficiary.

~~Proppant production.~~ ~~We generate revenue by providing proppant to oilfield service providers~~Recent Business Developments

On January 3, 2023, we acquired 100% of the issued and ~~E&P companies. We own~~outstanding membership interest of Producers, an employee-owned pressure pumping services provider serving Appalachia and ~~operate~~ the ~~Kermit~~Mid-Continent, for approximately $36.5 million consisting of (i) the issuance of our Class A common stock valued at $12.9 million; (ii) cash consideration of $1.4 million; (iii) an estimated amount payable of $8.3 million resulting from our preliminary calculation of working capital adjustments; and (iv) our pre-existing investment of $13.9 million.

On February 24, 2023, we acquired 100% of the issued and outstanding membership interests in Performance Proppants for an aggregate purchase price of $464.8 million consisting of (i) the issuance of our Class A common stock valued at $6.2 million; (ii) cash consideration of $454.4 million; and (iii) the settlement of a pre-existing receivable of $4.2 million. Performance Proppants is a frac sand ~~mine in west Texas and recently purchased and are~~provider in the ~~process~~Haynesville basin.

Results of ~~developing the West Munger sand mine near Lamesa, Texas, and we charge our customers on a per ton of proppant basis at current market prices. We do not have long-term~~Operations

written contractual arrangements with our customers with fixed pricing. For the three months ended March 31, 2022 and 2021, approximately 69% and 29%, respectively, of our proppant production segment’s revenue was intersegment revenue.Stimulation Services.

~~The principal costs of products and~~ Stimulation services involved in operating our business are expendables, personnel, equipment repairs and maintenance and fuel. Our fixed costs are relatively low and a large portion of the costs described below are only incurred as we perform jobs for our customers.

~~Expendables~~. Expendables used in our stimulation services business are the largest expenses incurred, and include the fuel, product and freight costs associated with proppant, chemicals and other consumables. Fuel is consumed both in the operation and movement of our hydraulic fracturing fleets and other equipment. In our proppant production business, fuel to run equipment is one of our major expenses. These costs comprise a substantial variable component of our service costs, particularly with respect to the quantity and quality of sand demanded when providing hydraulic fracturing services.

~~Raw Materials.~~ ~~Our manufacturing segment relies on various raw materials, specifically various grades of steel and other raw metals, and electricity.~~

~~Direct Labor Costs. Payroll and benefit expenses directly related to the delivery of our products and services are included in our operating costs.~~

~~Other Direct Costs~~. We incur other expenses related to our products and service offerings, including the costs of repairs and maintenance, general supplies, equipment rental and other miscellaneous operating expenses. Capital expenditures to upgrade or extend the useful life of equipment are not included in other direct costs.

~~Our management uses a variety of financial and operating metrics to evaluate and analyze the performance of our business, including Adjusted EBITDA.~~

Adjusted EBITDA is a non-GAAP financial measure and should not be considered as a substitute for net income, net loss, operating loss or any other performance measure derived in accordance with GAAP or as an alternative to net cash provided by operating activities as a measure of our profitability or liquidity. Adjusted EBITDA is a supplemental measure utilized by our management and other users of our financial statements such as investors, commercial banks, research analysts and others, to assess our financial performance because it allows us 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 and amortization) and items outside the control of our management team (such as income tax rates).

We view Adjusted EBITDA as an important indicator of performance. We define Adjusted EBITDA as our net income (loss), before (i) interest expense, net, (ii) income tax provision, (iii) depreciation, depletion and amortization, (iv) loss on disposal of assets and (v) other unusual or non-recurring charges, such as costs related to our initial public offering, non-recurring supply commitment charges, certain bad debt expense and gain on extinguishment of debt.

We believe that our presentation of Adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income (loss). Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect the most directly comparable GAAP financial measure. You should not consider Adjusted EBITDA in isolation or as a substitute for an analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of this non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

~~Our future results of operations may not be comparable to our historical results of operations for the reasons described below:~~

We have grown recently through strategic acquisitions and investments, including through our recently completed acquisitions of FTSI and West Munger and our investments in BPC and Flotek. These acquisitions are not reflected in our historical results of operations and our future results will differ as a result.

In addition, in connection with our acquisitions, we have recorded the acquired assets and liabilities at fair value on the date of acquisition, which has impacted deferred revenue and deferred costs balances and increased revenue and expenses from that which would have otherwise been recognized in subsequent periods. We also recorded identifiable intangible assets that are amortized over their useful lives, increasing expenses from that which would otherwise have been recognized.

We expect to incur additional recurring administrative expenses as a result of becoming a publicly traded corporation that we have not previously incurred, including costs associated with compliance under the Exchange Act, annual and quarterly reports to shareholders, transfer agent fees, audit fees, incremental director and officer liability insurance costs, SOX compliance readiness, and director and officer compensation. We additionally expect to incur approximately $2.5 million in incremental, non-recurring costs related to our transition to a publicly traded corporation.

ProFrac Holding Corp. is a corporation and will be subject to U.S. federal, state and local income taxes. Although the ProFrac Predecessor entities are subject to franchise tax in the State of Texas, they have historically been treated as pass-through entities for U.S. federal and other state and local income tax purposes and as such were not subject to U.S. federal income taxes or other state or local income taxes. Rather, the tax liability with respect to the taxable income of the ProFrac Predecessor entities was passed through to their owners. Accordingly, prior to the March 2022 acquisition of FTSI, a corporation subject to U.S. federal and state income tax, the financial data attributable to ProFrac Predecessor contains no provision for U.S. federal income taxes or income taxes in any state or locality (other than franchise tax in the State of Texas). Subsequent to the acquisition of FTSI in March 2022, the financial data of the ProFrac Predecessor does contain both U.S. federal and state income taxes. We estimate that we will be subject to U.S. federal and state taxes at a blended statutory rate of approximately 23% of pre-tax earnings. Additionally, with the acquisition of EKU, the Company is subject to certain foreign taxes, which were immaterialrevenues for the three months ended March 31, ~~2022.~~

~~Effective March 4, 2022 we account for income taxes under~~2023 increased $454.0 million, or 135% from the ~~asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences~~same period in 2022. The increase was primarily attributable to ~~differences between the financial statement carrying amounts~~our acquisitions of ~~existing assets~~FTS, USWS, REV and ~~liabilities~~Producers which increased our average fleet count and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled pursuant to the provisions of Accounting Standards Codification 740, Income Taxes. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.related pumping hours substantially.

We recorded a full valuation allowance on our net deferred tax assets based on our assessment that it is more likely than not that the deferred tax asset will not be realized. A change in these assumptions could cause a decrease to the valuation allowance, which could materially impact our results of operations.

Three Months Ended March 31,

(Dollars in thousands)

2022

2021

Revenues—Stimulation services

$
336,155

$
143,703

Revenues—Manufacturing

32,006

14,657

Revenues—Proppant production

12,408

5,589

Eliminations

(35,589
)

(14,363
)
Total revenues

344,980

149,586

Cost of revenues, exclusive of depreciation, depletion, and amortization—
   Stimulation services

244,581

119,353

Cost of revenues, exclusive of depreciation, depletion, and amortization—
   Manufacturing

19,373

10,650

Cost of revenues, exclusive of depreciation, depletion, and amortization—
   Proppant production

4,234

2,666

Eliminations

(35,589
)

(14,363
)
Total cost of revenues, exclusive of depreciation, depletion, and amortization

232,599

118,306

Depreciation, depletion and amortization

44,216

35,461

(Gain) loss on disposal of assets, net

(154
)

2,207

Selling, general and administrative

34,127

13,778

Interest expense, net

9,272

6,035

Loss on extinguishment of debt

8,273

—

Other income

(8,231
)

(187
)
Income tax (benefit) provision

752

(25
)
Net income (loss)

$
24,126

$
(25,989
)
Net income attributable to noncontrolling interest

(416
)

(9
)
Net income (loss) attributable to ProFrac Predecessor

$
23,710

$
(25,998
)
Other data:

Adjusted EBITDA—Stimulation services

$
73,569

$
12,953

Adjusted EBITDA—Manufacturing

$
10,022

$
2,330

Adjusted EBITDA—Proppant production

$
7,885

$
2,406

Adjusted EBITDA (1)

$
91,476

$
17,689

Active fleets (2)

21.7

15

Baker Hughes Domestic Average Rig Count—Onshore (3)

575

355

Average oil price (per barrel) (4)

$
94.45

$
57.79

Average natural gas price (per thousand cubic feet) (5)

$
4.84

$
3.70

~~Three months ended March 31, 2022 compared to three months ended March 31, 2021~~

~~Revenues—Stimulation services.~~ ~~Stimulation services~~Proppant production revenues ~~increased $192.5 million, or 134%, to $336.2 million~~ for the three months ended March 31, ~~2022,~~2023 increased $69.8 million, or 563% from ~~$143.7 million~~the same period in 2022. The increase was primarily attributable to our acquisitions of SP Silica of Monahans, LLC ("Monahans"), Monarch Silica, LLC ("Monarch") and Performance Proppants which caused the number of mines operated and the related tonnage mined to increase substantially. Additionally, proppant pricing increased due to increased demand primarily in the Permian Basin. Approximately 39% of the Proppant Production segment's revenue was intercompany.

Manufacturing. Manufacturing revenues for the three months ended March 31, 2021. The increase was primarily attributable to an increase in customer activity for our stimulation services, and an increase in active fleets, pumping hours and pricing. Additionally, FTSI contributed $48.62023 increased $35.1 million, ~~of revenue to this segment~~or 110% from the ~~acquisition date.~~

~~Revenues—Manufacturing.~~ Manufacturing revenues increased $17.3 million, or 118%, to $32.0 million for the three months ended March 31, 2022, from $14.7 million for the three months ended March 31, 2021. The increase was primarily attributable to an increase

same period in ~~demand for our products due to increased activity levels from customers for manufactured components utilized in the oilfield service industry.~~

~~Revenues—Proppant production.~~ Proppant production revenues increased $6.8 million, or 122%, to $12.4 million the three months ended March 31, 2022, from $5.6 million for the three months ended March 31, 2021. The increase was primarily attributable an increase in proppant production and pricing resulting from increased proppant demand primarily in the Permian basin.

~~Total revenues~~. Total revenues increased $195.4 million to $345.0 million for the three months ended March 31, 2022, from $149.6 million for the three months ended March 31, 2021. The increase was primarily attributable to an increase in customer activity for our stimulation services, and an increase in active fleets, pumping hours and pricing. Additionally, FTSI contributed $48.6 million of revenue from the acquisition date.

~~Cost of revenues, exclusive of depreciation, depletion, and amortization—Stimulation services~~. Cost of revenues, exclusive of depreciation, depletion, and amortization—Stimulation services increased $125.2 million, or 105%, to $244.6 million for the three months ended March 31, 2022, from $119.4 million for the three months ended March 31, 2021. The increase was primarily due to an increase in activity levels, as discussed in Revenue above, and additional input cost inflation. Additionally, FTSI contributed $32.5 million of cost to this segment from the acquisition date.

~~Cost of revenues, exclusive of depreciation, depletion, and amortization—Manufacturing~~. Cost of revenues, exclusive of depreciation, depletion, and amortization—Manufacturing increased $8.7 million, or 82%, to $19.4 million for the three months ended March 31, 2022, from $10.7 million for the three months ended March 31, 2021.2022. The increase was primarily attributable to an increase in demand for our products ~~as well as an increase~~due to increased activity levels from internal and external customers for manufactured components utilized in the ~~cost~~oilfield service industry. Approximately 95% of ~~raw materials.~~the Manufacturing segment's revenue was intercompany.

~~Cost of~~Other. Other revenues ~~exclusive of depreciation, depletion, and amortization—Proppant production. Cost of revenues, exclusive of depreciation, depletion, and amortization—Proppant production increased $1.5 million, or 59%, to $4.2 million~~ for the three months ended March 31, ~~2022, from $2.7 million~~2023 were $49.2 million. The increase was attributable to the consolidation of Flotek beginning in May 2022. Approximately 76% of other revenue was intercompany.

Stimulation Services. Stimulation services cost of revenues for the three months ended March 31, ~~2021.~~2023 increased $291.1 million, or 117% from the same period in 2022. The increase was primarily attributable anto the FTS, USWS, REV and Producers acquisitions which caused our average fleet count and related labor, fracturing materials and repairs and maintenance costs to increase ~~in proppant production and increased~~substantially. In addition, we saw a higher price for the cost of ~~production.~~materials and cost of services to operate the fleets.

~~Depreciation, depletion, and amortization~~Proppant Production. ~~Depreciation, depletion, and amortization increased $8.7 million, to $44.2 million~~Proppant production cost of revenues for the three months ended March 31, ~~2022,~~2023 increased $34.0 million, or 810% from ~~$35.5 million~~the same period in 2022. The increase was primarily attributable to the Monahans, Monarch and Performance Proppants acquisitions which caused the number of mines operated and the related tonnage mined to increase substantially. Additionally, proppant pricing increased due to increased demand primarily in the Permian Basin.

Manufacturing. Manufacturing cost of revenues for the three months ended March 31, ~~2021.~~2023 increased $35.7 million, or 184% from the same period in 2022. The increase was primarily ~~due~~attributable to ~~increased capital expenditure~~increases in demand for our products as well as the ~~first quarter~~cost of ~~2022 and the depreciation related to the assets acquired from FTSI Acquisition.~~raw materials.

~~Gain or Loss on disposal~~Other. Other cost of ~~assets, net. We recorded a net gain on disposal of assets of $0.2 million~~revenues for the three months ended March 31, ~~2022, compared with a net loss on disposal~~2023 was $45.7 million. The increase was attributable to the consolidation of ~~assets~~Flotek beginning in May 2022.

Selling, general and administrative expenses are comprised of ~~$2.2 million~~the following:

Selling, general and administrative expenses for the three months ended March 31, ~~2021.~~

~~Selling, general and administrative. Selling, general and administrative expenses increased $20.3~~2023 were $76.3 million, ~~or 148%, to $34.1~~an increase of $55.3 million ~~for~~from the ~~three months ended March 31, 2022, from $13.8 million for the three months ended March 31, 2021.~~same period in 2022. The increase was primarily due to higher headcount and personnel costs, higher incentive compensation, increased non-labor costs associated with the increased activity levels and $13.1 million of stock-based compensation expenses, of which $10.2 million related to expense associated with certain deemed shareholder contributions.

Depreciation, depletion, and amortization for the three months ended March 31, 2023 and 2022 was $110.3 million and $44.6 million, respectively. The increase was primarily attributable to the impact of the acquisitions made subsequent to March 31, 2022 and increased capital expenditures in the three months ended March 31, 2023 compared with the three months ended March 31, 2022.

Acquisition and integration costs for the three months ended March 31, 2023 and 2022 were $12.3 million and $13.0 million, respectively. These costs primarily relate to professional fees, severance and other costs associated with ~~the FTSI Acquisition of $13.0 million. Additionally, FTSI contributed $3.2 million of selling, general,~~our acquisition and ~~administrative expense from the acquisition date.~~integration activities.

Other operating expense, net ~~increased $3.2~~for the three months ended March 31, 2023 were $4.4 million ~~to $9.3~~compared with other operating income, net of $0.1 million for the three months ended March 31, ~~2022, from $6.0~~2022. The change was primarily attributable to $5.8 million related to legal costs incurred in connection with a patent infringement lawsuit against Halliburton (see Note 7) in the three months ended March 31, 2023 and a $1.7 million increase in loss on disposal of assets. These increased costs were partially offset by a non-cash gain of $3.0 million related to the change in fair value of an acquisition earnout.

Interest expense, net of interest income, for the three months ended March 31, ~~2021. The~~2023 and 2022 was $34.9 million and $9.3 million, respectively. This increase ~~in interest expense, net~~ was ~~attributable~~due to ~~various debt transaction, which increased our~~higher average debt balances and higher average interest rates for our term loan facility and ABL credit facility in the ~~first quarter~~three months ended March 31, 2023.

In the ~~notes~~three months ended March 31, 2023, we recognized a net gain of $4.1 million, which was primarily due to ~~our consolidated financial statements for additional discussion related to our debt.~~

~~Loss on extinguishment~~the forgiveness of ~~debt. As a result of the debt refinancing transactions during~~Flotek's Paycheck Protection Program loan. In the three months ended March 31, 2022, we recognized aan $8.3 million loss on extinguishment of ~~$8.3 million. See Note 7 – Indebtedness~~debt as a result of debt refinancing transactions and debt repayments.

For the three months ended March 31, 2023 we recognized non-cash losses totaling $9.4 million primarily related to the change in fair value of our Munger make-whole provision and a decrease in the ~~notes to~~fair value of our ~~consolidated financial statements~~investment in BPC. See our Annual Report for ~~additional discussion related to our debt.~~

~~Other income~~.more information on the Munger make-whole provision. For the three months ended March 31, 2022 we recognized ~~noncash~~non-cash income of $8.1 million ~~as other income~~ related to the change in fair value of ~~the Convertible Notes related to~~ our investment in ~~Flotek.~~Flotek's convertible notes.

Income taxes were $6.7 million and $0.6 million for the three months ended March 31, 2023 and 2022, ~~compared~~respectively. The increase is due to ~~zero~~our corporate reorganization to a taxable entity subsequent to our initial public offering in May 2022. Our effective tax rate for the three months ended March 31, ~~2021.~~2023 was 10.1%. The difference between our effective tax rate and the federal statutory rate is related to the income that is earned within the financial statement consolidated group that is not subject to tax within the financial statement consolidated group and changes in the valuation allowance on our net deferred tax assets.

~~The performance~~We have excluded cash and other sources of liquidity related to our VIE from the following discussion of our ~~segments~~liquidity and capital resources as we do not have the ability to access or use these items in our operations. As of March 31, 2023, there is ~~evaluated primarily on Segment Adjusted EBITDA. For~~substantial doubt about our VIE's ability to continue as a ~~reconciliation~~going concern. We believe that this substantial doubt does not materially affect our business, financial condition or results of ~~Segment Adjusted EBITDA~~operation as we do not guarantee any of our VIE's liabilities.

Historically, our primary sources of liquidity have been borrowings under our term loan facility or ABL credit facility and cash flows from operations.

At March 31, 2023, we had $57.5 million of cash and cash equivalents, excluding Flotek, and $111.5 million available for borrowings under our ABL credit facility, resulting in a total liquidity position of $169.0 million. Refer to ~~net income or loss, see~~ Note ~~14 – Segment Information,~~6 in the notes to our unaudited condensed consolidated financial statements ~~in this Quarterly~~contained herein and our Annual Report ~~on Form 10-Q, which~~for more information ~~is incorporated herein by reference.~~regarding our ABL credit facility.

~~Adjusted EBITDA—Stimulation services.~~ ~~Adjusted EBITDA—Stimulation services~~Cash Flows

Operating Activities. The $189.8 million increase in net cash provided by operating activities was due to higher earnings after adjustments for non-cash reconciling items as well as increased ~~$60.6~~cash provided by the net change in operating assets and liabilities. The increased cash provided by the net change in operating assets and liabilities was primarily due to our increased accounts payable balance as of March 31, 2023.

Investing Activities. The $191.1 million increase in net cash used in investing activities was primarily due to ~~$73.6~~an increase of $164.6 million in cash paid for acquisitions and an increase of $35.2 million of capital expenditures to support our larger fleet, and for growth initiatives such as building electric-powered hydraulic fracturing fleets and engine upgrades to convert legacy pumps to next generation technology. These increases were partially offset by a decrease of $44.6 million in proceeds from the sale of assets in the three months ended March 31, ~~2022, from $13.0~~2023 as well as our $45.9 million ~~for~~investment in BPC and our $10.0 million initial investment in Flotek in the three months ended March 31, ~~2021.~~ 2022.

Financing Activities. The $10.8 million increase in net cash provided by financing activities was ~~primarily attributable~~due to an $11.3 million increase in ~~average active fleets, increased pricing for~~net borrowings of long-term debt and revolving credit agreements and a decrease of $4.5 million in debt issuance costs offset by a $5.0 million decrease in member contributions.

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

As of March 31, 2023, we have $1.3 billion in aggregate principal amount of long-term debt outstanding. We believe we have a manageable debt maturity profile, with $140 million coming due over the next twelve months. For additional information about our ~~services,~~long-term debt, please see Item 8 "Financial Statements and ~~costs associated with the FTSI acquisition~~Supplementary Data" in our Annual Report.

The nature of ~~$13.0 million.~~our capital expenditures consists of a base level of investment required to support our current operations and amounts related to growth and company initiatives.

~~Adjusted EBITDA—Manufacturing.~~ ~~Adjusted EBITDA—Manufacturing increased $7.7 million, to $10.0 million for~~During the three months ended March 31, ~~2022, from $2.3~~2023, our capital expenditures were $83.2 million, consisting of expenditures for ~~the three months ended March 31, 2021. The increase was primarily due to increased volume~~maintenance capital expenditures for our ~~products used by our oil field services customers.~~

~~Adjusted EBITDA—Proppant production.~~ ~~Adjusted EBITDA—Proppant production increased $5.5 million,~~larger fleet, building four electric-powered hydraulic fracturing fleets, and engine upgrades to $7.9 million for the three months ended March 31, 2022, from $2.4 million for the three months ended March 31, 2021. The increase was primarily attributable an increase in proppant production and pricing resulting from increased proppant demand in the Permian basin.

Historically, our primary sources of liquidity and capital resources have been borrowings under our Old ABL Credit Facility, cash flows from our operations and capital contributions from our shareholders. Our primary uses of capital have been investing in and maintaining our property and equipment and repaying indebtedness.

Looking forward, we expect that our primary sources of liquidity and capital resources will be cash on hand, including net proceeds of our IPO, cash flows generated by operating activities and borrowings under our credit facilities.convert legacy pumps to next generation technology. We expect ~~that~~ our ~~primary uses~~capital expenditures to accelerate over the next six months given the projected timing of project completions and cash outlays. We will remain disciplined with capital ~~will be to continue to fund our operations, support organic~~allocation and ~~strategic growth opportunities and satisfy future debt payments.~~

We expect to incur significant additional indebtedness in order to finance the acquisitions of the SP Companies and USWS (the “Acquisition Transactions”), which will limit our operating flexibility, and could adversely affect our operations and financial results and prevent us from fulfilling our obligations. The USWS Merger Agreement requires us to use commercially reasonable efforts to obtain and consummate a financing to fund the repayment in connection with the closing of the Merger of certain indebtedness of USWS and its subsidiaries. In addition, the completion of the SPS Acquisition is dependent upon our ability to fund the $90 million cash purchase price under the SP Companies Purchase Agreement. Our obtaining the financing necessary to consummate either of the Acquisition Transactions is not a condition to closing either such Acquisition Transaction.

In order to fund our various obligations in connection with the Acquisition Transactions, including the repayment of approximately $170 million of USWS debt currently projected to be outstanding at closing and the payment of expenses incurred in connection with the Acquisition Transactions, we expect to incur up to approximately $250 million of new indebtedness. We currently expect such new indebtedness to be funded, at least in part, from a potential upsizing of our New Term Loan Credit Facility and/or New ABL Credit Facility. We also expect to assume approximately $55 million of indebtedness in connection with the USWS transaction, and to fund certain of our obligations in connection with the Acquisition Transactions through cash flows generated from operations. We cannot assure that we will be able to upsize our current facilities, refinance any of our outstanding indebtedness, and/or obtain additional financing on favorable terms, or at all, or that our cash flows generated from operations will be sufficient, in order to satisfy our obligations in connection with the Acquisition Transactions, or otherwise. For additional discussion of risks relating to our liquidity needs, the Acquisition Transactions and our anticipated additional indebtedness, see our risk factors under Part II, Item 1A of this Quarterly Report on Form 10-Q.

Based on our current cash and cash equivalents balance, operating cash flow, current availability under our credit facilities, and the ongoing actions and financing alternatives discussed above, we believe that we will be able to maintain sufficient liquidity to fund our planned acquisitions andreduce capital expenditures ~~satisfy our obligations, and remain in compliance with our existing debt covenants through the next twelve months and beyond.~~

~~On May 17, 2022, in connection with our IPO,~~based on total fleet activity levels to ensure we entered into a tax receivable agreement (the “Tax Receivable Agreement”) with certain of the common unit holders of ProFrac LLC (the “TRA Holders”). The Tax Receivable Agreement generally provides for the payment by us to each TRA Holder of 85% of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax (computed using simplifying assumptions to address the impact of state and local taxes) that we actually realize (or are deemed to realize in certain circumstances) as a result of (i) certain increases in tax basis that occur as a result of our acquisition (or deemed acquisition for U.S. federal income tax purposes) ofmaintain return thresholds on all ~~or a portion of such TRA Holder’s common units of ProFrac LLC in~~

connection with our IPO or pursuant to an exercise of the Redemption Right or the Call Right (as such terms are defined in the Third Amended and Restated Limited Liability Company Agreement of ProFrac LLC) and (ii) imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, any payments we make under the Tax Receivable Agreement. We depend on ProFrac LLC to make distributions to us in an amount sufficient to cover our obligations under the Tax Receivable Agreement.

Payments will generally be made under the Tax Receivable Agreement as we realize actual cash tax savings from the tax benefits covered by the Tax Receivable Agreement. However, if we experience a change of control, or the Tax Receivable Agreement otherwise terminates early, our obligations under the Tax Receivable Agreement would accelerate and we would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by us under the Tax Receivable Agreement (determined by applying a discount rate). Any such payment is expected to be substantial.

Our 2022 capital expenditure budget, excluding acquisitions, is estimated to be in a range between $240 million and $290 million. We have budgeted approximately $65 million to $70 million to construct three electric-powered fleets. We are fully committed to building the three electric-powered fleets and have several customers interested in contracting these fleets. We intend to align fleet construction and other growth capital expenditures with visible customer demand, by strategically deploying new equipment in response to inbound customer requests and industry trends. Also included in our 2022 capital expenditure budget is $25 million to $30 million to construct the West Munger sand mine. We estimate maintenance capital expenditures to be $2.75 million to $3.0 million per fleet per year. We expect that the remainder of our 2022 capital expenditure budget, excluding any potential acquisitions, will be used to fund other growth initiatives such as upgrading Tier II fleets to Tier IV dual fuel fleets. We continually evaluate our capital expenditures and the amount that we ultimately spend will depend on a number of factors, including customer demand for new fleets and expected industry activity levels.

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

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

We believe wethat our cash and cash equivalents, cash provided by operations, and the availability under our ABL credit facility will be ~~able~~sufficient to fund our ~~2022 capital program from cash flows from operations.~~

Our working capital was $71.0 million and $5.0 million as of March 31, 2022, and December 31, 2021, respectively. The $66.0 million increase in working capital was primarily due to higher activity levels in the first quarter of 2022.

~~The following table sets forth the historical cash flows for the three months ended March 31, 2022 and 2021:~~

Net cash provided by operating activities was $43.7 million and $16.3 million for the three months ended March 31, 2022 and 2021, respectively. The increase was primarily due to higher activity levels in the first quarter of 2022.

Net cash used in investing activities was $334.7 million and $2.9 million for the three months ended March 31, 2022 and 2021, respectively. The increase was primarily due to $279.0 million of cash paid for the FTSI Acquisition, our $46.0 million investment in BPC, and higher capital expenditures, ~~of $24.1 million related to dual fuel engine upgrades, ESC installations,~~satisfy our obligations, and remain in compliance with our ~~electric frac fleet build program. These uses of cash were partially offset by cash proceeds from the FTSI Sale Leaseback of real property.~~

~~Net cash provided by financing activities was $316.3 million~~existing debt covenants for ~~the three months ended March 31, 2022, compared to net cash used in financing activities of $6.6 million for the three months ended March 31, 2021. The increase in cash provided by financing~~

~~activities was primarily due to proceeds from the issuance of long-term debt associated with refinancing transactions related to the FTSI Acquisition.~~

On March 4, 2022, ProFrac LLC, ProFrac II LLC, as borrower (in such capacity, the “ABL Borrower”), and certain of the ABL Borrower’s wholly owned subsidiaries as obligors, entered into a senior secured asset-based revolving credit agreement (as amended, the “New ABL Credit Facility”), with a group of lenders with JPMorgan Chase Bank N.A., as administrative agent and collateral agent. The New ABL Credit Facility provides for an asset-based revolving credit facility with a borrowing base and lender commitments of $100.0 million. The New ABL Credit Facility has a borrowing base composed of certain eligible accounts receivable and eligible inventory less customary reserves, as redetermined monthly. As of March 31, 2022, the maximum availability under the New ABL Credit Facility was the aggregate lender commitments of $100.0 million with $70.7 million of borrowings outstanding and $9.2 million of letters of credit outstanding, resulting in approximately $20.1 million of remaining availability. Our New ABL Credit Facility matures on the earlier of (i) March 4, 2027 and (ii) 91 days prior to the stated maturity of any material indebtedness (other than the First Financial Loan).

Borrowings under the New ABL Credit Facility accrue interest based on a three-tier pricing grid tied to average historical availability, and the ABL Borrower may elect for loans to be based on either an Adjusted Term SOFR or a base rate, plus the applicable margin. The interest rate under our New ABL Credit Facility for (a) Adjusted Term SOFR is the applicable margin plus the fluctuating per annum rate equal to Adjusted Term SOFR (with an Adjusted Term SOFR Floor of 0.00%); and (b) Base Rate Loans are the applicable margin plus the fluctuating per annum rate equal to the greatest of the Prime Rate in effect on such day, or the NYFRB Rate in effect on such day plus 1/2% of 1% and the Adjusted Term SOFR for a one-month Interest Period as published two (2) U.S. Government Securities Business Days prior to such day (or if such day is not a Business Day, the immediately preceding Business Day), plus 1.0%. The applicable margin for Adjusted Term SOFR Loans ranges from 1.50% to 2.00% and for Base Rate Loans ranges from 0.50% to 1.00%, depending on the average daily availability over the last three months under our New ABL Credit Facility.

Our New ABL Credit Facility bears an unused line fee ranging from 0.250% to 0.375%, depending on the average daily availability over the last three months payable quarterly in arrears. The New ABL Credit Facility also bears customary letter of credit fees. The interest rate was 4.75% as of March 31, 2022.

Our New ABL Credit Facility is subject to customary mandatory prepayments, including a mandatory prepayment if the aggregate unpaid principal balance of revolving loans, agent advances, swingline borrowings, unreimbursed drawings under letters of credit and the undrawn amount of outstanding letters of credit exceeds at any time the lesser of (x) the then applicable borrowing base and (y) the then total effective commitments under the New ABL Credit Facility, in an amount equal to such excess. After the occurrence and during the continuance of a Cash Dominion Period (defined in the New ABL Credit Facility as (a) any period commencing upon the date that availability shall have been less than the greater of (i) 12.5% of the Maximum Credit (which is the lesser of the maximum revolver amount in effect at such time and the borrowing base at such time) and (ii) $10.0 million for a period of five consecutive business days and continuing until the date on which availability shall have been at least the ~~greater of (y) 12.5% of the Maximum Credit and (z) $10.0 million for 20 consecutive calendar days~~ next 12 months. If we pursue additional acquisitions during 2023, we will likely need to raise additional debt and/or ~~(b) any period commencing on the occurrence of certain specified events of default, and continuing during the period that such specified event of default shall be continuing).~~

~~Our New ABL Credit Facility contains certain customary representations and warranties and affirmative and negative covenants. The negative covenants include, subject~~equity financing to customary exceptions, limitations on indebtedness, dividends, distributions and certain other payments, investments, acquisitions, prepayments of specified junior indebtedness, amendments of specified junior indebtedness, transactions with affiliates, dispositions, mergers and consolidations, liens, restrictive agreements, sale and leaseback transactions, changes in fiscal periods and changes in line of business.

~~We are required by our New ABL Credit Facility to maintain minimum liquidity of $5.0 million at all times. Additionally, when availability is less than the~~fund them.greater of (i) 12.5% of the maximum credit (which is the lesser of the maximum revolver amount in effect at such time and the borrowing base at such time) and (ii) $10.0 million and continuing until such time as availability has been in excess of such threshold for a period of 20 consecutive calendar days, we are required by our New ABL Credit Facility to maintain a springing Fixed Charge Coverage Ratio (as defined in our New ABL Credit Facility) of at least 1.0 to 1.0, which is tested quarterly during such period. ProFrac LLC was in compliance with all covenants, and there were no existing defaults or events of default related to the New ABL Credit Facility as of March 31, 2022.

On April 8, 2022, the New ABL Credit Facility was amended to increase the borrowing base and lender commitments to $200.0 million and provide for an accordion feature in the amount of $100.0 million. As of April 30, 2022, the maximum availability under

the New ABL Credit Facility was the aggregate lender commitments of $200.0 million with $110.7 million of borrowings outstanding and $9.2 million of letters of credit outstanding, resulting in approximately $80.1 million of remaining availability.28

On March 4, 2022, ProFrac LLC, ProFrac II LLC, as borrower (in such capacity, the “Term Loan Borrower”), and certain of the Term Loan Borrower’s wholly owned subsidiaries as obligors, entered into a senior secured term loan credit agreement (the “New Term Loan Credit Facility”), with Piper Sandler Finance LLC, as administrative agent and collateral agent (the “Term Loan Agent”), and the lenders party thereto. The New Term Loan Credit Facility provides for a term loan facility in an aggregate principal amount of $450.0 million. As of March 31, 2022, the Term Loan Borrower had approximately $450.0 million outstanding under the New Term Loan Credit Facility. Our New Term Loan Credit Facility matures on March 4, 2025.

The respective rights of the New Term Loan Credit Facility lenders and the New ABL Credit Facility lenders in the ABL Priority Collateral and the Fixed Asset Priority Collateral are governed by an intercreditor agreement between the Term Loan Agent and the ABL Agent.

~~Our New Term Loan Credit Facility is subject to quarterly amortization beginning in June 2022, though any excess cash flow payments, reduce the required amortization.~~

Additionally, our New Term Loan Credit Facility is subject to a quarterly mandatory prepayment beginning for the calendar quarter ending on September 30, 2022 in an amount equal to the Applicable ECF Percentage (as defined in the New Term Loan Credit Facility). The Applicable ECF Percentage ranges from 50% of Excess Cash Flow (as defined in the New Term Loan Credit Facility) to 25% of Excess Cash Flow depending on the Total Net Leverage Ratio as of the last day of the applicable fiscal quarter. Our New Term Loan Credit Facility is subject to (x) the requirement that the Borrower offer to prepay the Term Loans with certain of the Net Cash Proceeds (as defined in the New Term Loan Credit Facility) from this offering (the “IPO Prepayment”), ranging from 100% of the first $100 million of Net Cash Proceeds, to 0% of the next $100 million of Net Cash Proceeds to 50% of all additional Net Cash

Proceeds after that and (y) additional customary mandatory prepayments, subject in some cases referenced in this clause (y) to the right of the Term Loan Borrower and its restricted subsidiaries to reinvest such proceeds within a specified period of time, and certain other exceptions.

Voluntary prepayments of borrowings under the New Term Loan Credit Facility are permitted at any time, in specified minimum principal amounts, subject to reimbursement of the lenders’ redeployment costs actually incurred in the case of a prepayment of SOFR Rate Loans other than on the last day of the relevant interest period. Between March 4, 2022 and March 4, 2023, certain prepayments of the New Term Loan Credit Facility are subject to a prepayment premium of 3.00% (or, in the case of any IPO Prepayment (as defined in the New Term Loan Credit Facility), 2.00%). Between March 5, 2023 and March 4, 2024, certain prepayments of the New Term Loan Credit Facility are subject to a 2.00% prepayment premium. After March 4, 2024, but prior to the Stated Termination Date (as defined in the New Term Loan Credit Facility) certain prepayments of the New Term Loan Credit Facility are subject to a 1.00% prepayment premium. No payment or prepayment premium shall be due on account of any payments or prepayments made on the Stated Termination Date.

Our New Term Loan Credit Facility contains certain customary representations and warranties and affirmative and negative covenants. The negative covenants include, subject to customary exceptions, limitations on indebtedness, dividends, distributions and certain other payments, investments, acquisitions, prepayments of specified junior indebtedness, amendments of specified junior indebtedness, transactions with affiliates, dispositions, mergers and consolidations, liens, restrictive agreements, changes in fiscal periods and changes in line of business.

We are required by our New Term Loan Credit Facility to maintain a Total Net Leverage Ratio (as defined in our New Term Loan Credit Facility) (i) of no more than 2:00 to 1:00 for the fiscal quarter ending on June 30, 2022, (ii) of no more than 1.55 to 1.00 for the fiscal quarters ending on September 30, 2022 and December 31, 2022, and (iii) of no more than 1.25 for each fiscal quarter ending on March 31, 2023 and thereafter.

~~We are required by our New Term Loan Credit Facility to maintain minimum liquidity of $30.0 million at all times.~~

Our New Term Loan Credit Agreement prohibits Capital Expenditures (as defined in the New Term Loan Credit Facility) in excess of (i) in the case of the Fiscal Year ended December 31, 2022, the greater of (x) $275,000,000 in the aggregate and (y) in the case of any period of four consecutive fiscal quarters ending in such Fiscal Year, 50% of Consolidated EBITDA for the Test Period most recently ended prior to the date of the applicable Capital Expenditure, and (ii) in the case of any period of four consecutive fiscal quarters ending thereafter, commencing with the period of four consecutive fiscal quarters ending on March 31, 2023, an aggregate amount equal to 50.0% of Consolidated EBITDA for the Test Period most recently ended prior to the date of the applicable Capital Expenditure, provided that if the amount of the Capital Expenditures permitted to be made in any Fiscal Year is greater than the actual amount of the Capital Expenditures actually made in such Fiscal Year, then up to $20,000,000 of such excess amount may be carried forward to the next succeeding Fiscal Year.

On December 22, 2021, ProFrac II LLC entered into a $30.0 million loan agreement with First Financial Bank, N.A. with a stated maturity date of January 1, 2024 (the “First Financial Loan”). The First Financial Loan bears interest at a variable rate based on the Prime rate published by the Wall Street Journal, floating daily. As of March 31, 2022, ProFrac II LLC had $26.4 million outstanding under the First Financial Loan.

The First Financial Loan is secured by a first lien on, and security interest in, certain truck tractors and all other trailers, trucks and vehicles owned by ProFrac Services and ProFrac Manufacturing, in each case, more particularly described in the security agreement, and is guaranteed by ProFrac Services, ProFrac Manufacturing and ProFrac LLC.

~~The First Financial Loan is subject to monthly principal amortization beginning in February 2022.~~

The First Financial Loan contains certain restrictive covenants which require ProFrac LLC to maintain a Total Net Leverage Ratio, as defined in the loan agreement, of no greater than 3.00:1.00, and a Fixed Charge Coverage Ratio, as defined in the loan agreement, of at least 1.00:1.00.

~~The Equify Bridge Note is unsecured and subordinated to the indebtedness owing under the New ABL Credit Facility and the New Term Loan Credit Facility.~~

Until the New ABL Credit Facility and the New Term Loan Credit Facility have been terminated, prepayments of principal under the Equify Bridge Note are permitted solely to the extent permitted under the New ABL Credit Facility and New Term Loan Credit Facility. After the New ABL Credit Facility and the New Term Loan Credit Facility have been terminated, prepayments may be made at any time without prepayment penalty or premium.

~~In June 2022, the Equify Bridge Note was fully paid with net proceeds from the IPO.~~

On March 4, 2022, ProFrac LLC entered into a $22.0 million subordinated promissory note with THRC Holdings with a stated maturity date of March 4, 2027 (the “Backstop Note”). The Backstop Note bears interest at a percentage per annum equal to 1.74%. Interest under the Backstop Note is paid on a quarterly basis and is solely payable in kind, with such interest amounts being added to the outstanding principal amount of the Backstop Note, until the date that both the New ABL Credit Facility and the New Term Loan Credit Facility shall have been terminated, after which date quarterly interest payments may be paid in kind or in cash.

~~The Backstop Note is unsecured and subordinated to the indebtedness owing under the New ABL Credit Facility and the New Term Loan Credit Facility.~~

Until the New ABL Credit Facility and the New Term Loan Credit Facility have been terminated, prepayments of principal under the Backstop Note are permitted solely to the extent permitted under the New ABL Credit Facility and New Term Loan Credit Facility. After the New ABL Credit Facility and the New Term Loan Credit Facility have been terminated, prepayments may be made at any time without prepayment penalty or premium.

~~In June 2022, the Backstop Note was fully paid with net proceeds from the IPO.~~

On March 4, 2022, ProFrac LLC entered into a $22.0 million subordinated promissory note with THRC Holdings with a stated maturity date of March 4, 2027 (the “Closing Date Note”). The Closing Date Note bears interest at a percentage per annum equal to 1.74%. Interest under the Closing Date Note is paid on a quarterly basis and is solely payable in kind, with such interest amounts being added to the outstanding principal amount of the Closing Date Note, until the date that both the New ABL Credit Facility and the New Term Loan Credit Facility shall have been terminated, after which date quarterly interest payments may be paid in kind or in cash.

~~The Closing Date Note is unsecured and subordinated to the indebtedness owing under the New ABL Credit Facility and the New Term Loan Credit Facility.~~

Until the New ABL Credit Facility and the New Term Loan Credit Facility have been terminated, prepayments of principal under the Closing Date Note are permitted solely to the extent permitted under the New ABL Credit Facility and New Term Loan Credit Facility. After the New ABL Credit Facility and the New Term Loan Credit Facility have been terminated, prepayments may be made at any time without prepayment penalty or premium.

~~In June 2022, the Closing Date Note was fully paid with net proceeds from the IPO.~~

~~The following table summarizes the principal maturity schedule for our long-term debt outstanding as of March 31, 2022:~~

2022

2023

2024

2025

2026

Thereafter

Total

First Financial loan

$
11,086

$
15,291

$
—

$
—

$
—

$
—

$
26,377

New ABL Credit Facility

—

—

—

—

—

70,706

70,706

New Term Loan Credit Facility

16,875

22,500

22,500

388,125

—

—

450,000

Backstop Note(1)

—

—

—

—

—

22,000

22,000

Closing Date Note(1)

—

—

—

—

—

22,000

22,000

Equify Bridge Loan(1)

—

—

—

—

—

45,800

45,800

Other

10,223

167

166

108

79

386

11,129

Total

$
38,184

$
37,958

$
22,666

$
388,233

$
79

$
160,892

$
648,012

During the three months ended March 31, 2022 and 2021, our capital expenditures were $41.5 million and $17.4 million, respectively. We currently expect our capital expenditures to increase in 2022 and 2023, which are expected to be funded with cash flows from operations. The primary drivers of the increase are building electric-powered hydraulic fracturing fleets, continued engine upgrades as part of our ESG initiatives, and deployment costs associated with reactivating hydraulic fracturing fleets.

From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of March 31, 2022 and December 31, 2021, the off-balance sheet arrangements and transactions that we have entered into include undrawn letters of credit. We do not believe that these arrangements are reasonably likely to materially affect our liquidity or availability of, or requirements for, capital resources.

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally acceptable in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported revenues and expenses during the reporting periods. We evaluate these estimates and assumptions on an ongoing basis and base our estimates on historical experience, current conditions and various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Our actual results may materially differ from these estimates.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Prospectus.

Listed below are the changes in our accounting policies that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved, and that we believe are critical to the understanding of our operations.

ITEM 3. ~~Quantitative and Qualitative Disclosures About Market Risk.~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices. Historically, our risks have been predominantly related to potential changes in the fair value of our long-term debt due to fluctuations in applicable market interest rates. Going forward our market risk exposure generally will be limited to those risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions, nor do we utilize financial instruments or derivative instruments for trading purposes.

Our material and fuel purchases expose us to commodity price risk. Our material costs primarily include the cost of inventory consumed while performing our pressure pumping services such as proppants, chemicals, trucking and fluid supplies. For our manufacturing segment, our material costs primarily include the cost of steel. For our proppant production segment, our material costs primarily include the cost of fuel. Our fuel costs consist primarily of diesel fuel used by our trucks, frac fleets and other motorized equipment. The prices for fuel and the raw materials in our inventory are volatile and are impacted by changes in supply and demand, as well as market uncertainty and regional shortages. Additionally, the market for our products and services is indirectly exposed to fluctuations in the prices of oil and natural gas to the extent such fluctuations impact well completion activity levels. Historically, we have generally been able to pass along price increases to our customers; however, we may be unable to do so in the future. We do not engage in commodity price hedging activities.

We are subject to interest rate risk on our variable rate debt from our ~~New Term Loan Credit Facility~~term loan credit facility and our ~~New~~ ABL ~~Credit Facility. The Company~~credit facility. We also ~~has~~have fixed rate debt but ~~does~~do not currently utilize derivative instruments to manage the economic effect of changes in interest rates. The impact of a 1% increase in interest rates on our outstanding debt as of March 31, ~~2022~~2023, would have resulted in an annual increase in interest expense of approximately ~~$5.2~~$11.1 million.

~~Credit~~Our exposure to other market risks has not materially changed since December 31, 2022. For additional quantitative and qualitative disclosures about market risk affecting us, see Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" in our Annual Report. Our exposure to market risk has not changed materially since December 31, 2022.

Financial instruments that potentially subject us to concentrations of credit risk are trade account receivables. We extend credit to customers and other parties in the normal course of business. We have established various procedures to manage our credit exposure, including credit evaluations and maintaining an allowance for doubtful accounts.ITEM 4. CONTROLS AND PROCEDURES

~~Item 4. Controls and Procedures.~~ Evaluation of Disclosure Controls and Procedures

~~We maintain a system~~In accordance with Exchange Act Rule 13a-15, we carried out an evaluation, under the supervision and with the participation of management, including our Executive Chairman (our principal executive officer) and our Chief Financial Officer (our principal financial officer), of the effectiveness of our disclosure controls and procedures ~~(as defined in Exchange Act Rules 13a-15(e)~~as of the end of the period covered by this report. Based on that evaluation, our Executive Chairman and ~~15d-15(e)) designed~~Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023 to ~~ensure~~provide reasonable assurance that ~~the~~ information required to be disclosed ~~by us~~ in ~~the~~our reports ~~that we file~~filed or ~~submit~~submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and ~~forms of~~forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the ~~SEC, and~~Exchange Act is accumulated and communicated to our management, including our Executive Chairman ~~(our principal executive officer)~~ and Chief Financial Officer, ~~(our principal financial officer),~~ as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.disclosures.

Our management, with the participation of our Executive Chairman and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined under the Exchange Act, as of March 31, 2022, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Executive Chairman and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

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

There were no changes in our internal control over financial reporting during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Information with respect~~Please refer to ~~this Item may be found~~the information in Note ~~13 – Commitments and contingencies~~7 included in the notes to ~~our~~unaudited condensed consolidated financial statements ~~in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.~~contained herein.

~~This Quarterly Report on Form 10-Q should be read in conjunction with the risk factors disclosed under the heading “Risk Factors” in the Prospectus. Except for the risk factors noted below, there~~There have been no material changes ~~to the risk factors disclosed under the heading “Risk Factors”~~ in the ~~Prospectus. In addition to the risk factors enumerated below, risk factors in our Prospectus, including without limitation~~significant risk factors that address risks relating to potential future acquisitions and risks relating to indebtedness, are implicated by the Acquisition Transactions (as defined below) and our expected financing needs in connection therewith.

~~Consummation of the acquisitions of the SP Companies and USWS is contingent upon the satisfaction of a number of conditions, including, as to USWS, approval by USWS’ stockholders, which~~ may not be satisfied or completed on a timely basis, if at all. Failure to complete either of these transactions could negatively impact our stock price, business, financial condition, results of operations or prospects.

Consummation of the acquisitions of the SP Companies and USWS (the “Acquisition Transactions”) is subject to conditions to closing that are not wholly within the Company’s control, including, among other things, with respect to USWS, adoption of the Merger Agreement by the holders of a majority of the outstanding shares of USWS Common Stock entitled to vote on the adoption of the Merger Agreement. We cannot assure you that each of the conditions with respect to either Acquisition Transaction will be satisfied or waived in a timely manner, if at all, and either Acquisition Transaction may be delayed or not consummated. If the conditions are not satisfied or waived in a timely manner and either of the Acquisition Transactions is delayed or not consummated, we may lose some or all of the intended or perceived benefits of the Acquisition Transactions, which could cause our stock price to decline and harm our business.

We are also subject to additional risks in connection with the Acquisition Transactions, including, without limitation: (1) the parties’ ability to meet expectations regarding the timing and completion of the Acquisition Transactions; (2) the occurrence of any event, change or other circumstance that could give rise to the termination of the Acquisition Transactions; (3) the effect of the announcement or pendency of the Acquisition Transactions on our business relationships, operating results, and business generally; (4) risks that the Acquisition Transactions disrupt the Company’s current plans and operations; (5) the amount of the costs, fees, expenses and other charges related to the Acquisition Transactions; (6) the outcome of any legal proceedings that may be instituted against us or any of our affiliates relating to the transactions contemplated by the Acquisition Transactions; (7) the restrictions imposed on our business and operations pursuant to any affirmative or negative covenants set forth in the documents relating to the Acquisition Transactions, and the potential impact of such covenants on our business; (8) the risk that the Acquisition Transactions will divert management’s attention resulting in a potential disruption of our current business plan; (9) potential difficulties in employee retention arising from the Acquisition Transactions; (10) the ability to obtain certain governmental and regulatory approvals, including the expiration or termination of the HSR Act waiting period; and (11) the ability to integrate acquired assets and personnel into our existing business model and realize the expected value of resulting operational synergies from the Acquisition Transactions.

We expect to incur significant additional indebtedness in order to finance the Acquisition Transactions, which will limit our operating flexibility, and could adversely affect our operations and financial results and prevent us from fulfilling our obligations.

The USWS Merger Agreement requires us to use commercially reasonable efforts to obtain and consummate a financing to fund the repayment in connection with the closing of the Merger of certain indebtedness of USWS and its subsidiaries. In addition, the completion of the SPS Acquisition is dependent upon our ability to fund the $90 million cash purchase price under the SP Companies Purchase Agreement. Our obtaining the financing necessary to consummate either of the Acquisition Transactions is not a condition to closing either such Acquisition Transaction.

Our ability to upsize our current facilities, refinance any of our outstanding indebtedness, and/or obtain additional financing in order to satisfy our obligations in connection with the Acquisition Transactions will depend on, among other things, our financial condition at the time, restrictions in agreements governing our indebtedness, and other factors, including the financial condition of USWS and the SP Companies, restrictions in agreements governing the indebtedness of that we are assuming, and the condition of the financial markets and the markets in which we compete. As a result, we cannot assure that we will be able to upsize our current facilities, refinance any of our outstanding indebtedness, and/or obtain additional financing on favorable terms, or at all, or that our cash flows generated from operations will be sufficient, in order to satisfy our obligations in connection with the Acquisition Transactions, or otherwise.

~~To the extent we are able to upsize our current facilities, refinance any of our outstanding indebtedness, and/or obtain additional financing, such level of indebtedness may:~~

In addition, the terms of any financing obligations to be incurred in connection with any upsizing of our current facilities, refinancing of any of our outstanding indebtedness, and/or additional financing are likely to contain covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions, including, among other things, limitations on our ability to:

Our ability to comply with these provisions may be affected by general economic conditions, political decisions, industry conditions and other events beyond our control. Our failure to comply with the covenants contained in any amended or new financing facilities could result in an event of default, which could materially and adversely affect our business, results of ~~operation and financial condition.~~

~~If there were an event of default under~~operations or liquidity as described in Item 1A "Risk Factors" in our current, amended or new debt instruments (if any), the holders of such debt may be able to cause all amounts outstanding to be due and payable immediately and such event of default may be cross-defaulted to other debt. Our assets or cash flow may not be sufficient to fully repay borrowings under such debt instruments if accelerated upon an event of default, and there is no guarantee that we would be able to repay, refinance or restructure the payments under any such indebtedness.

~~We may not be able to generate sufficient cash flow to service all of our obligations, including our obligations under our new credit and other financing facilities.~~

Our ability to fund our various obligations in connection with the Acquisition Transactions, make payments on and to upsize our current facilities, refinance any of our outstanding indebtedness, and/or obtain additional financing, including any indebtedness incurred to finance the Acquisition Transactions, and to fund planned capital expenditures, other strategic transactions and expansion

efforts, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.Annual Report.

Our business may not be able to generate sufficient cash flows from operations, and we cannot assure that future borrowings will be available to us in amounts sufficient to enable us to pay our indebtedness or any future indebtedness as such indebtedness matures and to fund our other liquidity needs. If this is the case, we will need to refinance all or a portion of our indebtedness on or before maturity, and we cannot assure that we will be able to refinance any of our indebtedness on commercially reasonable terms, or at all. We may need to implement one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing. These financing strategies may not be executed on satisfactory terms, if at all. Our ability to upsize our current facilities, refinance our indebtedness or obtain additional financing, and to do so on commercially reasonable terms, will depend on, among other things, our financial condition at the time, restrictions in agreements governing our indebtedness, and other factors, including the condition of the financial markets and the markets in which we will compete.

If we do not generate sufficient cash flows from operations, and additional borrowings, refinancings or proceeds of asset sales are not available to us, we may not have sufficient cash to enable us to meet all of our obligations, including our various obligations in connection with the Acquisition Transactions.

~~Item~~ITEM 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds.~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On ~~May 12, 2022, our Registration Statement on Form S-1, as amended (File No. 333-261255), was declared effective in connection with the IPO, pursuant to which~~January 3, 2023, we issued ~~and sold an aggregate of 18,228,153~~420,818 shares of our Class A ~~Common Stock including~~common stock to the sellers of Producers as partial ~~exercise~~consideration for 100% of the ~~underwriters’ over-allotment option to purchase additional shares, at a price~~issued and outstanding membership interest of Producers (see Note 2). The securities issued to the ~~public~~sellers of ~~$18.00 per share. J.P. Morgan Securities LLC, Piper Sandler & Co. and Morgan Stanley & Co. LLC acted as representatives~~Producers were offered in reliance on an exemption from registration provided by Section 4(a)(2) of the ~~underwriters. The IPO closed~~Securities Act. We relied on ~~May 17, 2022. The IPO and exercise~~this exemption from registration based on part on representations made by each of the ~~over-allotment option generated combined net proceeds~~sellers of ~~approximately $303.9 million, after deducting underwriting discounts and commissions of $15.2 million and offering expenses of $9.0 million. With~~Producers, including that each seller is an "accredited investor" as defined in Rule 501(a) under the exception of $4.5 million to be paid to Wilks Brothers for IPO support services and activities including legal, tax, technology and accounting support, no payments for any offering expenses were made directly or indirectly to (i) anySecurities Act.

On February 24, 2023, we issued 312,826 shares of our ~~officers or directors or their associates, (ii) any persons owning 10% or more~~Class A common stock to an entity affiliated with the management team of ~~any class~~Performance Proppants in connection with such entity's reinvestment of ~~our equity securities or (iii) any of our affiliates~~

~~The Company used $72.9 million of the net~~cash proceeds from the IPO to redeem the membership ownership interests from the then-existing owners of THRC FTSI Related Equity (as described in Note 11 – Acquisitions and Investments in the notes to our consolidated financial statements) and contributed the remaining proceeds to ProFrac LLC. The Company used the remaining proceeds to (i) to pay down $143.8 millionclosing price of the ~~outstanding borrowings~~Performance Proppants transaction (see Note 2). The securities issued to the entity were offered in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. We relied on this exemption from registration based on part on representations made by the entity, including that it was an "accredited investor" as defined in Rule 501(a) under the ~~New Term Loan Credit Facility, (ii)~~Securities Act.

Additionally, and in connection with the Performance Proppants transaction, on or about April 7, 2023, we issued 39,372 shares of our Class A common stock to ~~fully pay~~certain individuals pursuant to their respective employment agreements. The securities issued to the ~~$22.0 million~~individuals were offered in reliance on an exemption from registration provided by Section 4(a)(2) of the ~~outstanding borrowings of~~Securities Act. We relied on this exemption from registration based on part on representations made by the ~~Backstop Note (iii) pay down $22.0 million of~~individuals, including that each Individual is an “accredited investor” as defined in Rule 501(a) under the ~~outstanding borrowings of~~Securities Act and without a view to distribute the Closing Date Note and (iv) pay down $20.8 million of the outstanding borrowings of the Equify Bridge Note. The Company currently intends to use the balance of the remaining proceeds for general corporate uses and additional repayment of debt.securities.

~~Item~~ITEM 3. ~~Defaults Upon Senior Securities.~~DEFAULTS UPON SENIOR SECURITIES

The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Quarterly ~~Report on Form 10-Q.~~Report.

~~Furnish the~~The exhibits required to be filed or furnished by Item 601 of Regulation S-K ~~(§ 229.601 of this chapter).~~are listed below.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly ~~authorized.~~authorized on May 12, 2023.


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)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A ~~common stock,~~Common Stock, par value $0.01 per share	~~PFHC~~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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
~~Non-accelerated filer~~	☒	~~Smaller reporting company~~	☐

Emerging growth company	☒☐


		Page
		Cautionary ~~Statement~~Note Regarding Forward-Looking Statements	13
PART I.			~~FINANCIAL INFORMATION~~I
Item 1.	Financial Statements (Unaudited)	35
	~~ProFrac Holdings, LLC~~Condensed Consolidated Balance Sheets	35
	~~ProFrac Holdings, LLC~~Condensed Consolidated Statements of Operations	46
	~~ProFrac Holdings, LLC~~Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Condensed Consolidated Statements of Changes in Equity	58
	~~ProFrac Holdings, LLC~~Condensed Consolidated Statements of Cash Flows	69
	~~ProFrac Holdings, LLC~~ Notes to Unaudited Condensed Consolidated Financial Statements	710
	~~ProFrac Holding Corp. Balance Sheets and Accompanying Notes~~	29
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3324
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4629
Item 4.	Controls and Procedures	4729
PART ~~II.~~			~~OTHER INFORMATION~~II
Item 1.	Legal Proceedings	4830
Item 1A.	Risk Factors	4830
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5030
Item 3.	Defaults Upon Senior Securities	5030
Item 4.	Mine Safety Disclosures	5030
Item 5.	Other Information	5030
Item 6.	Exhibits	5131
~~Signatures~~SIGNATURES		5433


	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


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


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

(In thousands)	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	28,654		$	5,376
Accounts receivable, net		298,870			161,632
Accounts receivable—related party		3,396			4,515
Prepaid expenses, and other current assets		18,726			6,213
Inventories		139,143			73,942
Total current assets		488,789			251,678
Property, plant, and equipment		1,126,602			827,865
Accumulated depreciation and depletion		(506,831	)		(464,178	)
Property, plant, and equipment, net		619,771			363,687
Operating lease right-of-use assets		79,049			—
Investments		78,296			4,244
Intangible assets, net		28,681			27,816
Other assets		19,302			17,145
Total assets	$	1,313,888		$	664,570
Liabilities and equity
Current liabilities:
Accounts payable	$	216,054		$	121,070
Accounts payable—related party		19,553			21,275
Current portion of operating lease liabilities		8,371			—
Accrued expenses		90,079			38,149
Other current liabilities		36,123			34,400
Current portion of long-term debt		47,620			31,793
Total current liabilities		417,800			246,687
Long-term debt		488,204			235,128
Long-term debt—related party		89,800			34,645
Operating lease liabilities		70,815			—
Other liabilities		902			—
Total liabilities		1,067,521			516,460
Commitments and contingencies (Note 13)
Equity		244,992			147,015
Noncontrolling interests		1,421			1,039
Accumulated other comprehensive (loss) income		(46	)		56
Total equity		246,367			148,110
Total liabilities and equity	$	1,313,888		$	664,570

	Three Months Ended March 31,
(In thousands)	2022			2021
Revenues	$	344,980		$	149,586
Operating costs and expenses:
Cost of revenues, exclusive of depreciation, depletion and amortization		232,599			118,306
Depreciation, depletion and amortization		44,216			35,461
(Gain) loss on disposal of assets, net		(154	)		2,207
Selling, general, and administrative		34,127			13,778
Total operating costs and expenses		310,788			169,752
Operating income (loss)		34,192			(20,166	)
Other (expense) income:
Interest expense, net		(9,272	)		(6,035	)
Loss on extinguishment of debt		(8,273	)		—
Other income		8,231			187
Income (loss) before income tax provision		24,878			(26,014	)
Income tax (provision) benefit		(752	)		25
Net income (loss)	$	24,126		$	(25,989	)
Net income attributable to noncontrolling interests		(416	)		(9	)
Net income (loss) attributable to ProFrac Holdings, LLC	$	23,710		$	(25,998	)
Other comprehensive (loss) income		(136	)		6
Comprehensive income (loss)	$	23,574		$	(25,992	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(34	)		2
Comprehensive income (loss) attributable to ProFrac Holdings, LLC	$	23,608		$	(25,994	)

(In thousands)	Equity			Accumulated Other Comprehensive Income (Loss)			Noncontrolling interests			Total
Balance, January 1, 2022	$	147,015		$	56		$	1,039		$	148,110
Net income		23,710			—			416			24,126
Member contributions		5,000			—			—			5,000
Deemed distribution		(3,664	)		—			—			(3,664	)
THRC related equity		72,931			—			—			72,931
Currency translation adjustments		—			(102	)		(34	)		(136	)
Balance, March 31, 2022	$	244,992		$	(46	)	$	1,421		$	246,367



(In thousands)	Equity			Accumulated Other Comprehensive Income			Noncontrolling interests			Total
Balance, January 1, 2021	$	175,027		$	—		$	1,785		$	176,812
Net (loss) income		(25,998	)		—			9			(25,989	)
Currency translation adjustments		—			6			—			6
Noncontrolling interest of acquired business		—			—			1,228			1,228
Balance, March 31, 2021	$	149,029		$	6		$	3,022		$	152,057


	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


Balance as of December 31, 2022	��	$	2,462.9
Class A shares issued to acquire Producers			6.7
Class A shares issued to acquire Performance Proppants			2.8
Net income			42.0
Stock-based compensation			1.9
Stock-based compensation related to deemed contribution			6.7
Foreign currency translation adjustments			0.1
Adjustment of redeemable noncontrolling interest to redemption amount (1)			(1,268.2	)
Balance as of March 31, 2023		$	1,254.9

	March 31, 2022							December 31, 2021
(In thousands)	Gross Book Value		Less: Accumulated Amortization			Net Book Value		Gross Book Value		Less: Accumulated Amortization			Net Book Value
Electric frac licenses	$	22,500	$	—		$	22,500	$	22,500	$	—		$	22,500
Acquired technology		7,144		(963	)		6,181		5,905		(589	)		5,316
Intangible assets, net	$	29,644	$	(963	)	$	28,681	$	28,405	$	(589	)	$	27,816


	March 31, 2023		December 31, 2022
Raw materials and supplies	$	93.2	$	78.7
Work in process		10.2		9.7
Finished products and parts		179.7		161.1
Total	$	283.1	$	249.5


	March 31, 2023			December 31, 2022
Machinery and equipment	$	1,944.4		$	1,671.7
Mining property and mine development		420.4			172.1
Buildings and leasehold improvements		68.7			62.0
Land		60.2			44.3
Office equipment, software and other		9.2			7.3
Construction-in-progress		221.9			156.1
Total		2,724.8			2,113.5
Less: accumulated depreciation, depletion and amortization		(814.9	)		(717.1	)
Property, plant, and equipment, net	$	1,909.9		$	1,396.4


	March 31, 2023		December 31, 2022
Employee compensation and benefits	$	37.7	$	41.0
Sales, use, and property taxes		21.7		20.1
Insurance		6.9		7.4
Interest		19.3		17.5
Income taxes		7.2		0.7
Tax receivable agreement		3.3		3.3
Other		34.1		25.4
Total accrued expenses	$	130.2	$	115.4

	March 31,			December 31,
(In thousands)	2022			2021
Old ABL Credit Facility	$	—		$	69,000
Old Term Loan		—			171,355
First Financial Loan		26,377			30,000
New ABL Credit Facility		70,706			—
New Term Loan Credit Facility		450,000			—
Backstop Note(1)		22,000			—
Closing Date Note(1)		22,000			—
Equify Bridge Note(1)		45,800			—
Best Flow Credit Facility(1)		—			7,101
Best Flow Note(1)		—			10,827
Alpine Promissory Note(1)		—			16,717
Other		11,129			1,695
Total gross debt		648,012			306,695
Less: unamortized debt issuance costs		(22,388	)		(5,129	)
Less: current portion of long-term debt		(47,620	)		(31,793	)
Total long-term debt	$	578,004		$	269,773

	2022		2023		2024		2025		2026		Thereafter		Total
First Financial loan	$	11,086	$	15,291	$	—	$	—	$	—	$	—	$	26,377
New ABL Credit Facility		—		—		—		—		—		70,706		70,706
New Term Loan Credit Facility		16,875		22,500		22,500		388,125		—		—		450,000
Backstop Note(1)		—		—		—		—		—		22,000		22,000
Closing Date Note(1)		—		—		—		—		—		22,000		22,000
Equify Bridge Note(1)		—		—		—		—		—		45,800		45,800
Other		10,223		167		166		108		79		386		11,129
Total	$	38,184	$	37,958	$	22,666	$	388,233	$	79	$	160,892	$	648,012

	Three Months Ended March 31,
(Dollars in thousands)	2022
Cash paid for amounts included in the measurement of our lease obligations	$	2,105
Right-of-use assets obtained in exchange for lease obligations	$	44,959
Right-of-use assets recognized upon adoption of the leasing standard	$	35,817
Weighted-average remaining lease term	8.1 years
Weighted-average discount rate		5.0	%

(In thousands)
Remainder of 2022	$	9,954
2023		11,870
2024		11,395
2025		10,222
2026		10,236
2027		10,473
2028 and thereafter		35,022
Total lease payments		99,172
Less imputed interest		(19,986	)
Total lease liabilities	$	79,186

(In thousands)
Assets acquired:
Cash and cash equivalents	$	53,771
Accounts receivable		89,268
Prepaid expense and other assets		4,037
Inventories		42,344
Property, plant and equipment		307,113
Operating lease ROU asset		2,748
Intangible assets		1,239
Other assets		1,583
Total assets acquired		502,103
Liabilities assumed:
Accounts payable		62,985
Accrued expenses		19,308
Operating lease liability current		1,235
Current portion of debt		10,136
Other current liabilities		309
Operating lease liability non-current		1,512
Other non-current liabilities		928
Total liabilities assumed		96,413
Net assets acquired	$	405,690

	March 31, 2022
Risk-free interest rate		1.63	%
Expected volatility		90.0	%
Term until liquidation (years)		0.84
Stock price	$	1.26
Discount rate		7.2	%


	Three Months Ended March 31,
	2023
Numerator:
Net income attributable to ProFrac Holding Corp.	$	22.0
Net income reallocated to dilutive Class A common shares		0.1
Net income attributable to ProFrac Holding Corp. used for diluted earnings per Class A common share	$	22.1

Denominator:
Weighted average Class A common shares used for basic EPS computation		54.5
Dilutive potential of employee restricted stock units		0.4
Weighted average Class A common shares used for diluted EPS computation		54.9

Basic and diluted earnings per Class A common share	$	0.40


Exhibit Number	Description
3.1
~~2.1~~		~~Agreement~~Second Amended and ~~Plan~~Restated Certificate of ~~Merger, dated as~~Incorporation of ~~October 21, 2021, by and between FTS International, Inc.,~~ ProFrac ~~Holdings, LLC and ProFrac Acquisitions, Inc.~~Holding Corp. (incorporated by reference to Exhibit ~~2.1~~3.1 to the ~~Company’s Registration Statement on Form S-1 (File No. 333-261255) filed with the SEC on November 22, 2021).~~
~~2.2~~		Master Reorganization Agreement, dated as of May 12, 2022, by and among ProFrac Holdings, LLC, ProFrac Holding Corp. and the other parties thereto (incorporated by reference to Exhibit 2.1 to the Company’sRegistrant's Current Report on Form 8-K filed with the SEC on ~~May 18, 2022).~~March 28, 2023)
~~2.3^~~3.2	Agreement and Plan of Merger, dated as of June 21, 2022, by and among U.S. Well Services, Inc., ProFrac Holding Corp. and Thunderclap Merger Sub I, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2022).
~~3.1~~		Amended and Restated Certificate of Incorporation of ProFrac Holding Corp., as filed with the Secretary of State of the State of Delaware on May 17, 2022 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).
~~3.2~~		Amended and Restated Bylaws of ProFrac Holding Corp., effective as of May 17, 2022 (incorporated by reference to Exhibit 3.2 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on May 18, 2022).
~~4.1~~10.1	~~Registration Rights~~Third Amendment, Consent and Limited Waiver to Term Loan Credit Agreement, dated as of ~~May 17,~~December 30, 2022, by and among ProFrac ~~Holding Corp., THRC~~ Holdings ~~LP, Farris C. Wilks~~II, LLC, ProFrac Holdings, LLC, the guarantors party thereto, the lenders party thereto, and Piper Sandler Finance LLC, as the ~~other parties thereto~~agent and collateral agent for the lenders (incorporated by reference to Exhibit ~~4.1~~10.1 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on ~~May 18, 2022).~~January 6, 2023)
~~4.2~~10.2	Third ~~Amended~~Amendment to Credit Agreement, dated as of December 30, 2022, by and ~~Restated Limited Liability Company Agreement of~~among ProFrac Holdings II, LLC, ProFrac Holdings, LLC, ~~dated~~the guarantors party thereto, the lenders party thereto, and JPMorgan Chase Bank, as ~~of May 17, 2022~~the agent and collateral agent for the lenders (incorporated by reference to Exhibit ~~4.2~~10.2 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on ~~May 18, 2022).~~January 6, 2023)
~~4.3~~10.3	~~Stockholders’~~Consulting Agreement, ~~dated~~effective as of ~~May 17, 2022, by and among~~January 13, 2023 between ProFrac Holding Corp.~~, THRC Holdings, LP, Farris C. Wilks, FARJO Holdings, LP~~ and ~~the Farris and Jo Ann Wilks 2022 Family Trust~~Mr. Coy Randle (incorporated by reference to Exhibit ~~4.3~~10.1 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on ~~May 18, 2022).~~January 12, 2023)
~~10.1~~10.4	~~Tax Receivable~~First Amendment to Stockholders' Agreement, ~~dated~~effective as of ~~May 17, 2022, by and among~~January 13, 2023, between ProFrac Holding Corp.~~, the TRA Holders~~ and the ~~Agents named therein~~stockholders party thereto (incorporated by reference to Exhibit ~~10.1~~10.2 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on ~~May 18, 2022).~~January 12, 2023)
~~10.2 †~~10.5	Employment Agreement, effective as of January 13, 2023, between ProFrac Holding Corp. ~~2022 Long Term Incentive Plan~~and Phillip Blaine Wilbanks (incorporated by reference to Exhibit ~~10.2~~10.3 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on ~~May 18, 2022).~~January 12, 2023)
~~10.3~~10.6	~~Shared Services~~Indemnification Agreement (Phillip Blaine Wilbanks (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed with the SEC on January 12, 2023)
10.7	Fourth Amendment to Term Loan Credit Agreement, dated as of ~~May 3, 2022,~~February 1, 2023, by and ~~between Wilks Brothers,~~among ProFrac Holdings II, LLC, ProFrac Holdings, LLC, the guarantors party thereto, the lenders party thereto, and Piper Sandler Finance LLC, as the agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on February 2, 2023)
10.8	Assignment and Amendment of Membership Interest Purchase Agreement, dated as of February 24, 2023, by and among ProFrac Holdings II, LLC, Performance Holdings I, LLC, Performance Holdings II, LLC and Alpine Silica, LLC (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the SEC on February 28, 2023)
10.9	Contribution Agreement, dated as of February 24, 2023, by and among ProFrac Holding Corp., Alpine Silica, LLC, Tidewater Partners, LLC, Performance Holdings I, LLC and Performance Holdings II, LLC (incorporated by reference to Exhibit 10.3 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on ~~May 18, 2022).~~February 28, 2023)
~~10.4~~10.10*†	~~Indemnification Agreement (Johnathan Ladd Wilks) (incorporated by reference~~Fifth Amendment to ~~Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~
~~10.5~~		~~Indemnification Agreement (Matthew D. Wilks) (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~
~~10.6~~		~~Indemnification Agreement (James Coy Randle, Jr.) (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~
~~10.7~~		~~Indemnification Agreement (Lance Turner) (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~
~~10.8~~		~~Indemnification Agreement (Robert Willette) (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~

~~10.9~~				~~Indemnification Agreement (Sergei Krylov) (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~
~~10.10~~				~~Indemnification Agreement (Theresa Glebocki) (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~
~~10.11~~				~~Indemnification Agreement (Stacy Nieuwoudt) (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~
~~10.12~~				~~Indemnification Agreement (Gerald Haddock) (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2022).~~
~~10.13~~				Term Loan Credit Agreement, ~~among ProFrac Holdings, LLC,~~dated as ~~holdings,~~of February 23, 2023, by and among ProFrac Holdings II, LLC, asProFrac Holdings, LLC, the ~~borrower, the several~~ lenders ~~from time to time~~and guarantors party thereto, and Piper Sandler Finance LLC, as the agent and ~~the~~ collateral agent for the lenders


10.11*†	Fourth Amendment to that certain asset-based revolving Credit Agreement, dated as of ~~March 4, 2022 (incorporated~~February 23, 2023, by ~~reference to Exhibit 10.8 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-261255) filed with the SEC on March 31, 2022)~~.
~~10.14~~		~~Credit Agreement~~and among ProFrac ~~Holdings, LLC, as holdings, ProFrac Holdings~~ II LLC, as borrower, ProFrac Holdings, the ~~borrower, the several lenders from time to time~~Lenders, letter of credit issuers, and guarantors party thereto, and JPMorgan Chase Bank, N.A., as the agent, ~~and~~ the collateral agent and the swingline lender (as amended by the First Amendment to Credit Agreement, dated as of July 25, 2022, the Second Amendment to Credit Agreement, dated as of November 1, 2022, and the Third Amendment to Credit Agreement, dated as of December 30, 2022)
10.12	Amendment No. 2 to Amended and Restated Series A Warrant Agreement, dated March ~~4, 2022~~29, 2023, between ProFrac Holding Corp., Continental Stock Transfer & Trust Company and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit ~~10.10 to Amendment No. 2~~10.52 to the ~~Company’s Registration Statement~~Registrant's Annual Report on Form ~~S-1 (File No. 333-261255)~~10-K filed with the SEC on March ~~31, 2022).~~
~~10.15~~		~~Subordinated Promissory Note among ProFrac Holdings II, LLC, as payor, and Equify Financial LLC, as payee, dated as of March 4, 2022~~ ~~(incorporated by reference to Exhibit 10.11 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-261255) filed with the SEC on March 31, 2022).~~
~~10.16~~		Subordinated Promissory Note among ProFrac Holdings, LLC, as payor, and THRC Holdings, LP, as payee, dated as of March 4, 2022 (incorporated by reference to Exhibit 10.12 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-261255) filed with the SEC on March 31, 2022).
~~10.17~~		~~Subordinated Promissory Note among ProFrac Holdings, LLC, as payor, and THRC Holdings, LP, as payee, dated as of March 4, 2022~~ ~~(incorporated by reference to Exhibit 10.13 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-261255) filed with the SEC on March 31, 2022).~~
~~10.18~~		Securities Purchase Agreement dated February 16, 2022 by and between Flotek Industries, Inc. and ProFrac Holdings, LLC (incorporated by reference to Exhibit 10.14 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-261255) filed with the SEC on March 31, 2022).
~~10.19~~		~~Purchase and Sale Agreement, dated as of February 18, 2022, by and between ProFrac Holdings, LLC and Wilks Development, LLC~~ ~~(incorporated by reference to Exhibit 10.6 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-261255) filed with the SEC on April 26, 2022).~~
~~10.20~~		Amendment No. 1 to Chemical Products Supply Agreement between Flotek Chemistry, LLC and ProFrac Services, LLC dated May 17, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 23, 2022).
~~10.21~~		Chemical Products Supply Agreement between Flotek Chemistry, LLC and ProFrac Services, LLC dated February 2, 2022 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 23, 2022).
~~10.22~~		Form of Voting Agreement, by and among ProFrac Holding Corp. and the stockholders of U.S. Well Services, Inc. party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2022).
~~10.23~~		Form of Warrant Purchase Agreement, by and among ProFrac Holding Corp. and the holders of warrants of U.S. Well Services, Inc. party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2022).30, 2023)
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002

32.1**		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002
9955		Mine Safety Disclosure ~~Exhibit.~~Exhibit
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)


	~~Profrac~~ProFrac Holding Corp.

~~Date: June 24, 2022~~	By:	/s/ Matthew D. Wilks
		Name: Matthew D. Wilks
		Title: Executive Chairman and Director (Principal Executive Officer)

~~Date: June 24, 2022~~	By:	~~/s/~~/s/ Lance Turner
		Lance Turner
		Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)