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

AtAs of November ~~8, 2022,~~6, 2023, the registrant had ~~53,958,894~~159,388,841 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, the risk factors disclosed under the heading “Risk Factors” in the “Risk Factors” in our prospectus, dated May 12, 2022, filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b) under the Securities Act on May 16, 2022 in connection with our initial public offering, the factors described under the heading “Risk Factors” in our prospectus, dated August 8, 2022, filed with the SEC pursuant to Rule 424(b) under the Securities Act on August 8, 2022, in connection with the resale of our Class A common stock by the selling shareholders named therein, the factors described under the heading “Risk Factors” in our quarterly report on Form 10-Q10-K for the ~~quarter~~year ended ~~June 30,~~December 31, 2022 and the factors described under the heading “Risk Factors” in the proxy statement/information statement/prospectus included in the registration statement on Form S-4 filed with the SEC on August 30, 2022, as amended by Amendment No. 1 to such registration statement filed with the SEC on September 22, 2022, in connection with our acquisition of U.S. Well Services, Inc., 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.(the "Annual Report").

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.

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

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

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

Members'

Class A Common Stock

Class B Common Stock

Additional Paid

Retained

Accumulated
Other
Comprehensive

Noncontrolling

Total Equity

(In thousands)

Equity

Shares

Amount

Shares

Amount

in Capital

Earnings

Income (Loss)

Interests

(Deficit)

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

Foreign currency translation

—

—

—

—

—

—

—

(102
)

(34
)

(136
)
Balance, March 31, 2022

$
244,992

—

$
—

—

$
—

$
—

$
—

$
(46
)

$
1,421

$
246,367

Net income prior to corporate reorganization

56,157

—

—

—

—

—

—

—

(46
)

56,111

Issuance of Class A shares in IPO

—

18,228

182

—

—

227,548

—

—

—

227,730

Issuance of Class B shares

—

—

—

101,133

1,011

—

—

—

—

1,011

Effect of corporate reorganization and reclassification to redeemable noncontrolling interest

(301,149
)

20,895

209

—

—

(81,110
)

—

—

—

(382,050
)
Adjustment of redeemable noncontrolling interest to redemption amount at IPO

—

—

—

—

—

(146,438
)

(1,291,910
)

—

—

(1,438,348
)
Class A shares issued to settle asset purchase

—

2,114

21

—

—

16,675

—

—

—

16,696

Net income after corporate reorganization

—

—

—

—

—

—

6,558

—

(8,658
)

(2,100
)
Recognition of Flotek noncontrolling interest

—

—

—

—

—

—

—

—

99,617

99,617

Stock-based compensation

—

—

—

—

—

269

—

—

526

795

Stock-based compensation related to deemed contribution

—

—

—

—

—

11,252

—

—

—

11,252

Foreign currency translation

—

—

—

—

—

—

—

10

3

13

Additional paid-in capital related to tax receivable agreement

—

—

—

—

—

609

—

—

—

609

Adjustment of redeemable noncontrolling interest to redemption amount

—

—

—

—

—

(28,805
)

(125,428
)

—

—

(154,233
)
Balance, June 30, 2022

$
—

41,237

$
412

101,133

$
1,011

$
—

$
(1,410,780
)

$
(36
)

$
92,863

$
(1,316,530
)

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

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

~~The accompanying notes are an integral part of these consolidated financial statements~~

~~The accompanying notes are an integral part of these 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)

NOTE 2. ACQUISITIONS

~~Table~~On January 3, 2023, we acquired 100% of ~~Contents~~

~~3. Restricted cash~~

~~The following table provides~~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 ~~reconciliation~~total purchase consideration of ~~cash, cash equivalents, and restricted cash reported within the consolidated statement~~$36.5 million, consisting of ~~cash flows as of September 30, 2022, and December 31, 2021:~~

(In thousands)

September 30,
2022

December 31,
2021

Cash and cash equivalents

$
64,678

$
5,376

Restricted cash included in prepaid expenses and other current assets

2,064

—

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

$
66,742

$
5,376

~~As of September 30, 2022, restricted cash included cash used as collateral for our credit card program.~~

~~4. Supplemental balance sheet information~~

~~Inventories~~

~~The following table summarizes the components of our inventories as of September 30, 2022, and December 31, 2021:~~

(In thousands)

September 30,
2022

December 31,
2021

Raw materials and supplies

$
107,303

$
13,911

Work in process

9,987

3,288

Finished products and parts

121,504

56,743

Total

$
238,794

$
73,942

~~The increase in inventory from December 31, 2021, to September 30, 2022 was partially due to acquired inventory of $54.5~~(i) Class A common stock valued at $12.9 million ~~related to our acquisitions of FTS International, Inc. (“FTSI”) and Flotek Industries, Inc. (“Flotek”). The remaining increase is related to our increased activity levels in 2022.~~

~~Accrued Expenses~~

~~The following table summarizes our accrued expenses as of September 30, 2022, and December 31, 2021:~~

(In thousands)

September 30,
2022

December 31,
2021

Accrual for purchased materials

$
71,286

$
15,600

Employee compensation and benefits

29,860

8,107

Sales, use, and property taxes

21,082

5,974

Interest

13,130

879

Income taxes

10,665

—

Tax receivable agreement

3,491

—

Tax distribution to redeemable noncontrolling interests

21,114

—

Other

23,693

7,589

Total

$
194,321

$
38,149

~~Table of Contents~~

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

~~The following table summarizes the components of our property, plant, and equipment, net as of September 30, 2022, and December 31, 2021:~~

(In thousands)

September 30,
2022

December 31,
2021

Machinery and equipment

$
1,180,092

$
760,829

Mining property and mine development

97,265

34,809

Office equipment, software and other

15,156

5,550

Land

950

—

Buildings and leasehold improvements

27,373

15,947

Total

1,320,836

817,135

Less: accumulated depreciation and depletion

(632,801
)

(464,178
)
Construction in progress

133,174

10,730

Property, plant, and equipment, net

$
821,209

$
363,687

The increase in net property, plant, and equipment from December 31, 2021, to September 30, 2022, was due to acquired assets of $328.7 million related to our FTSI and Flotek acquisitions, and $103.7 million frombased on the acquisition date closing price of ~~Monahans (as defined herein). This increase was partially offset by $48.2~~$21.40; (ii) cash consideration of $1.4 million; (iii) a working capital adjustment of $8.3 million ~~of FTSI assets sold~~paid in ~~the sale lease-back transaction immediately following the FTSI acquisition.~~

Depreciation expense for the three months ended September 30, 2022 and 2021, was $68.1 million and $35.1 million, respectively. Depreciation expense for the nine months ended September 30, 2022 and 2021, was $175.6 million and $105.1 million, respectively.

~~Major classifications of 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 the components of our finite-lived intangible assets as of September 30, 2022, and December 31, 2021:~~

September 30, 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

14,644

(2,214
)

12,430

5,905

(589
)

5,316

Intangible assets, net

$
37,144

$
(2,214
)

$
34,930

$
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 ~~acquisition~~sellers of ~~FTSI, we estimated~~Producers in May 2023; and (iv) our pre-existing investment of $13.9 million. Throughout the ~~period to be three years. Amortization expense related to intangible assets was $0.7 million and $0.2 million for the three~~six months ended September 30, 2022 and 2021, respectively. Amortization expense related to intangible assets was $1.4 million and $0.5 million for the nine months ended September 30, 2022 and 2021, respectively.

~~Table of Contents~~

~~7. Indebtedness~~

~~The following table summarizes the components of our debt as of September 30, 2022 and December 31, 2021:~~

September 30,

December 31,

(In thousands)

2022

2021

Old ABL Credit Facility

$
—

$
69,000

Old Term Loan

—

171,355

First Financial Loan

19,080

30,000

New ABL Credit Facility

—

—

New Term Loan Credit Facility

525,726

—

Best Flow Credit Facility(1)

—

7,101

Best Flow Note(1)

—

10,827

Alpine Promissory Note(1)

—

16,717

Flotek Convertible Notes

12,739

—

Other

10,459

1,695

Total gross debt

568,004

306,695

Less: unamortized debt issuance costs

(23,235
)

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

(60,541
)

(31,793
)
Total long-term debt

$
484,228

$
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 bore 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 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.

~~On March 4, 2022, the Old ABL Credit Facility was replaced by the New ABL Credit Facility (as described below).~~

~~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 no 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 Old 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, 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~~

~~Table of Contents~~

~~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 replaced by the New Term Loan Credit Facility (as described below), 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”). In August 2021, the loan agreement was amended to remove the covenants in place prior to the amendment. As 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 September 30, 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 initially provided for an asset-based revolving credit facility with a borrowing base and lender commitments of $100.0 million. On April 8, 2022, the New ABL Credit Facility was amended to increase the borrowing base and lender commitments to $200.0 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 September 30, 2022, the maximum availability under the New ABL Credit Facility was the aggregate lender commitments of $200.0 million with no borrowings outstanding and $10.5 million of letters of credit outstanding, resulting in approximately $189.5 million of remaining availability. The 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).

~~On July 25, 2022,~~ the New ABL Credit Facility was amended to add an uncommitted $100.0 million incremental facility (the “Incremental Facility”), under the terms of which existing lenders can make additional loans (in their sole discretion) under, or new lenders can join, the Incremental Facility and increase the potential size of the New ABL Credit Facility from $200 million to $300 million, subject to satisfaction of certain conditions. All other terms and conditions of the New ABL Credit Facility remained substantially unchanged. See Note 19 – Subsequent events.

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 the 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 ½% 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 the 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 7.00% as of September 30, 2022.

~~Table of Contents~~

The 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) $13.3~~ ~~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) $13.3~~ 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).

The New ABL 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, sale and leaseback transactions, changes in fiscal periods and changes in line of business.

We are required by the 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 the New ABL Credit Facility to maintain a springing Fixed Charge Coverage Ratio (as defined in the New ABL Credit Facility) of at least 1.0 to 1.0, which is tested quarterly during such period. The Company 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 September 30, 2022.

~~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 Piper Sandler Finance LLC, as administrative agent and collateral agent, and the lenders party thereto, providing for a term loan facility in an aggregate amount of $300 million. On July 25, 2022, the New Term Loan Facility was amended to increase the size of the New Term Loan Facility by $150.0 million with an uncommitted option to obtain commitments for a potential additional $100.0 million of delayed draw loans before the earlier to occur of (i) the consummation of the Company’s acquisition of USWS (as defined herein) and (ii) March 31, 2023. The maturity date of the New Term Loan Facility remains the same at March 4, 2025. The Company used a portion of the proceeds from the increased New Term Loan Facility to fund the acquisitions of Monahans and USWS (see Note 14 – Acquisitions and investments and Note 19 – Subsequent events), and used the remainder of the proceeds to pay outstanding debt under the New ABL Credit Facility and/or for other general corporate purposes.

On August 25, 2022, the Term Loan Borrower requested $80 million of delayed draw loans under the New Term Loan Credit Facility, which was funded by certain existing lenders under the New Term Loan Credit Facility on September 1, 2022. After giving effect to the funding of this delayed draw loan and solely to the extent that the Term Loan Borrower is able to obtain corresponding commitments from the existing lenders and/or new lenders, the Term Loan Borrower may request an additional $20 million of delayed draw loans under the New Term Loan Credit Facility, subject to the terms and conditions thereof.

~~As of September 30, 2022, the Term Loan Borrower had approximately $525.7 million outstanding under the New Term Loan Credit Facility. The 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 two-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 the 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%.~~

~~Table of Contents~~

~~The applicable margin for (a) SOFR Rate Loans ranges from~~ ~~7.25% to 8.00% and (b) Base Rate Loans ranges from~~ ~~6.25% 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~~ ~~11.1% as of September 30, 2022.~~

The 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. The New Term Loan Credit Facility is secured by a lien on, and security interest in, substantially all of each such guarantor’s assets.

The 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, the New Term Loan Credit Facility is subject to a quarterly mandatory prepayment beginning for the calendar quarter ending on December 31, 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. No payment or prepayment premium shall be due on account of any payments or prepayments made on the Stated Termination Date.

The 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 the New Term Loan Credit Facility to maintain a Total Net Leverage Ratio (as defined in the 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 the New Term Loan Credit Facility to maintain minimum liquidity of $30.0 million at all times.~~

~~The Company was in compliance with all covenants, and there were no defaults or events of default related to the New Term Loan Credit Facility, as of September 30, 2022.~~

~~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.~~

~~Table of Contents~~

~~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.

~~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 provided 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.

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

~~Table of Contents~~

~~Flotek Convertible Notes~~

On February 2, 2022, Flotek entered into a private investment in public equity transaction (the “PIPE Transaction”) with a consortium of investors to secure growth capital. Pursuant to the PIPE Transaction, Flotek issued $11.2 million in aggregate initial principal amount of convertible notes payable (“Flotek Convertible Notes”). The Flotek Convertible Notes accrue paid-in-kind interest at a rate of 10% per annum, have a maturity of one year, and are convertible into common stock of Flotek (a) at Flotek’s option if Flotek’s common stock equals or exceeds $2.50 for 20 trading days during a 30 consecutive trading day period, (b) at the holder’s option at any time prior to maturity, at a price of $1.088125 per share or (c) at maturity, at a price of $1.088125 per share. On March 21, 2022, $3.0 million of Flotek Convertible Notes were converted at a holder’s option into approximately 2.8 million shares of Flotek common stock. The Flotek Convertible Notes are obligations of Flotek and have no recourse or claim against the assets of ProFrac Corp. or its other consolidated subsidiaries.

At September 30, 2022, there was $8.2 million principal amount of Flotek Convertible Notes outstanding, which were included in the Company’s consolidated financial statements at a carrying value of $12.7 million.

~~Other indebtedness~~

As of September 30, 2022 and December 31, 2021, the Company had other debt agreements outstanding with unpaid principal balances of $10.5 million and $1.7 million, respectively. At September 30, 2022, other indebtedness included various equipment financing agreements of $3.4 million. In October 2022, we repaid the remaining $3.4 million under these agreements. At September 30, 2022, other indebtedness also included a $4.8 million loan under the Paycheck Protection Program established under the Coronavirus Aid, Relief, and Economic Securities Act held by Flotek.

~~The following table summarizes the principal maturity schedule for our long-term debt outstanding as of September 30, 2022:~~

2022

2023

2024

2025

2026

Thereafter

Total

First Financial loan

$
3,789

$
15,291

$
—

$
—

$
—

$
—

$
19,080

New ABL Credit Facility

—

—

—

—

—

—

—

New Term Loan Credit Facility

6,571

26,286

26,286

466,583

—

—

525,726

Flotek Convertible Notes

—

12,739

—

—

—

—

12,739

Other.

4,506

3,038

1,907

543

79

386

10,459

Total

$
14,866

$
57,354

$
28,193

$
467,126

$
79

$
386

$
568,004

~~8. Income taxes~~

Before May 12, 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 Company 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 Company which are reflected as income tax expense or benefit in historical periods. In connection with the IPO in May 2022, the Company reorganized and ProFrac LLC became partially owned by ProFrac Corp., a C-Corporation. ProFrac Corp. is a taxable entity and is required to account for income taxes under the asset and liability method for periods subsequent to May 12, 2022.

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

As of September 30, 2022, the Company had approximately $161.2 million of net deferred tax assets. The deferred tax assets are driven by the outside basis difference between tax and GAAP in the Company’s outside basis in ProFrac LLC (including $23.8 million subject to the Tax Receivable Agreement), generated by both the FTSI transaction and the IPO. We have recorded a valuation allowance on the Company’s net deferred tax assets based on our assessment that it is more likely than not that the deferred tax assets will not be realized, with the exception of certain deferred tax assets that are expected to be utilized in the 2022 tax year of approximately $4.1 million. This valuation allowance assessment is based on the cumulative losses incurred by the Company in recent years. A change in our assessment could cause a decrease to the valuation allowance, which could materially impact our results of operations.

~~Table of Contents~~

The Company’s effective tax rate (“ETR”) from continuing operations is expected to be 5.0% for tax year 2022. After consideration of a 2.4% net state tax rate (inclusive of the Texas Margin tax), the majority of the remaining difference between the federal corporate income tax rate of 21% and our effective tax 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. This is due to the Company not being subject to tax prior to IPO, as well as the amount of post-IPO income that is attributable to the Class B shareholders. As such, the Company’s income tax expense for the nine months ended September 30, 2022 is $13.0 million.

ProFrac LLC is obligated to make cash distributions to PFH Unit holders to fund their respective income tax liabilities relating to their share of the income of ProFrac LLC. At September 30, 2022, the Company recorded a liability for accrued distributions of $21.1 million to be made to redeemable noncontrolling interest holders to fund their estimated tax payments.

~~9. Tax receivable agreement~~

In connection with our IPO, ProFrac Corp. entered into a tax receivable agreement (the “TRA”) with certain PFH Unit holders (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 (computed using simplifying assumptions to address the impact of state and local taxes) that ProFrac Corp. actually realizes (or is deemed to realize in certain circumstances) as a 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 PFH Units in connection with the IPO or the exercise of the Redemption Right (as defined in the TRA) or the Call Right (as defined in the TRA), and (ii) imputed interest deemed to be paid by ProFrac Corp. as a result of, and additional tax basis arising from, any payments ProFrac Corp. makes under the TRA. ProFrac Corp. will be dependent on ProFrac LLC to make distributions to ProFrac Corp. in an amount sufficient to cover ProFrac Corp.’s obligations under the TRA. ProFrac Corp. will retain the benefit of the remaining 15% of any actual net cash tax savings. The payment obligations under the TRA are ProFrac Corp.’s obligations and not obligations of ProFrac LLC, and we expect that the payments required to be made under the TRA could be substantial.

The term of the TRA commenced upon the completion of the IPO and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless we experience a Change of Control (as defined in the TRA, which includes certain mergers, asset sales, or other forms of business combinations) or the TRA otherwise terminates early (at our election or as a result of our breach or the commencement of bankruptcy or similar proceedings by or against us) and ProFrac Corp. makes the termination payments specified in the TRA in connection with such Change of Control or other early termination. In the event that the TRA is not terminated, the payments under the TRA could commence in 2023 and will continue for 15 years after the date of the last redemption of the PFH Units.

Payments will generally be made under the TRA as we realize actual cash tax savings from the tax benefits covered by the TRA. However, if we experience a Change of Control or the TRA otherwise terminates early, ProFrac Corp.’s obligations under the TRA would accelerate and ProFrac Corp. would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by it under the TRA. We estimate that such an immediate payment could range up to more the $500 million. There can be no assurance that we will be able to satisfy our obligations under the TRA.

Estimating the amount and timing of payments that may become due under the TRA is by its nature imprecise. For purposes of the TRA, net cash tax savings generally are calculated by comparing ProFrac Corp.’s actual tax liability (determined by using the actual applicable U.S. federal income tax rate and an assumed combined state and local income and franchise tax rate) to the amount ProFrac Corp. would have been required to pay had it not been able to utilize any of the tax benefits subject to the TRA. The actual increases in tax basis covered by the TRA, as well as the amount and timing of any payments under the TRA, will vary depending on a number of factors, including the timing of any redemption of PFH Units, the price of ProFrac Corp.’s Class A Common Stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of the redeeming PFH Unit holder’s tax basis in its PFH Units at the time of the relevant redemption, the depreciation and amortization periods that apply to the increase in tax basis, the amount and timing of taxable income we generate in the future, the U.S. federal income tax rates then applicable, and the portion of ProFrac Corp.’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis.

~~We account for amounts payable under the TRA when we determine that a liability is probable and the amount is reasonably estimable. At September 30, 2022, the liability from the TRA was $3.5 million.~~

~~Table of Contents~~

~~10. Earnings per share~~

~~The numerators and denominators of the basic and diluted earnings per share (“EPS”) computations for our Class A Common Stock are calculated as follows:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)

2022

2021

2022

2021

Numerator:

Net income attributable to ProFrac Holding Corp.

$
44,930

$
—

$
51,488

$
—

Net income reallocated to dilutive Class A shares

85

—

72

—

Net income attributable to ProFrac Holding Corp. used for diluted earnings per Class A share

45,015

—

51,560

—

Denominator:

Weighted-average Class A shares used for basic EPS computation

41,239

40,846

Dilutive potential of employee restricted stock units

110

81

Weighted-average Class A shares used for diluted EPS computation

41,349

40,927

Basic and diluted EPS - Class A Common Stock

$
1.09

$
1.26

~~11. Stock-based compensation~~

~~Stock-based Compensation Related to Deemed Contributions~~

In connection with the Company’s IPO, our majority shareholders, Farris Wilks (“Farris”) and Dan Wilks (“Dan”) (together with certain family members or entities they control), sold PFH Units representing approximately 1% of the equity interest in ProFrac LLC to an entity controlled by our Chief Executive Officer, Ladd Wilks (“Ladd”), and our Executive Chairman, Matt Wilks (“Matt”), respectively. These equity interests in ProFrac LLC entitled each of Ladd and Matt to 1,220,978 shares of Class B common stock in ProFrac Corp. These units were sold in exchange for promissory notes. While some of the documentation relating to these transfers was subject to completion, we concluded that both transactions were consummated in connection with the Company’s IPO and, for accounting purposes, should be treated in accordance with ASC Topic 718, ~~Compensation — Stock Compensation~~, as deemed contributions to the Company by Farris and Dan and grants of stock-based compensation to Ladd and Matt by the Company similar to stock options. As no future service period was required and because the promissory notes are prepayable at any time, all related stock-based compensation expense was recognized in the second quarter of 2022.The stock-based compensation expense was $33.7 million using the Black-Scholes-Merton option-pricing model with an average contractual term of 16.5 years, a volatility rate of 64%, and a 0% dividend yield.

Also in connection with the IPO, Farris engaged in estate planning that may result, subject to other terms and conditions, in additional shares being transferred by Farris to Ladd if the Company’s total market capitalization increases to certain target levels within the next five years, which resulted in a performance award being deemed granted by the Company to Ladd. We concluded that this arrangement should be treated, for accounting purposes, in accordance with ASC Topic 718, ~~Compensation — Stock Compensation, as a deemed contribution to the Company by a related party and the grant of stock compensation with market conditions to Ladd by the Company.~~

The grant date fair value of this award was estimated to be $45.2 million and will be recognized over the estimated derived service period of approximately one year. The grant date fair value and the derived service period of this award was determined using a Monte Carlo simulation method, which incorporates the possibility that the market capitalization targets may not be satisfied. The Monte Carlo simulation is affected by a number of variables, including the fair value of our underlying common shares ($18.00 at grant date), the expected common share price volatility over the expected term (79.2%), the expected dividend yield of our common shares over the expected term (0.0%), the risk-free interest rates over the expected term (2.86%), and the performance period of the award (five years).

The derived service period for the award was determined based on the median vesting time for the simulations that achieved the vesting hurdle. Stock-based compensation expense associated with this award will be recognized over the earlier of (i) the derived service period and (ii) the date on which the market condition is satisfied. Stock-based compensation expense of $10.2 million and $15.3 million was recognized in the third quarter and first nine months of 2022, respectively. At September 30, 2022, there was $29.9 million of total unrecognized compensation cost related to this award, which is expected to be recognized over a weighted average period of 0.8 years.

~~Table of Contents~~

~~2022 Equity and Incentive Compensation Plan~~

In May 2022, the Company adopted the ProFrac Holding Corp. 2022 Long Term Incentive Plan (“2022 Plan”) to attract and retain officers, employees, directors, and other key personnel and to provide those persons incentives and awards for performance. The 2022 Plan originally allocated 3,121 thousand shares of our Class A Common Stock in the form of incentive stock options, non-qualified stock options, restricted stock, restricted stock units (“RSUs”), stock appreciation rights, or other stock-based awards. As of September 30, 2022, up to approximately 2,543 thousand shares were available for future grants under the 2022 Plan.

On May 24, 2022, the Company issued 509 thousand RSUs, which had a grant date fair value of $9.1 million. The RSUs were valued at $17.90 per share, the market price of our Class A Common Stock on the date of grant. In August 2022, the Company issued 69 thousand RSUs, which had a grant date fair value of $1.2 million. The RSUs were valued at $17.85 per share, the market price of our Class A Common Stock on the date of grant. Awards granted vest from one to three years from the date of grant.

Stock-based compensation expense for the Company in the third quarter and first nine months of 2022 for these RSUs was $2.1 million and $3.0 million, respectively. The weighted-average grant-date fair value per share of RSUs granted was $17.89. The fair value of RSUs vested in the third quarter of 2022 was zero. At September 30, 2022, there was $7.4 million of total unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted average period of 1.0 years.

~~12. Leases~~

Effective January 1, 2022, we adopted the new lease accounting guidance under 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 current period adjustment approach; 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 and nine months ended September 30, 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 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, 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.

~~Table of Contents~~

~~The following table summarizes the components of our lease costs:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)

2022

2022

Operating lease costs

$
3,429

$
9,030

Short-term lease costs

843

2,199

Total lease costs

$
4,272

$
11,229

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

Nine Months Ended
September 30,

(Dollars in thousands)

2022

Cash paid for amounts included in the measurement of our lease obligations

$
8,691

Right-of-use assets obtained in exchange for lease obligations

$
45,412

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
%

~~The following table summarizes the maturity of our operating leases as of September 30, 2022:~~

(In thousands)

Remainder of 2022

$
3,667

2023

13,378

2024

12,642

2025

11,496

2026

11,537

2027

11,812

2028 and thereafter

38,465

Total lease payments

102,997

Less imputed interest

(20,285
)
Total lease liabilities

$
82,712

~~13. Related party transactions~~

In the normal course of business, the Company has entered into transactions with related parties where the Wilks (or entities they control) hold a controlling financial interest. During the three and nine months ended September 30, 2022 and 2021, the Company 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, including the Company. Amounts paid to Automatize include costs passed through to third-party trucking companies and a commission retained by Automatize. These payments 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 Company. 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 Company. 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 Company. 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.

~~Table of Contents~~

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 the Company, billing the Company 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 the Company 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 the Company rents and sells 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 the Company. Amounts paid to the 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 Company. 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 USA LLC (“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 and nine months ended September 30, 2022 and 2021:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)

2022

2021

2022

2021

Automatize

$
22,428

$
25,228

$
72,279

$
56,496

FHE

4,025

—

11,302

—

Wilks Brothers

5,503

4,419

14,302

8,926

Related Lessors

1,821

1,604

6,469

4,719

Wilks Construction

9,327

—

22,716

—

Equify Financial

—

1,853

986

1,853

3 Twenty-Three

—

974

247

974

Carbo

863

160

941

513

Cisco Logistics

—

85

—

509

Interstate

—

24

20

56

Equify Risk

—

—

—

3

Other

29

29

149

81

Total

$
43,996

$
34,376

$
129,411

$
74,130

~~Table of Contents~~

~~The following table summarizes related party accounts payable as of September 30, 2022 and December 31, 2021:~~

September 30,

December 31,

(In thousands)

2022

2021

Automatize

$
15,184

$
11,198

Wilks Brothers

15,049

9,990

Wilks Construction

4,640

57

Cisco Logistics

1

—

Carbo

0

10

Related Lessors

37

1

Other

0

19

Total

$
34,911

$
21,275

~~The following table summarizes revenue from related parties for the three and nine months ended September 30, 2022 and 2021:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)

2022

2021

2022

2021

Flying A

$
1,273

$
573

$
3,193

$
2,701

Carbo

31

395

784

574

Wilks Brothers

1

—

4

5

Interstate

4

2

4

113

Other

6

1

7

35

Total

$
1,315

$
971

$
3,992

$
3,428

~~The following table summarizes related party accounts receivable as of September 30, 2022 and December 31, 2021:~~

September 30,

December 31,

(In thousands)

2022

2021

Flying A

$
2,603

$
2,412

Cisco Logistics

1,493

1,489

Carbo

96

591

Interstate

316

—

Other

2

23

Total

$
4,510

$
4,515

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 September 30, 2022, substantially all of the assets have been sold by the member.

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.

~~14. Acquisitions and investments~~

~~FTS International, Inc.~~

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”).

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

~~Table of Contents~~

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. 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.

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:~~

(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

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. Throughout the second quarter of 2022, we integrated ~~FTSI’s~~Producers' operations. As a result, we track all stimulation services assets as one group and it would be impracticable to separately report ~~FTSI~~Producers' revenues or pretax earnings subsequent to ~~March 31, 2022.~~the acquisition.

~~Flotek Industries, Inc.~~

On February ~~2, 2022,~~24, 2023, we ~~entered into an agreement with Flotek Industries, Inc. (“Flotek”~~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”)~~, pursuant to which Flotek will provide full downhole chemistry solutions~~ for a ~~minimum~~total purchase consideration of ~~ten hydraulic fleets for three years starting~~$462.5 million, consisting of (i) Class A common stock valued at $6.2 million based on ~~April 1, 2022, at a~~the acquisition date closing price of ~~cost plus 7% (“Flotek Supply Agreement”). In exchange for entry into~~$19.67; (ii) cash consideration of $452.1 million; and (iii) the Flotek Supply Agreement, we received $10 million in initial principal amount of Flotek Convertible Notes and acquired an additional $10 million in principal amount of Flotek Convertible Notes in the PIPE Transaction. Our equity ownership in Flotek on a fully diluted basis as a result of this investment is approximately 17%. In addition, we received the right to designate up to two directors to Flotek’s board of directors.

~~Table of Contents~~

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 Flotek Convertible Notes that will be convertible into Flotek common stock. The Flotek Supply Agreement Amendment and issuance to us of additional Flotek Convertible Notes were 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. Our equity ownership in Flotek on a fully diluted basis after the consummation of these transactions is approximately 43%, and we are permitted to designate two additional directors, or up to four directors to Flotek’s board of directors. Because of our power to appoint directors to the board of directors without a direct equity interest in Flotek, we determined that Flotek is a VIE. We further determined that the Company is the primary beneficiary of the VIE, primarily due to our ability to appoint four of seven directors to Flotek’s board of directors. As a result, subsequent to May 17, 2022, we have accounted for this transaction as a business combination using the acquisition method of accounting and Flotek’s financial statements have been included in our consolidated financial statements from May 17, 2022. As we had no direct equity interest in Flotek during 2022, we allocated 100% of Flotek’s loss to noncontrolling interests in our consolidated financial statements.

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. At May 17, 2022, we had a supply agreement contract liability of $9.9 million, which was included as purchase consideration for Flotek as a settlement of a pre-existing ~~relationship. All effects~~receivable of ~~the Supply Agreement have been eliminated from our consolidated financial statements subsequent to May 17, 2022.~~

~~The notes issued to ProFrac accrue paid-in-kind interest at~~$4.2 million. Performance Proppants is 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. At May 17, 2022, we estimated the fair value of these Convertible Notes to be $30.2 million, which was included as purchase consideration for Flotek as a settlement of a pre-existing relationship. All effects of the Flotek Convertible Notes have been eliminated from our consolidated financial statements subsequent to May 17, 2022.

~~Before May 17, 2022, we designated our investment~~frac sand provider in the Flotek 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 onHaynesville basin. During the ~~consolidated statements of operations. For the period from February 2, 2022 through May 17, 2022 we recognized noncash income of $10.2 million as other (expense) income on~~three months and nine months ended September 30, 2023, our unaudited condensed consolidated statements of operations include revenues of $59.3 million and $142.2 million, respectively, and pretax income of $25.5 million and $60.9 million, respectively, related to the ~~change in fair value of the Flotek Convertible Notes.~~Performance Proppants acquisition.

In June 2022, Flotek issued and sold to ProFrac II LLC, a wholly-owned subsidiary of ProFrac LLC, pre-funded warrants to purchase from Flotek up to approximately 13.1 million shares of Flotek common stock at any time and at an exercise price equal to $0.0001 per share, in exchangeWe accounted for ~~$19.5 million in cash. ProFrac II LLC and its affiliates may not receive any voting or consent rights in respect of~~ these 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 $4.5 million to Flotek. We entered into this transaction to provide additional working capital to Flotek to enable it to perform under the Flotek Supply Agreement Amendment. ~~These pre-funded warrants have been eliminated from our consolidated financial statements.~~

~~Table of Contents~~

acquisitions as business combinations. The following table ~~summarizes~~reflects pro forma revenues and net income (loss) for the three and nine months ended September 30, 2023 and 2022 as if the 2022 and 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.

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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


	Three Months Ended September 30,					Nine Months Ended September 30,
(unaudited)	2023			2022		2023		2022
Revenues	$	574.2		$	894.6	$	2,171.6	$	2,230.0
Net income (loss)	$	(17.9	)	$	129.1	$	44.7	$	139.6

The following table represents our preliminary allocation of ~~the fair value~~total purchase consideration of ~~Flotek’s assets, liabilities~~Producers and ~~noncontrolling interest:~~

(In thousands)

Settlement of pre-existing relationships

Accounts payable

$
(2,713
)
Supply Agreement contract liability

(9,874
)
Fair value of previously held interest in 10% Convertible PIK Notes

30,220

Settlement of pre-existing relationships

$
17,633

Assets acquired

Cash and cash equivalents

$
21,725

Restricted cash

40

Accounts receivable

18,853

Inventories

12,210

Assets held for sale

1,805

Other current assets

3,405

Property and equipment

21,551

Operating lease right-of-use assets

3,884

Deferred tax assets

282

Goodwill

82,340

Other long-term assets

17

Total assets acquired

166,112

Liabilities assumed:

Accounts payable and accrued liabilities

24,203

Operating lease liabilities

7,394

Finance lease liabilities

79

Long-term debt

17,101

Other liabilities

85

Total liabilities assumed

48,862

Noncontrolling interests

99,617

Assets acquired less liabilities assumed and noncontrolling interests

$
17,633

~~We used our best estimates and assumptions to assign fair value~~Performance Proppants to the ~~tangible and intangible~~identifiable assets acquired and liabilities assumed atbased on the fair values on their acquisition ~~date. The majority~~dates:


	Producers		Performance Proppants
Cash and cash equivalents	$	0.3	$	2.0
Accounts receivable		7.5		14.8
Prepaid expenses and other assets		1.1		0.6
Inventories		2.8		7.5
Property, plant and equipment		29.5		476.9
Intangible assets		—		5.6
Total identifiable assets acquired		41.2		507.4
Accounts payable		10.9		16.7
Accrued expenses		0.7		2.8
Current portion of long-term debt		0.2		2.1
Other current liabilities		—		49.6
Non-current portion of debt		0.1		0.6
Other non-current liabilities		—		42.3
Total liabilities assumed		11.9		114.1
Goodwill		7.2		69.2
Total purchase consideration	$	36.5	$	462.5

We generally used the cost approach to value acquired property, plant and equipment adjusted for the age, condition and utility of the ~~measurements~~associated assets. The market approach valuation technique was used for assets that had comparable market data available. Included in Performance Proppants property, plant and equipment valuation is mineral reserves valued at $248.3 million using the income approach, which is predicated upon the value of the future cash flows that an asset will generate over its economic life. The intangible assets 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 the goodwill will be deductible for income tax purposes.

The allocations of purchase price to the identifiable assets acquired and liabilities assumed for these acquisitions are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of the noncontrolling interest was based on the Flotek common stock price reported by the New York Stock Exchange at the date of the acquisition, which represented Level 1 inputs. No portion of the recorded goodwill is tax deductible.

For the nine month period ended September 30, 2022, our revenues and pretax earnings included $21.2 million and $21.1 million loss, respectively, associated with the Flotek acquired operations after May 17, 2022. The entire pretax loss was allocated to noncontrolling interests.

~~The allocation of the purchase price to Flotek’s net tangible assets and liabilities and identifiable intangible assets as of May 17, 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.

~~SP Silica~~ These determinations include the use of ~~Monahans, LLC~~

On July 25, 2022, the Company acquired 100% of the issued and outstanding membership interests of each of SP Silica of Monahans, LLC and SP Silica Sales, LLC (collectively “Monahans”), the West Texas subsidiaries of Signal Peak Silica, for a purchase price of $97.7 million in cash. This purchase price is subject to a working capital adjustmentestimates based on information that ~~will be finalized in the fourth quarter of 2022.~~

We have accounted for the acquisition of Monahans using the acquisition method of accounting. We used our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumedwas available at the ~~acquisition date. The~~

~~Table of Contents~~

~~majority of~~time these unaudited condensed consolidated financial statements were prepared. We believe that the ~~measurements of assets acquired and liabilities assumed~~estimates used are ~~based on inputs that are not observable in~~reasonable; however, the ~~market and thus represent Level 3 inputs.~~

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

(In thousands)

Assets acquired:

Cash and cash equivalents

$
61

Accounts receivable

11,117

Prepaid expense and other assets

596

Inventories

3,148

Property, plant and equipment

103,665

Intangible assets

7,500

Goodwill

15,233

Other assets

8,916

Total assets acquired

150,236

Liabilities assumed:

Accounts payable

9,783

Accrued expenses

1,035

Deferred revenue

4,335

Current portion of debt

45

Other current liabilities

15,757

Long-term debt

25

Other non-current liabilities

21,596

Total liabilities assumed

52,576

Net assets acquired

$
97,660

Throughout the third quarter of 2022, we integrated Monahans operations. As a result, we track all proppant production assets as one group and it would be impracticable to separately report Monahans revenues or pretax earnings subsequent to the acquisition date.

The allocation of the purchase price to Monahans net tangible assets and liabilities and identifiable intangible assets as of July 25, 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 considerationestimates are subject to change ~~during the measurement period, up to one year from the date the acquisition closed.~~

~~The following unaudited pro forma results of operations have been prepared~~ as though the FTSI, Flotek, and Monahans acquisitions 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.

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)
2022

2021

2022

2021

Revenue
$
705,900

$
303,267

$
1,763,830

$
852,069

Net income (loss)
$
144,895

$
(40,763
)

$
195,268

$
(136,403
)

~~Table of Contents~~

~~Basin Production and Completion LLC~~

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 and B-1 preferred units of BPC for $46.0 million (“Basin Units Acquisition”), consisting of $40.0 million to BPC for series A-1 and 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, 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.

Subsequent to February 9, 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 16 — Fair Value of Financial Interests for more information on our investments using Level 3 measurements. At September 30, 2022, the estimated fair value of these investments in BPC was $49.8 million.

~~EKU~~

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~~becomes available.

ProFrac Holding Corp.

Notes to ~~the recognized intangible assets.~~Unaudited Condensed Consolidated Financial Statements (continued)

~~Munger Ranch~~

~~The Company entered into an agreement to acquire property~~(Amounts 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,millions, except per share amounts, 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 ultimately elected the equity option, as such this was a non-cash transaction for the Company for the year ended December 31, 2021.where otherwise noted)

The Munger Right Agreement includes a ‘Make Whole’ provision. Under the Make Whole provision, if any seller liquidates 100% of the shares of our Class A Common Stock they are issued prior to the one-year anniversary of the IPO and the value of the shares sold does not equal such seller’s share of the $30.0 million purchase price, then the Company will pay the difference between the amount of cash the seller would have received had they elected the cash option and the amount they ultimately received upon the sale of the Class A shares issued under the equity option. This Make Whole provision is accounted for as a written put option with a fair value of $5.0 million as of September 30, 2022 and 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 part of the IPO completed in May 2022, the Company issued 2,114,273 shares of Class A Common Stock worth $38.1 million as consideration for the Munger Ranch purchase.~~

~~Table of Contents~~

~~iO-TEQ, LLC~~

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.

~~Best Flow minority interests~~

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, which the company paid in cash, during the three months ended March 31, 2022.

~~15. Goodwill~~

The changes in the carrying amount of goodwill by reportable segment were as ~~follows~~follows:


	Stimulation Services		Proppant Production			Manufacturing		Other		Total
Balances as of December 31, 2022	$	153.3	$	5.5		$	-	$	81.7	$	240.5
Acquisition of Producers		7.2		-			-		-		7.2
Acquisition of Performance		-		75.7			-		-		75.7
Measurement period adjustments		4.7		(4.9	)		-		-		(0.2	)
Balances as of September 30, 2023	$	165.2	$	76.3		$	-	$	81.7	$	323.2

The measurement period adjustments for the stimulation services segment included an adjustment to finalize the estimate for contingent liabilities at the acquisition date for our U.S. Well Services acquisition.

The measurement period adjustments for the stimulation services segment included an adjustment to recognize a $5.3 million post-closing working capital adjustment related to our December 2022 acquisition of REV Energy Holdings, LLC ("REV"), which resulted in a reduction to the principal balance of our long-term debt payable to REV and a corresponding decrease to goodwill for the same amount.

The measurement period adjustment for the Proppant production segment related to adjustments to working capital balances for our Performance Proppant acquisition.

NOTE 12. OTHER OPERATING EXPENSE, NET

Other operating expense, net is comprised of the following:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2023			2022		2023			2022
(Gain) loss on disposal of assets	$	(1.3	)	$	0.6	$	(0.3	)	$	2.6
Litigation expenses and accruals for legal contingencies		10.3			—		23.5			4.0
Severance charges		1.1			—		1.1			—
Acquisition earnout adjustment		—			—		(6.6	)		—
Provision for credit losses, net of recoveries		—			—		0.1			—
Total	$	10.1		$	0.6	$	17.8		$	6.6

(Gain) loss on disposal of assets, net consists of gains and losses on the sale of excess property, early equipment failures and other asset dispositions.

Litigation expenses and accruals for legal contingencies generally represent legal and professional fees incurred in litigation as well as estimates for loss contingencies with regards to certain vendor disputes and litigation matters. In the nine months ended September 30, ~~2022 and 2021, intersegment revenues~~2023, these costs represent litigation costs incurred in connection with a patent infringement lawsuit against Halliburton. See Note 7 for a discussion of significant litigation matters.

Severance charges relate to the ~~proppant production segment were 56% and 46% and 61% and 40%, respectively.~~

~~The performance~~departure of our segments is evaluated primarily on Adjusted EBITDA. 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) stock-based compensation, and (vi) other unusual or non-recurring charges, such as costs related to our initial public offering, non-recurring supply commitment charges, certain bad debt expense, loss on extinguishment of debt and gain on investments.

~~Table of Contents~~

~~Segment information, and a reconciliation of Adjusted EBITDA, for~~two executives in the three ~~and nine~~ months ended September 30, ~~2022 and 2021 is as follows:~~2023.

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)

2022

2021

2022

2021

Revenues

Stimulation services

$
668,578

$
190,723

$
1,581,289

$
502,932

Manufacturing

48,742

19,861

115,602

50,741

Proppant production

24,642

6,399

54,581

19,769

Other

46,872

—

62,231

—

Total segments

788,834

216,983

1,813,703

573,442

Eliminations

(92,104
)

(21,052
)

(182,149
)

(53,106
)
Total

$
696,730

$
195,931

$
1,631,554

$
520,336

Adjusted EBITDA

Stimulation services

$
249,557

$
31,599

$
519,214

$
75,027

Manufacturing

8,416

502

27,798

3,181

Proppant production

9,198

2,417

29,657

8,069

Other

(11,072
)

—

(18,526
)

—

Adjusted EBITDA for reportable segments

256,099

34,518

558,143

86,277

Interest expense, net

(16,261
)

(6,896
)

(38,984
)

(19,118
)
Depreciation, depletion and amortization

(68,758
)

(35,241
)

(177,038
)

(105,606
)
Income tax benefit (provision)

(8,157
)

(170
)

(13,021
)

138

Loss on disposal of assets, net

(667
)

(3,397
)

(2,656
)

(7,472
)
Loss on extinguishment of debt

(242
)

—

(17,337
)

—

Litigation accrual

—

—

(4,000
)

—

Stock compensation expense

(2,719
)

—

(4,174
)

—

Stock compensation expense related to deemed contributions

(10,207
)

—

(49,056
)

—

Bad debt expense, net of recoveries

—

(2,562
)

(5
)

(2,562
)
Loss on foreign currency transactions

80

(116
)

126

(116
)
Reorganization costs

—

(211
)

(55
)

(211
)
Acquisition related expenses

(5,806
)

—

(22,888
)

—

Unrealized gain on investments, net

—

—

8,526

—

Net income (loss)

$
143,362

$
(14,075
)

$
237,581

$
(48,670
)

~~Segment information as of September 30, 2022 and December 31, 2021 is as follows:~~

(In thousands)

September 30,
2022

December 31,
2021

Total assets

Stimulation services

$
1,663,989

$
510,579

Manufacturing

140,396

77,968

Proppant production

298,138

100,294

Other

196,946

—

Total segment assets

2,299,469

688,841

Eliminations

(320,185
)

(24,271
)
Total

$
1,979,284

$
664,570

~~Table of Contents~~

~~19. Subsequent events~~

~~Acquisition of U.S. Well Services, Inc.~~

~~On November 1, 2022,~~The acquisition earnout adjustment represents a decrease in the Company acquired U.S. Well Services, Inc. (NASDAQ: USWS) (“USWS”) in a stock-for-stock merger transaction pursuant to the Agreement and Plan of Merger (the “USWS Merger Agreement”), dated as of June 21, 2022, by and among the Company, USWS and Thunderclap Merger Sub I, Inc., a Delaware corporation and an indirect subsidiaryfair value of the ~~Company (“Merger Sub”). Pursuant~~contingent consideration related to our acquisition of REV in December 2022.

NOTE 13. INCOME TAXES

The Predecessors 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 ~~terms~~ordinary business income or loss and ~~conditions of~~certain deductions were passed-through and reported on the ~~USWS Merger Agreement, on November 1, 2022, Merger Sub merged with and into USWS, with USWS surviving~~members’ income tax returns. As such, the ~~merger as the surviving corporation and an indirect subsidiary of the Company. At the effective time of the merger, each share of USWS Class A Common Stock was converted automatically into the right~~Predecessors were not required to receive 0.3366 shares of the Company’s Class A Common Stock. As a result of this transaction, the Company issued an aggregate of approximately 12.9 million shares of its Class A Common Stock to holders of USWS Class A Common Stock, USWS Series A Preferred Stock, USWS Equity Linked Convertible Notes (as such terms are definedaccount for U.S. federal income taxes in the USWS Merger Agreement), and USWS equity awards. The equity issued, based on the Company’s Class A Common Stock 10-day VWAP as of October 31, 2022, was approximately $270 million. In addition, the Company used cash to retire approximately $170 million of USWS debt, leaving approximately $35 million of various forms of equipment related financing outstanding.unaudited condensed consolidated financial statements.

Pursuant to the terms of the USWS Merger Agreement, the Company assumed the obligations of USWS under certain of its public and private warrants, including those that traded on NASDAQ. These warrants now represent the right to receive, upon valid exercise thereof, shares of the Company’s Class A Common Stock in an amount equal to the product of (i) the number of shares of USWS Class A Common Stock subject to such warrant immediately prior to the effective time of the merger and (ii) 0.3366. The assumed public warrants are traded on NASDAQ under the symbol “ACDCW.” In addition, pursuant to a warrant purchase agreement entered into concurrently with the execution of the USWS Merger Agreement, the Company purchased all of the outstanding February Term C Loan Warrants and March Term C Loan Warrants (as such terms are defined in the USWS Merger Agreement) of USWS from their holders for total aggregate consideration of approximately $2.6 million, which warrants were automatically canceled and ceased to exist as of the effective time of the merger.

In connection with the Company’s acquisition of USWS, the ABL Borrower borrowed approximately $164 million under the Amended ABL Credit Facility (as defined herein). See below for additional discussion regarding the Amended ABL Credit Facility.

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 owned certain securities of USWS. Upon the consummation of the merger, the Wilks Parties received approximately 4.1 million shares of ProFrac Class A Common Stock as merger consideration.

~~The accounting for this acquisition is in process and will be completed in the fourth quarter.~~

~~Amendment to New Term Loan Credit Facility.~~

On November 1, 2022, the Company entered into a second amendment to the New Term Loan Credit Facility (as amended, the “Amended New Term Loan Credit Facility”), pursuant to which the Agent and the Required Lenders have agreed to: (a) consent to (i) the Amended ABL Credit Facility; (ii) certain existing debt of U.S. Well Services Holdings, LLC (successor by conversion to USWS), a Delaware limited liability company (“U.S. Well LLC”), and each of its subsidiaries (collectively, the “U.S. Well Entities”), remaining outstanding (the “U.S. Well Debt”) following the Company’s acquisition of USWS; (iii) the corresponding liens on the assets of the U.S. Well Entities securing such U.S. Well Debt (the “U.S. Well Liens”) remaining outstanding following the acquisition; and (iv) any restrictions existing under the agreements evidencing the U.S. Well Debt, which would otherwise be prohibited under the Amended Term Loan Credit Facility and (b) waive any defaults and/or events of default arising as a result of the defaults and/or events of default existing under the agreements evidencing the U.S. Wells Debt, including without limitation, as a result of the consummation of the First Amendment Acquisition (as defined in the Amended Term Loan Credit Facility) with respect to the U.S. Well Entities, subject to the terms and conditions set forth in the Amended Term Loan Agreement. Immediately following consummation of the Company’s acquisition of USWS, the U.S. Well Debt was repaid in full and the U.S. Well Liens were all released.

~~Table of Contents~~

~~Amendment to New ABL Credit Facility.~~

On November 1, 2022, the Company entered into a second amendment to the New ABL Credit Facility (as amended, the “Amended ABL Credit Facility”), pursuant to which the Agent and the Lenders have agreed to: (a) consent to U.S. Well LLC and its subsidiaries becoming Restricted Subsidiaries (as defined in the Amended Term Loan Credit Facility) of ProFrac LLC immediately prior the payment in full of certain U.S. Well Debt and the termination and release of certain U.S. Well Liens and agree that the existence of such debt or liens any restrictions in the applicable documents will not trigger a default or event of default under the Amended ABL Credit Facility and (b) waive any defaults and/or events of default under the ABL Credit Facility and the other applicable loan documents solely relating to or arising from (i) U.S. Well and its subsidiaries becoming Restricted Subsidiaries of ProFrac LLC immediately prior the payment in full of the certain of the U.S. Well Debt and the termination and release of certain U.S. Well Liens and (ii) any defaults and/or events of default existing under the applicable documents which govern the U.S. Well Debt, including without limitation, as a result of the consummation of the Merger, subject to the terms and conditions set forth in the Amended ABL Credit Facility.

Under the Amended ABL Credit Facility, (i) the aggregate Maximum Revolver Amount (as defined in the Amended ABL Credit Facility) was increased from $200.0 million to $280.0 million as of the Second Amendment Effective Date (as defined in the Amended ABL Credit Facility) and (ii) the Borrower is entitled to request up to $120.0 million of additional Revolving Credit Commitment Increases (as defined in the Amended ABL Credit Facility) after the Second Amendment Effective Date subject to certain terms and conditions provided that, as of the Second Amendment Effective Date, such additional Revolving Credit Commitment Increases are uncommitted.

In connection with the Company’s acquisition of USWS, the ABL Borrower borrowed approximately $164 million under the Amended Credit Facility. Immediately prior to this draw down, there were no amounts outstanding under the Amended ABL Credit Facility.

~~Table of Contents~~

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

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

~~Recent Developments~~

~~Initial Public Offering~~

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 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 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.~~

~~Corporate Reorganization~~

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:

•

~~the Company~~ ~~amended and restated its Certificate of Incorporation and Bylaws;~~

•

~~the Company and the other members of ProFrac LLC entered into the Third Amended and Restated ProFrac Limited Liability Company Agreement (the “ProFrac LLC Agreement”); and~~

•

~~in connection with the adoption of the ProFrac LLC Agreement, the Company was admitted as the sole managing member of ProFrac LLC.~~

~~For additional information regarding the Corporate Reorganization and the Master Reorganization Agreement, please see “Corporate Reorganization” in our~~ ~~prospectus, dated May 12, 2022, filed with the SEC pursuant to Rule 424(b) under the Securities Act on May 16, 2022 in~~ connection with our initial public offering ~~(the “IPO~~ ~~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.~~

~~Acquisition of FTS International, Inc.~~

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”).

~~Consolidation of Flotek Industries, Inc.~~

~~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 ten 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 Flotek Convertible Notes and acquired an additional $10 million in principal amount of Flotek Convertible Notes in the PIPE Transaction. Our equity ownership in Flotek on a fully diluted basis as a result of this investment is approximately 17%. In addition, we received the right to designate up to two 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 Flotek Convertible Notes that will be convertible into Flotek common stock. The Flotek Supply Agreement Amendment and issuance to us of additional Flotek Convertible Notes were 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. Our equity ownership in Flotek on a fully diluted basis after the consummation of these transactions is approximately 43%, and we are permitted to designate two additional directors, or up to four directors to Flotek’s board of directors. Because of our power to appoint directors to the board of directors without a direct equity interest in Flotek, we determined that Flotek is a variable interest entity (“VIE”). We further determined that the Company is the primary beneficiary of the VIE, primarily due to our ability to appoint four of seven directors to Flotek’s board of

~~Table of Contents~~

directors. As a result, subsequent to May 17, 2022, we have accounted for this transaction as a business combination using the acquisition method of accounting and Flotek’s financial statements have been included in our consolidated financial statements from May 17, 2022. As we had no direct equity interest in Flotek during the three and six months ended September 30, 2022, we allocated 100% of Flotek’s loss to noncontrolling interests in our consolidated financial statements. See Note 14 – Acquisitions and investments in the notes to our consolidated financial statements for additional discussion related to the acquisition of Flotek.

~~Acquisition of SP Silica of Monahans, LLC~~

On July 25, 2022, the Company acquired 100% of the issued and outstanding membership interests of each of SP Silica of Monahans, LLC and SP Silica Sales, LLC (collectively “Monahans”), the West Texas subsidiaries of Signal Peak Silica, for a purchase price of $97.7 million in cash. This purchase price is subject to a working capital adjustment that will be finalized in the fourth quarter of 2022.

~~Acquisition of U.S. Well Services, Inc.~~

On November 1, 2022, the Company acquired U.S. Well Services, Inc. (NASDAQ: USWS) (“USWS”) in a stock-for-stock merger transaction pursuant to the Agreement and Plan of Merger (the “USWS Merger Agreement”), dated as of June 21, 2022, by and among the Company, USWS and Thunderclap Merger Sub I, Inc, a Delaware corporation and an indirect subsidiary of the Company (“Merger Sub”). Pursuant to the terms and conditions of the USWS Merger Agreement, on November 1, 2022, Merger Sub merged with and into USWS, with USWS surviving the merger as the surviving corporation and an indirect subsidiary of the Company. At the effective time of the merger, each share of USWS Class A Common Stock was converted automatically into the right to receive 0.3366 shares of our Class A Common Stock. As a result of this transaction, we issued an aggregate of approximately 12.9 million shares of our Class A Common Stock to holders of USWS Class A Common Stock, USWS Series A Preferred Stock, USWS Equity Linked Convertible Notes (as such terms are defined in the USWS Merger Agreement), and USWS equity awards. The equity issued, based on our Class A Common Stock 10-day VWAP as of October 31, 2022, was approximately $270 million. In addition, the Company used cash to retire approximately $170 million of USWS debt, leaving approximately $35 million of various forms of equipment related financing outstanding. Further, in connection with our acquisition of USWS, we borrowed approximately $164 million under the Amended ABL Credit Facility. See Note 19 – Subsequent events in the notes to our consolidated financial statements for additional discussion related to the acquisition of USWS and the Amended ABL Credit Facility, respectively.

~~Our Predecessor~~reorganized and ProFrac ~~Holding~~LLC became partially owned by ProFrac Corp.

~~Our predecessor consists of~~, a C-corporation. 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 information 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.

~~Overview~~

We are a growth-oriented, vertically integrated and innovation-driven energy services company providing hydraulic fracturing, completion services and other complementary products and services to leading upstream oil and gas companies engaged in the exploration and production (“E&P”) of North American unconventional oil and natural gas resources. Founded in 2016, ProFrac was built to be 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. We believe the technical 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 in the United States, where we have cultivated deep and longstanding customer relationships with some of those regions’ most active E&P companies. We operate in three 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 September 30, 2022, 31 were active.

~~Table of Contents~~

~~Overall trends and outlook~~

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. These difficult industry conditions allowed us to strengthen our industry leadership position by implementing targeted and forward-looking initiatives that enhance our equipment and provide greater supply chain control.

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 led to supply chain disruptions worldwide. Tariffs, access to employees, increased shipping rates and raw material shortages are impacting markets. Our supply chain is either vertically integrated or predominantly U.S. based, reducing our exposure to global disruptions 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 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 approximately ten engines per month from Tier II to Tier IV DGB and expect the pace of upgrades to increase in 2023. In November 2022 we fully deployed our first electric fleet and expect to have 12 electric fleets deployed by early 2023. 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.

~~How we generate revenue~~

We operate three business segments: stimulation services, manufacturing and proppant production. Business activities that are not separately reportable, which only included Flotek, are classified in the other category.

~~Stimulation services.~~ We own and operate 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 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 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 September 30, 2022, we operate facilities in Cisco, Aledo and Fort Worth, Texas, including an ISO 9001 2015 certified OEM

~~Table of Contents~~

manufacturing facility, in which we manufacture and refurbish many of the components used by our fleets, including pumps, fluid ends, power ends, flow iron 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 and nine months ended September 30, 2022 and 2021, intersegment revenues for the manufacturing segment were 95% and 91%, and 91% and 88%, respectively.

~~Proppant production.~~ We generate revenue by providing proppant to oilfield service providers and E&P companies. We own and operate the Kermit sand mine in west Texas and recently purchased and are in the process 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 contractual arrangements with our customers with fixed pricing. For the three and nine months ended September 30, 2022 and 2021, intersegment revenues for the proppant production segment were 56% and 46%, and 61% and 40%, respectively.

~~Costs of conducting our business~~

The principal costs of products and 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.

~~How we evaluate our operations~~

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

~~Note regarding Non-GAAP financial measures~~

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, (v) stock-based compensation, and (vi) other unusual or non-recurring charges, such as costs related to our initial public offering, non-recurring supply commitment charges, certain bad debt expense, loss on extinguishment of debt and gain on investments.

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

~~Table of Contents~~

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.

~~Factors affecting the comparability of our financial results~~

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

~~Recent Acquisitions~~

We have grown recently through strategic acquisitions and investments, including through our recently completed acquisitions of USWS, Monahans, FTSI, West Munger and our consolidation of 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.

~~Public company expenses~~

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.

~~Income taxes~~

~~ProFrac Holding~~ Corp. is a ~~corporation~~taxable entity and ~~will be subject~~is required 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~~account 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 immaterial for the three and nine months ended September 30, 2022.

~~Effective March 4, 2022 we account for~~its income taxes under the asset and liability ~~method. Under this~~ method for periods subsequent to May 17, 2022.

We record income taxes for interim periods based on an estimated annual effective tax rate. The estimated annual effective rate is recomputed on a quarterly basis and may fluctuate due to changes in forecasted annual operating income, positive or negative changes to the valuation allowance for net deferred tax assets and ~~liabilities are recognized~~changes to actual or forecasted permanent book to tax differences. Our effective tax rate 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 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.

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.

~~Table of Contents~~

.~~Results of operations~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(Dollars in thousands)

2022

2021

2022

2021

Revenues—Stimulation services

$
668,578

$
190,723

$
1,581,289

$
502,932

Revenues—Manufacturing

48,742

19,861

115,602

50,741

Revenues—Proppant production

24,642

6,399

54,581

19,769

Other

46,872

—

62,231

—

Eliminations

(92,104
)

(21,052
)

(182,149
)

(53,106
)
Total revenues

696,730

195,931

1,631,554

520,336

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

    Stimulation services

381,685

145,501

970,801

391,302

    Manufacturing

36,571

16,525

78,048

41,091

    Proppant production

13,199

3,189

26,742

9,890

    Other

48,263

—

67,371

—

Eliminations

(91,650
)

(21,052
)

(181,695
)

(53,106
)
Total cost of revenues, exclusive of depreciation, depletion, and amortization

388,068

144,163

961,267

389,177

Depreciation, depletion and amortization

68,758

35,241

177,038

105,606

Loss on disposal of assets, net

667

3,397

2,656

7,472

Selling, general and administrative

70,287

20,047

191,962

47,919

Interest expense, net

16,261

6,896

38,984

19,118

Loss on extinguishment of debt

242

—

17,337

—

Other expense (income)

928

92

(8,292
)

(148
)
Income tax (benefit) provision

8,157

170

13,021

(138
)
Net income (loss)

$
143,362

$
(14,075
)

$
237,581

$
(48,670
)
Less: net (income) loss attributable to ProFrac Predecessor

—

14,033

$
(79,867
)

$
48,509

Less: net loss attributable to noncontrolling interests

11,751

42

$
20,039

$
161

Less: net income attributable to redeemable noncontrolling interests

(110,183
)

—

(126,265
)

—

Net income attributable to ProFrac Holding Corp

$
44,930

$
—

$
51,488

$
—

Other data:

Adjusted EBITDA—Stimulation services

$
249,557

$
31,599

$
519,214

$
75,027

Adjusted EBITDA—Manufacturing

$
8,416

$
502

$
27,798

$
3,181

Adjusted EBITDA—Proppant production

$
9,198

$
2,417

$
29,657

$
8,069

Adjusted EBITDA—Other

$
(11,072
)

$
—

$
(18,526
)

$
—

Adjusted EBITDA (1)

$
256,099

$
34,518

$
558,143

$
86,277

Active fleets (2)

31

15

28

15

Baker Hughes Domestic Average Rig Count—Onshore (3)

692

452

643

407

Average oil price (per barrel) (4)

$
93.18

$
70.62

$
98.79

$
64.83

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

$
8.30

$
4.53

$
6.97

$
3.76

~~(1)~~

For definitions of the non-GAAP financial measures of Adjusted EBITDA, see “Note regarding Non-GAAP financial measures” above, and for a reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, see Note 18 – Segment Information, in the notes to our consolidated financial statements in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.

~~(2)~~

~~Active fleets is the average number of fleets operating in the period.~~

~~(3)~~

~~Average onshore U.S. rig count published by Baker Hughes.~~

~~(4)~~

~~Average West TX Intermediate Spot Price published by EIA.~~

~~(5)~~

~~Average Henry Hub Natural Gas Spot Price published by EIA.~~

~~Table of Contents~~

~~Three and~~ nine months ended September 30, ~~2022~~2023 was 20.5%, compared ~~to three and nine months ended September 30, 2021~~

~~Revenues~~

~~Revenues—Stimulation services.~~with Stimulation services revenues for the third quarter and first nine months of 2022 increased $477.9 million, or 251%, and $1,078.4 million, or 214%, respectively from the same periods in 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 revenue to this segment from the acquisition date.5.2

~~Revenues—Manufacturing.~~ Manufacturing revenues for the third quarter and first nine months of 2022 increased $28.9 million, or 145%, and $64.9 million, or 128%, respectively from the same periods in 2021.The increase was primarily attributable to an increase 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 for the third quarter and first nine months of 2022 increased $18.2 million, or 285%, and $34.8 million, or 176%, respectively from the same periods in 2021. The increase was primarily attributable to an increase in proppant production and pricing resulting from increased proppant demand primarily in the Permian basin. Additionally, Monahans contributed revenue to this segment from the acquisition date.

~~Revenues—Other.~~ ~~Other revenues for the third quarter and first nine months of 2022 were $46.9 million and $62.2 million, respectively, compared to zero~~% in the same ~~periods~~period in ~~2021.~~2022. The ~~increase was attributable to the consolidation of Flotek.~~

~~Total revenues~~. Total revenues for the third quarter and first nine months of 2022 increased $500.8 million and $1,111.2 million, respectively, from the same periods in 2021. The increase was primarily attributable to an increase in customer activity fordifference between our ~~stimulation services, and an increase in active fleets, pumping hours and pricing. Additionally, FTSI contributed from the acquisition date.~~

~~Operating costs and expenses~~

~~Cost of revenues, exclusive of depreciation, depletion, and amortization—Stimulation services~~. Stimulation services for the third quarter and first nine months of 2022 increased $236.2 million, or 162%, and $579.5 million, or 148%, respectively from the same periods in 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 cost to this segment from the acquisition date.

~~Cost of revenues, exclusive of depreciation, depletion, and amortization—Manufacturing~~. Manufacturing for the third quarter and first nine months of 2022 increased $20.0 million, or 121%, and $37.0 million, or 90%, respectively from the same periods in 2021. The increase was primarily attributable to an increase in demand for our products as well as an increase in the cost of raw materials.

~~Cost of revenues, exclusive of depreciation, depletion, and amortization—Proppant production~~. Proppant production for the third quarter and first nine months of 2022 increased $10.0 million, or 314%, and $16.8 million, or 170%, respectively from the same periods in 2021. The increase was primarily attributable to a litigation charge of $4.0 million and an increase in proppant production and increased cost of production. Additionally, Monahans contributed cost to this segment from the acquisition date.

~~Cost of revenues, exclusive of depreciation, depletion, and amortization—Other~~. Other for the third quarter and first nine months of 2022 was $48.3 million and $67.4 million, respectively, compared to zero in the same periods in 2021. The increase was attributable to the consolidation of Flotek.

~~Depreciation, depletion, and amortization~~. Depreciation, depletion, and amortization for the third quarter and first nine months of 2022 increased $33.5 million and $71.4 million, respectively from the same periods in 2021, The increase was primarily due to increased capital expenditure in the first nine months of 2022effective tax rate and the ~~depreciation~~federal statutory rate in 2022 related to the ~~assets acquired from FTSI acquisition.~~income that was earned within the financial statement consolidated group that is not subject to tax within the financial statement consolidated group.

~~Gain or Loss on disposal~~The conversion of ~~assets, net. For the third quarter and first nine months of 2022 we recorded~~our Class B common stock to Class A common stock (see Note 8) resulted in a shift from a net ~~loss on disposal of assets of $0.7 million and $2.7 million, respectively, compared with~~deferred tax asset position before the conversion to a net ~~loss on disposal~~deferred tax liability position after the conversion. As of ~~assets~~September 30, 2023, $74.4 million of ~~$3.4 million and $7.5 million, respectively, for the same periods in 2021.~~

~~Selling, general and administrative~~. Selling, general and administrative expenses for the third quarter and first nine months of 2022 increased $50.2 million, or 251%, and $144.0 million, or 301%, respectively from the same periods in 2021. The increaseour net deferred tax liability was primarily due to a stock-based compensation charge of $40.3 million primarily related to certain deemed contributions in the second quarter of 2022 and stock-based compensation expense of $12.9 million in the third quarter of 2022. The increase was also due to higher headcount and personnel costs, higher incentive compensation, increased non-labor costs associated with the ~~increased activity~~

~~Table~~conversion. The recognition of ~~Contents~~

~~levels,~~this net deferred tax liability was recorded as an equity transaction because the holders of Class B common stock and ~~acquisition related expenses. See Note 11 – Stock-based compensation in the notes to our consolidated financial statements for additional discussion related to the stock-based compensation charge.~~their affiliates control us through their Class A common stock holdings.

~~Interest expense, net. Interest expense, net for the third quarter and first nine months of 2022 increased $9.4 million and $19.9 million, respectively, from the same periods~~21

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(Amounts in 2021. The increase in interest expense, net was attributable to various debt transactions, which increased our debt balances, and higher average interest rates. See Note 7 – Indebtedness in the notes to our consolidated financial statements for additional discussion related to our debt.millions, except per share amounts, or where otherwise noted)

~~Loss on extinguishment of debt~~. In the third quarter and first nine months of 2022 we recognized a loss on extinguishment of debt of $0.2 million and $17.3 million respectively. As a result of the debt refinancing transactions in the first quarter of 2022 and debt repayments in the second quarter of 2022, we recognized a loss on extinguishment of debt of $8.8 million and $17.1 million for the second quarter and first six months of 2022, respectively.

~~Other income~~. For the third quarter and first nine months of 2022 we recognized noncash loss of $0.9 million and income of $8.3 million, respectively, primarily related to the change in fair value of the Convertible Notes related to our investment in BPC and Flotek.

~~Income tax benefit (provision).~~ Income tax expense for the third quarter and first nine months of 2022 was $8.2 million and $13.0 million, respectively, compared to an income tax expense of $0.2 and income tax benefit of $0.1 million for the same periods in 2021. The increase in the 2022 tax provision is due to the ProFrac Predecessor being partially owned by ProFrac Corp, a taxable entity, subsequent to the IPO.

~~Segment results~~

The performance of our segments is evaluated primarily on Segment Adjusted EBITDA. For a reconciliation of Segment Adjusted EBITDA to net income or loss, see Note 18 – Segment Information, in the notes to our consolidated financial statements in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.

~~Adjusted EBITDA—Stimulation services.~~ Adjusted EBITDA—Stimulation services for the third quarter and first nine months of 2022 increased $218.0 million and $444.2 million, respectively, from the same periods in 2021. The increase was primarily attributable to an increase in average active fleets and increased pricing for our services, partially offset by costs associated with the FTSI acquisition of $13.0 million.

~~Adjusted EBITDA—Manufacturing.~~ Adjusted EBITDA—Manufacturing for the third quarter and first nine months of 2022 increased $7.9 million and $24.6 million, respectively, from the same periods in 2021. The increase was primarily due to increased volume for our products used by our oil field services customers.

~~Adjusted EBITDA—Proppant production.~~ Adjusted EBITDA—Proppant production for the third quarter and first nine months of 2022 increased $6.8 million and $21.6 million, respectively, from the same periods in 2021. The increase was primarily attributable to an increase in proppant production and pricing resulting from increased proppant demand in the Permian basin. Additionally, Monahans contributed to this segment from the acquisition date.

~~Adjusted EBITDA—Other.~~ Adjusted EBITDA—Other for the third quarter and first nine months of 2022 decreased $11.1 million and $$18.5 million, respectively, from the same periods in 2021. The decrease was due to Flotek results.

~~Liquidity and capital resources~~

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.

Since our IPO, 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. We expect that our primary uses of capital will be to continue to fund our operations, support organic and strategic growth opportunities and satisfy future debt payments.

Due to our determination that Flotek is a VIE of which the Company is the primary beneficiary, Flotek’s financial statements have been included in our consolidated financial statements from May 17, 2022. However, we do not have the ability to access or use Flotek’s cash or liquidity in our operations and, accordingly, have excluded Flotek’s cash and other sources of liquidity from the

~~Table of Contents~~

following discussion of our liquidity and capital resources. See Note 14 – Acquisitions and investments in the notes to our consolidated financial statements for additional discussion related to the acquisition of Flotek.

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 below, we believe that we will be able to maintain sufficient liquidity to fund our planned acquisitions and capital expenditures, satisfy our obligations, and remain in compliance with our existing debt covenants through the next twelve months and beyond.

Tax Receivable Agreement

~~On May 17, 2022, in~~In connection with our ~~IPO, we~~initial public offering, ProFrac Corp. entered into a tax receivable agreement (the “TRA”) with certain ~~of the common unit~~ holders of limited liability company interests in ProFrac LLC (the “TRA Holders”). The TRA generally provides for ~~the~~ payment by usProFrac Corp. to ~~each~~the TRA ~~Holder~~Holders of ~~85%~~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 weProFrac Corp. actually ~~realize~~realizes (or ~~are~~is deemed to realize in certain circumstances) as a result of (i) certain increases in tax basis that occur as a result of ~~our~~ProFrac Corp.'s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s ~~common units of~~ ProFrac LLC units in connection with ~~our IPO~~the initial public offering or ~~pursuant to an~~the exercise of the Redemption Right (as defined in the TRA) or the Call Right (as defined in the TRA), and (ii) imputed interest deemed to be paid by usProFrac Corp. as a result of, and additional tax basis arising from, any payments ~~we make~~ProFrac Corp. makes under the TRA. ~~We depend on ProFrac LLC to make distributions to us in an amount sufficient to cover our obligations under the TRA.~~

Payments will generally be made under the TRA as ~~we realize~~ProFrac Corp. realizes actual cash tax savings from the tax benefits covered by the TRA. ~~However, if~~As a result of the conversion of all our Class B common stock to Class A common stock (see Note 8) and the tax effect of this transaction, we ~~experience~~recorded a ~~Change~~$58.9 million noncurrent TRA liability. The recognition of ~~Control (as defined~~the TRA liability was recorded as an equity transaction because the holders of Class B common stock and their affiliates control us through their Class A common stock holdings. As of September 30, 2023, the current liability for our TRA obligation was an additional $3.3 million.

NOTE 16. 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 business activities that are not separately reportable, which primarily includes Flotek for the periods presented.

We evaluate the performance of our segments based on Adjusted EBITDA. We define Adjusted EBITDA as our net income (loss) before (i) interest expense, net, (ii) income taxes, (iii) depreciation, depletion and amortization, (iv) (loss) gain on disposal of assets, net, (v) stock-based compensation, and (vi) other charges, such as reorganization costs and other costs related to our initial public offering, certain credit losses, gain (loss) on extinguishment of debt, unrealized gain (loss) on investments, acquisition and integration expenses, litigation expenses and accruals for legal contingencies, acquisition earnout adjustments, and severance charges.

ProFrac Holding Corp.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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

Summarized financial information for our reportable segments is as follows:


	Stimulation Services		Proppant Production		Manufacturing		Other			Eliminations			Total
Three months ended September 30, 2023:
Revenue
External customers	$	485.4	$	69.5	$	1.5	$	17.8		$	—		$	574.2
Intercompany		4.1		28.9		42.3		30.8			(106.1	)		—
Total Revenue	$	489.5	$	98.4	$	43.8	$	48.6		$	(106.1	)	$	574.2

Adjusted EBITDA	$	93.3	$	51.6	$	1.6	$	2.8		$	—		$	149.3

Three months ended September 30, 2022:
Revenue
External customers	$	668.3	$	10.9	$	2.3	$	15.2		$	—		$	696.7
Intercompany		0.3		13.8		46.4		31.7			(92.2	)		—
Total Revenue	$	668.6	$	24.7	$	48.7	$	46.9		$	(92.2	)	$	696.7

Adjusted EBITDA	$	249.5	$	9.2	$	4.5	$	(11.1	)	$	—		$	252.1

Nine months ended September 30, 2023:
Revenue
External customers	$	1,879.8	$	200.7	$	13.2	$	47.2		$	—		$	2,140.9
Intercompany		8.1		89.7		128.8		102.3			(328.9	)		—
Total Revenue	$	1,887.9	$	290.4	$	142.0	$	149.5		$	(328.9	)	$	2,140.9

Adjusted EBITDA	$	421.9	$	150.7	$	12.7	$	(6.4	)	$	—		$	578.9

Nine months ended September 30, 2022:
Revenue
External customers	$	1,578.9	$	21.0	$	10.4	$	21.2		$	—		$	1,631.5
Intercompany		2.4		33.6		105.2		41.0			(182.2	)		—
Total Revenue	$	1,581.3	$	54.6	$	115.6	$	62.2		$	(182.2	)	$	1,631.5

Adjusted EBITDA	$	519.3	$	29.6	$	17.4	$	(18.5	)	$	—		$	547.8

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 reconciles total Adjusted EBITDA to net income:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Adjusted EBITDA	$	149.3		$	252.1		$	578.9		$	547.8
Interest expense, net		(40.2	)		(16.3	)		(116.1	)		(39.0	)
Depreciation, depletion and amortization		(111.5	)		(69.1	)		(330.7	)		(178.1	)
Income tax benefit (expense)		6.7			(7.9	)		(9.6	)		(12.4	)
Gain (loss) on disposal of assets, net		1.3			(0.6	)		0.3			(2.6	)
(Loss) gain on extinguishment of debt		—			(0.2	)		4.1			(17.3	)
Acquisition earnout adjustment		—			—			6.6			—
Stock-based compensation		(2.3	)		(2.7	)		(7.6	)		(4.2	)
Stock-based compensation related to deemed contributions		(2.1	)		(10.2	)		(19.7	)		(49.1	)
Provision for credit losses, net of recoveries		—			—			(0.1	)		—
Severance charges		(1.1	)		—			(1.1	)		—
Acquisition and integration costs		(2.6	)		(5.8	)		(20.1	)		(22.9	)
Litigation expenses and accruals for legal contingencies		(10.3	)		—			(23.5	)		(4.0	)
Unrealized (loss) gain on investments, net		(5.1	)		—			(24.1	)		8.5
Net (loss) income	$	(17.9	)	$	139.3		$	37.3		$	226.7

Segments assets are comprised of the following:


	September 30, 2023			December 31, 2022
Total assets:
Stimulation Services	$	2,909.3		$	2,647.9
Proppant Production		1,126.7			477.1
Manufacturing		224.3			140.5
Other		182.5			193.7
Total segment assets		4,442.8			3,459.2
Eliminations		(1,220.7	)		(525.6	)
Total assets	$	3,222.1		$	2,933.6

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

The following discussion and analysis of our financial condition and results of operations should be in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included in this Quarterly Report, as well as our Annual Report.

We are a vertically integrated and innovation-driven energy services holding company providing hydraulic fracturing, proppant production, other completion services and other complementary products and services to leading upstream oil and natural gas companies engaged in the exploration and production ("E&P") of North American unconventional oil and natural gas resources.

We operate in three reportable business segments: stimulation services, proppant production and manufacturing. Our stimulation services segment owns and operates a fleet of mobile hydraulic fracturing units and other auxiliary equipment that generates revenue by providing stimulation services to our customers. Our proppant production segment provides proppant to oilfield service providers and 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, and fluid ends.

Before our corporate reorganization on May 17, 2022, our unaudited condensed consolidated financial statements presented herein consisted of the accounts of the Predecessors. Subsequent to May 17, 2022, our unaudited condensed consolidated financial statements presented herein include our accounts and those of our subsidiaries that are wholly-owned, controlled by us ~~under~~or a VIE where we are the ~~TRA (determined~~primary beneficiary.

We have been impacted by ~~applying~~reduced demand for our fleets in 2023 and we have reacted by lowering our active fleet count in June and again in August. We have taken a ~~discount rate). Any such payment is expected~~disciplined approach to capital allocation to align with our customers' activity levels this year; however, we believe we will be ~~substantial.~~increasing our fleet count at the beginning of 2024 and we are currently preparing for those fleet deployments.

~~Our 2022 Capital Budget~~On February 24, 2023, we acquired 100% of the issued and outstanding membership interests in Performance Proppants for an aggregate purchase price of $462.5 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; reduced by (iv) a post-closing working capital adjustment of $2.3 million finalized and paid to us.

~~Our 2022 capital expenditure budget is estimated~~In September 2023, the Company entered into a purchase agreement with THRC Holdings, LP and FARJO Holdings, LP, pursuant to bewhich the Company issued and sold 50,000 shares of Preferred Stock for gross proceeds of $50.0 million. THRC Holdings, LP and FARJO Holdings, LP are Wilks Parties. For more information, see Note 8 and Note 17 to the unaudited condensed consolidated financial statements.

Stimulation Services. Stimulation services revenues for the three months ended September 30, 2023 decreased by $179.1 million from the same period in 2022. This decrease was primarily attributable to a ~~range between $330~~decrease in average active fleets and lower fleet utilization. Stimulation services revenues for the nine months ended September 30, 2023 increased by $306.6 million from the same period in 2022. This increase was attributable to an increase in average active fleets and higher pricing in the first three months of 2023.

Proppant Production. Proppant production revenues for the three and nine months ended September 30, 2023 increased by $73.7 million and ~~$350~~$235.8 million, ~~excluding~~respectively, from the ~~impact~~same periods in 2022. The increases were primarily attributable to acquisitions which increased the number of ~~acquisitions,~~mines operated and the related tonnage mined. Revenue recognized for the amortization of acquired off-market contracts for the three and nine months ended September 30, 2023 was $16.4 and $41.0 million, respectively. During the three and nine months ended September 30, 2023, approximately 29% and 31%, respectively, of the Proppant Production segment's revenues were intercompany, compared with 56% and 62%, respectively, in the same periods last year.

Manufacturing. Manufacturing revenues for the three months ended September 30, 2023 decreased by $4.9 million from the same period in 2022 which was attributable to decreased intercompany demand for manufacturing products due to decreased activity levels for internal customers. Manufacturing revenues for the nine months ended September 30, 2023 increased by $26.4 million from the same period in 2022. The increase was primarily attributable to an increase in demand for manufacturing products due to increased activity levels for internal customers. During the three and ~~costs.~~nine months ended September 30, 2023, approximately 97% and 91%, respectively, of the Manufacturing segment's revenues were intercompany, compared with 95% and 91%, respectively, in the same periods last year.

Other. Other revenues for the three and nine months ended September 30, 2023 increased by $1.7 million and $87.3 million, respectively, from the same periods in 2022. The increase for the first nine months of 2023 was partially attributable to ~~our capital budget~~the consolidation of Flotek beginning in May 2022. During the three and nine months ended September 30, 2023, approximately 63% and 68%, respectively, of other revenue was intercompany, compared with 68% and 66%, respectively, in the same periods last year. Flotek recorded $10.0 million of intercompany revenue related to contract shortfalls because the stimulation services segment did not purchase the minimum contractual commitment of chemistry products from Flotek.

Stimulation Services. Stimulation services cost of revenues for the three months ended September 30, 2023 decreased by $19.9 million from the same period in 2022. Stimulation services cost of revenues for the nine months ended September 30, 2023 increased by $364.9 million from the same period in 2022. These increases were primarily ~~represents~~attributable to an ~~acceleration~~increase in average active fleets and increased volume and cost of ~~a number~~fracturing materials. Cost of growth-related initiatives to improve our pumping hours and our profit generating potential. We continued accelerating our engine upgrade program as the year progressed converting more Tier 2 engines to Tier 4 DGB engines and expect the full year costrevenues for this ~~initiative to be approximately $50 million. We expect~~segment included an intercompany supply commitment charge of $10.0 million because the ~~construction~~stimulation services segment did not purchase the minimum contractual commitment of ~~our~~chemistry products from Flotek.

Proppant Production. Proppant production cost of revenues for the three ~~electric fleets to cost approximately $75~~and nine months ended September 30, 2023 increased by $29.4 million and $101.5 million, respectively, from the ~~construction of our Lamesa sand plant~~same periods in 2022. The increase was primarily attributable to ~~cost approximately $45 million. We are also investing approximately $30 million in reducing~~acquisitions which increased the number of mines operated and the related tonnage mined.

Manufacturing. Manufacturing cost of revenues for the three and nine months ended September 30, 2023 decreased by $9.6 million and increased by $29.2 million, respectively, from the same periods in 2022. These changes were primarily attributable to changes in demand for these products.

Other. Other cost of revenues for the three and nine months ended September 30, 2023 decreased by $8.9 million and increased by $66.3 million, respectively, from the same periods in 2022. The increase for the first nine months of 2023 was partially attributable to the consolidation of Flotek beginning in May 2022.

Selling, general and administrative expenses, excluding stock-based compensation for the three and nine months ended September 30, 2023 increased by $5.0 million and $66.2 million, respectively, from the same periods in 2022. The increase for the first nine months of 2023 was primarily due to higher labor and non-labor costs associated with our acquisitions. Subsequent to June 30, 2023, we adjusted our cost structure to right size our organization, through the acceleration of acquisition synergies and headcount reductions.

Depreciation, depletion, and amortization for the three and nine months ended September 30, 2023 and 2022 increased by $42.4 million and $152.6 million, respectively, from the same periods in 2022. The increases were primarily attributable to the impact of the acquisitions made subsequent to September 30, 2022 and increased capital expenditures in recent periods.

Acquisition and integration costs primarily relate to professional fees, severance and other costs associated with our acquisition and integration activities. These costs for the three and nine months ended September 30, 2023 and 2022 decreased by $3.2 million and $2.8 million, respectively.

Other operating expense, net for the three and nine months ended September 30, 2023 were $10.1 million and $17.8 million, respectively, compared with other operating expense, net of $0.6 million and $6.6 million for the three and nine months ended September 30, 2022, respectively. The increases were primarily attributable to $10.3 million and $23.5 million of legal costs incurred in connection with a patent infringement lawsuit against Halliburton (see Note 7), for the three and nine months ended September 30, 2023, respectively. These increased costs were partially offset by a non-cash gain of $6.6 million related to the change in fair value of an acquisition earnout during the nine months ended September 30, 2023.

Interest expense, net of interest income, for the three and nine months ended September 30, 2023 was $40.2 million and $116.1 million, respectively, compared with $16.3 million and $39.0 million, respectively, in the same periods in 2022. These increases were due to higher average debt balances and higher average interest rates for our term loan facility and ABL credit facility in both the three and nine months ended September 30, 2023.

In the nine months ended September 30, 2023, we recognized a net gain of $4.1 million, which was primarily due to the forgiveness of Flotek's Paycheck Protection Program loan. In the three and nine months ended September 30, 2022, we recognized $0.2 million and $17.3 million loss on extinguishment of debt as a result of debt refinancing transactions and debt repayments.

For the three and nine months ended September 30, 2023 we recognized expense of $4.9 million and income of $22.0 million, respectively. These amounts were due to non-cash losses of $5.1 million and $24.1 million, respectively, primarily related to the change in fair value of our Munger make-whole provision and a decrease in the fair value of our investment in BPC. In May 2023, the expiration date of the Munger make-whole provision was extended until May 17, 2024. See our Annual Report for more information on the Munger make-whole provision.

For the three and nine months ended September 30, 2022, we recognized expense of $1.0 million and income of $8.2 million, respectively. The income for the nine months ended September 30, 2023, primarily related to the change in fair values of our investment in BPC and our investment in Flotek's convertible notes prior to May 2022.

Our effective tax rate for the nine months ended September 30, 2023 was 20.5%, compared with 5.2% in the same period in 2022. The difference between our effective tax rate and the federal statutory rate in 2022 related to the income that was earned within the financial statement consolidated group that was not subject to tax within the financial statement consolidated group.

We have excluded cash and other sources of liquidity related to our VIE from the following discussion of our liquidity and capital resources as we do not have the ability to access or use these items in our operations. As of September 30, 2023, there is substantial doubt about our VIE's ability to continue as a going concern. We believe that this substantial doubt does not materially affect our business, financial condition or results of 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. In the three months ended September 30, 2023, the Company raised $50.0 million from the sale of its Series A preferred stock to THRC Holdings and FARJO Holdings. The Company presently does not expect any further funds from these sources. THRC Holdings and FARJO Holdings are Wilks Parties. See Note 17 to the unaudited condensed consolidated financial statements.

At September 30, 2023, we had $20.6 million of cash and cash equivalents, excluding Flotek, and $116.0 million available for borrowings under our ABL credit facility, resulting in a total liquidity position of $136.6 million. Refer to Note 6 in the notes to our unaudited condensed consolidated financial statements contained herein and our Annual Report for more information regarding our ABL credit facility.

We believe that our cash and cash equivalents, cash provided by operations and the availability under our ABL credit facility will be sufficient to fund our capital expenditures and satisfy our financial obligations for at least the next 12 months. Our management regularly evaluates our debt obligations and, where necessary, alters our strategy to ensure ongoing compliance with our existing debt covenants, including most recently taking steps designed to ensure ongoing compliance with our leverage ratio. There can be no assurance that our management will be successful in these efforts.

Operating Activities. The $254.2 million increase in net cash provided by operating activities was due to increased cash provided by the net change in operating assets and liabilities, which was partially offset by lower earnings after adjustments for non-cash reconciling items. The increased cash provided by the net change in operating assets and liabilities was primarily due to a decrease in our accounts receivable balance as of September 30, 2023.

Investing Activities. The $62.9 million increase in net cash used in investing activities was primarily due to an increase in cash paid for acquisitions, partially offset by a decrease in cash paid for other investments.

Financing Activities. The $264.7 million decrease in net cash provided by financing activities was primarily due to a decrease in net proceeds from the issuance of common stock, a decrease in net borrowings of long-term debt and revolving credit agreements, offset by and an increase in net proceeds from the issuance of Preferred Stock.

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

As of September 30, 2023, we have $1.1 billion in aggregate principal amount of long-term debt outstanding, with $122.8 million coming due over the next twelve months. For additional information about our long-term debt, please see Note 6 of this Quarterly Report and Item 8 "Financial Statements and Supplementary Data" in our Annual Report.

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

During the nine months ended September 30, 2023, our capital expenditures were $233.9 million, consisting of maintenance capital expenditures for our fleet, building four electric-powered hydraulic fracturing fleets, ~~waiting~~and engine upgrades to convert legacy pumps to next generation technology. During the second quarter, we decided to reduce capital expenditures for ~~maintenance~~the remainder of the year to more closely align with our customers’ activity levels and ~~establishing a robust swing program~~our reduced number of active fleets as well as to ~~allow for equipment~~maintain target return thresholds on capital investments. We now estimate capital expenditures in 2023 will range from $280 million to ~~be returned to service quicker and ensure our equipment continues to pump more hours per month.~~$290 million.

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. ~~We believe we will be able to fund our 2022 capital program from cash flows from operations.~~

Our growth strategy includes potential acquisitions and other strategic ~~transactions, and from~~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 ~~of ProFrac,~~ 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 ~~the ProFrac Board.~~our board of directors. We cannot guarantee that any such potential transaction would be completed on acceptable terms, if at all.

Our working capital was $290.9 million and $5.0 million as of September 30, 2022, and December 31, 2021, respectively. The $285.9 million increase in working capital was primarily due to higher activity levels in the first nine months of 2022.

~~Cash~~We have historically funded our acquisitions through issuances of our equity securities and ~~Cash Flows~~

~~The following table sets forth the historical cash flows for the nine months ended September 30, 2022~~borrowings under our term loan facility or ABL credit facility. For any future acquisitions, we may utilize borrowings under our ABL credit facility and ~~2021:~~

~~Net cash provided by operating activities was $256.7 million and $37.7 million for the nine months ended September 30, 2022 and 2021, respectively. The increase was primarily due~~various financing sources available to ~~higher activity levels and profitability, offset by working capital increases in the first nine months of 2022.~~

Net cash used in investing activities was $629.8 million and $55.5 million for the nine months ended September 30, 2022 and 2021, respectively. The increase was primarily due to $279.0 million of cash paid for the FTSI acquisition, $97.7 million cash paid for the Monahans acquisition, our $46.0 million investment in BPC, and higher capital expenditures of $168.9 million related to dual fuel engine upgrades, ESC installations, and 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 $434.5 million and $31.3 million for the nine months ended September 30, 2022, and 2021, respectively. The increase in cash provided by financing activities was due to proceeds fromus, including the issuance of ~~long-term~~equity or debt ~~associated with refinancing transactions related~~securities through public offerings or private placements, to ~~the FTSI acquisition, proceeds from upsizing the New ABL Credit Facility (as described below), and proceeds from our IPO. These proceeds were offset by payments against our various~~fund these acquisitions. Our ability to complete future offerings of equity or debt ~~instruments.~~

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 initially provided for an asset-based revolving credit facility with a borrowing base and lender commitments of $100.0 million. On April 8, 2022, the New ABL Credit Facility was amended to increase the borrowing base and lender commitments to $200.0 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 September 30, 2022, the maximum availability under the New ABL Credit Facility was the aggregate lender commitments of $200.0 million with no borrowings outstanding and $10.5 million of letters of credit outstanding, resulting in approximately $189.5 million of remaining availability. The 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).

On July 25, 2022, the New ABL Credit Facility was amended to add an uncommitted $100.0 million incremental facility (the “Incremental Facility”), under the terms of which existing lenders can make additional loans (in their sole discretion) under, or new lenders can join, the Incremental Facility and increase the potential size of the New ABL Credit Facility from $200 million to $300 million, subject to satisfaction of certain conditions. All other terms and conditions of the New ABL Credit Facility remained substantially unchanged.

~~Borrowings under the New ABL Credit Facility accrue interest based on a three-tier pricing grid tied to average historical availability,~~securities and the ~~ABL Borrower may elect for loans to be based~~timing of these offerings will depend on either an Adjusted Term SOFR or a base rate, plus the applicable margin. The interest rate under the New ABL Credit Facility for (a) Adjusted Term SOFR is the applicable margin plus the fluctuating pervarious factors including prevailing market conditions and our financial condition.

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 the New ABL Credit Facility.ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 7.00% as of September 30, 2022.

The 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) $13.3 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) $13.3 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).

~~We are required by the New ABL Credit Facility to maintain minimum liquidity of $6.7 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) $13.3 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 the New ABL Credit Facility to maintain a springing Fixed Charge Coverage Ratio (as defined in the New ABL Credit Facility) of at least 1.0 to 1.0, which is tested quarterly during such period. The Company 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 September 30, 2022.

On November 1, 2022, the New ABL Credit Facility was amended to (i) increase the aggregate Maximum Revolver Amount from $200.0 million to $280.0 million and (ii) increase the Incremental Facility to $120.0 million and thereby increase the potential size of the New ABL Credit Facility from $280.0 million to $400.0 million, subject to the satisfaction of certain conditions. See Note 19 – Subsequent events in the notes to our condensed consolidated financial statements for additional discussion. On November 1, 2022, we borrowed approximately $164 million under the Amended ABL Credit Facility in connection with our acquisition on USWS.

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, providing for a term loan facility in an aggregate amount of $300 million. On July 25, 2022, the New Term Loan Facility was amended to increase the size of the New Term Loan Facility by $150.0 million with an uncommitted option to obtain commitments for a potential additional $100.0 million of delayed draw loans before the earlier to occur of (i) the consummation of the Merger and (ii) March 31, 2023. The maturity date of the New Term Loan Facility remains the same at March 4, 2025.The Company used a portion of the proceeds from the increased New Term Loan Facility to fund the acquisition of Monahans and anticipates using the remainder of the proceeds and operating cash to facilitate the Merger, pay outstanding debt under the New ABL Credit Facility and/or for other general corporate purposes. As of September 30, 2022, the Term Loan Borrower had approximately $525.7 million outstanding under the New Term Loan Credit Facility. The New Term Loan Credit Facility matures on March 4, 2025.

either Adjusted Term SOFR or Base Rate, plus the applicable margin. The interest rate on the 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 7.25% to 8.00% and (b) Base Rate Loans ranges from 6.25% 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 11.10% as of September 30, 2022.

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.

~~The 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, the New Term Loan Credit Facility is subject to a quarterly mandatory prepayment beginning for the calendar quarter ending on December 31, 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. The New Term Loan Credit Facility is subject to customary mandatory prepayments, subject in some cases 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.

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

The 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.

The 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. 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 September 30, 2022.

On November 1, 2022, the New Term Loan Credit Facility was amended in connection with the Company’s acquisition of USWS. See Note 19 – Subsequent events in the notes our consolidated financial statements for additional discussion.

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 September 30, 2022, ProFrac II LLC had $19.1 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 September 30, 2022:~~

During the nine months ended September 30, 2022 and 2021, our capital expenditures were $239.5 million and $70.6 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 September 30, 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~~utilize financial instruments for trading or other speculative purposes, nor do we utilize leveraged financial instruments. Our exposure to other market risks has not 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 IPO 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.

We evaluate our ownership, contractual and other interest in entities to determine if they are VIEs. 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.

changed since December 31, 2022. For additional information, see Item ~~3. Quantitative~~7A. "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 materialsRisk" 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 and our New ABL Credit Facility. The Company also has fixed rate debt but does 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 September 30, 2022 would have resulted in an annual increase in interest expense of approximately $5.3 million.ITEM 4. CONTROLS AND PROCEDURES

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.~~ 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 September 30, 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 September 30, 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 September 30, 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 ~~17 – 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 IPO Prospectus. Except for the risk factors noted below, thereThere have been no material changes toin the significant risk factors ~~disclosed under the heading “Risk Factors”~~that may affect our business, results of operations or liquidity as described in ~~the IPO Prospectus, the factors described under the heading “Risk Factors”~~Item 1A "Risk Factors" in our ~~prospectus, dated August 8, 2022, filed~~Annual Report.

In September 2023, the Company entered into a purchase agreement with ~~the SEC~~THRC Holdings, LP and FARJO Holdings, LP, pursuant to Rule 424(b) under the Securities Act on August 8, 2022, in connection with the resale of our Class A common stock by the selling shareholders named therein, the factors described under the heading “Risk Factors” in our quarterly report on Form 10-Q for the quarter ended June 30, 2022, and the factors described under the heading “Risk Factors” in our proxy statement/information statement/prospectus in the registration statement on Form S-4 filed with the SEC on August 30, 2022, as amended by Amendment No. 1 to such registration statement filed with the SEC on September 22, 2022, relating to our acquisition of USWS.

Our financial results may be materially adversely affected by the inclusion of Flotek’s financial statements in our consolidated financial statements, and we do not have the benefit of Flotek’s cash or liquidity.

~~Due to our determination that Flotek is a VIE of~~ which the Company is the primary beneficiary, Flotek’s financial statements have been included in our consolidated financial statements from May 17, 2022. Consequently, our financial results may be materially adversely affected if Flotek reports poor or worsened financial results. In addition, we do not have the ability to access or deploy Flotek’s cash or liquidity in our operations, which may limit our ability to mitigate the impact of the inclusion of Flotek’s financial statements in our consolidated financial statements.

~~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 we~~ issued and sold ~~an aggregate of 18,228,153~~50,000 shares of ~~our Class A Common~~Preferred Stock ~~including the partial exercise~~for gross proceeds of ~~the underwriters’ over-allotment option to purchase additional shares, at a price~~$50.0 million. THRC Holdings, LP and FARJO Holdings, LP are Wilks Parties. For more information, see Note 8 to the public of $18.00 per share. J.P. Morgan Securities LLC, Piper Sandler & Co. and Morgan Stanley & Co. LLC acted as representatives of the underwriters. The IPO closed on May 17, 2022. The IPO and exercise of the over-allotment option generated combined net proceeds of approximately $301.7 million, after deducting underwriting discounts and commissions of $15.2 million and offering expenses of $9.0 million. With 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) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliatesunaudited condensed consolidated financial statements.

The Company used $72.9 million of the net proceeds from the IPO to redeem the membership ownership interests from the then-existing owners of THRC FTSI Related Equity (as described in Note 14 – 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 million of the outstanding borrowings under the New Term Loan Credit Facility, (ii) to fully pay the $22.0 million of the outstanding borrowings of the Backstop Note (iii) pay down $22.0 million of the outstanding borrowings of the Closing Date Note and (iv) pay down $20.8 million of the outstanding borrowings of the Equify Bridge Note. The Company used the balance of the remaining proceeds for general corporate uses and additional repayment of debt.ITEM 3. DEFAULTS UPON SENIOR SECURITIES

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. The securities issued to the sellers of Munger Ranch were offered in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act. The Company relied on this exemption from registration based on part on representations made by each of the sellers of Munger Ranch, including that each such seller is an “accredited investor” as defined in Rule 501(a) under the Securities Act.ITEM 4. MINE SAFETY DISCLOSURES

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.

During the third quarter of 2023, none of our directors or executive officers adopted Rule 10b5-1 trading plans and none of our directors or executive officers terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item ~~5. Other Information.~~408(c) of Regulation S-K).

~~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 November 9, 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, par value $0.01 per share	ACDC	The Nasdaq Global Select Market
Warrants ~~each 124.777 warrants exercisable for one share of~~to purchase 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
	Condensed Consolidated Balance Sheets	35
	Condensed Consolidated Statements of Operations	56
	Condensed Consolidated Statements of Comprehensive (Loss)Income ~~(Loss)~~	67
	Condensed Consolidated Statements of Changes in Equity	78
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4130
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5536
Item 4.	Controls and Procedures	5636
PART ~~II.~~			~~OTHER INFORMATION~~II
Item 1.	Legal Proceedings	5737
Item 1A.	Risk Factors	5737
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5737
Item 3.	Defaults Upon Senior Securities	5837
Item 4.	Mine Safety Disclosures	5837
Item 5.	Other Information	5837
Item 6.	Exhibits	5938
~~Signatures~~SIGNATURES		6139


	September 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	25.1		$	35.1
Accounts receivable, net		332.3			535.5
Accounts receivable — related party, net		6.5			2.1
Inventories		271.9			249.5
Prepaid expenses and other current assets		42.8			43.2
Total current assets		678.6			865.4
Property, plant, and equipment, net		1,845.4			1,396.4
Operating lease right-of-use assets, net		94.1			112.9
Goodwill		323.2			240.5
Intangible assets, net		182.3			203.1
Investments ($37.8 and $53.6 at fair value, respectively)		42.8			58.6
Deferred tax assets		—			0.4
Other assets		55.7			56.3
Total assets	$	3,222.1		$	2,933.6

LIABILITIES, TEMPORARY EQUITY, AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	341.1		$	339.4
Accounts payable — related party		17.5			24.0
Accrued expenses		113.0			115.4
Current portion of long-term debt		122.8			127.6
Current portion of operating lease liabilities		31.0			36.0
Other current liabilities		70.8			25.7
Other current liabilities — related party		7.4			—
Total current liabilities		703.6			668.1
Long-term debt		902.1			735.0
Long-term debt — related party		32.2			62.8
Operating lease liabilities		67.8			81.0
Deferred tax liabilities		79.4			—
Other liabilities		75.2			36.0
Total liabilities		1,860.3			1,582.9

Temporary equity:
Series A preferred stock, $0.01 par value, 50 thousand shares authorized, 50 thousand and zero shares issued and outstanding, respectively		57.5			—
Redeemable noncontrolling interest		—			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, 159.4 and 53.9 shares issued and outstanding, respectively		1.5			0.5
Class B common stock, $0.01 par value, 400.0 shares authorized, zero and 104.2 shares issued and outstanding, respectively		—			1.0
Additional paid-in capital		1,171.3			—
Retained earnings (accumulated deficit)		77.5			(1,185.9	)
Accumulated other comprehensive loss		(0.2	)		—
Total stockholders' equity (deficit) attributable to ProFrac Holding Corp.		1,250.1			(1,184.4	)
Noncontrolling interests		54.2			72.2
Total stockholders' equity (deficit)		1,304.3			(1,112.2	)
Total liabilities, temporary equity, and stockholders' equity (deficit)	$	3,222.1		$	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)	September 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	64,678		$	5,376
Accounts receivable, net		501,337			161,632
Accounts receivable—related party		4,510			4,515
Prepaid expenses, and other current assets		25,065			6,213
Assets held for sale		1,805			—
Inventories		238,794			73,942
Total current assets		836,189			251,678
Property, plant, and equipment		1,454,010			827,865
Accumulated depreciation and depletion		(632,801	)		(464,178	)
Property, plant, and equipment, net		821,209			363,687
Operating lease right-of-use assets		78,569			—
Deferred tax assets		2,033			—
Investments		56,753			4,244
Intangible assets, net		34,930			27,816
Goodwill		97,573			—
Other assets		52,028			17,145
Total assets	$	1,979,284		$	664,570


	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 for acquisitions		0.7		—		—			—			9.6			—			—			—			9.6
Stock-based compensation		—		—		—			—			0.9			—			—			0.1			1.0
Stock-based compensation related to deemed contribution		—		—		—			—			3.5			—			—			—			3.5
Net income (loss)		—		—		—			—			—			22.0			—			(4.2	)		17.8
Foreign currency translation		—		—		—			—			—			—			0.1			0.1			0.2
Flotek common stock issued to satisfy convertible notes held by third parties		—		—		—			—			—			—			—			12.7			12.7
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
Stock-based compensation		—		—		—			—			2.7			—			—			(0.4	)		2.3
Stock-based compensation related to deemed contribution		—		—		—			—			6.8			—			—			—			6.8
Class A shares issued for vested equity awards		0.6		—																				—
Tax withholding related to net share settlement of equity awards		—		—		—			—			(0.8	)		—			—			—			(0.8	)
Net loss		—		—		—			—			—			(2.9	)					(1.5	)		(4.4	)
Foreign currency translation		—		—		—			—			—			—			(0.3	)		(0.1	)		(0.4	)
Flotek common stock issued to satisfy convertible notes held by ProFrac Holdings Corp.		—		—		—			—			31.6			—			—			(31.6	)		—
Adjustment of redeemable noncontrolling interest to redemption amount		—		—		—			—			(57.9	)		—			—			—			(57.9	)
Conversion of Class B common stock to Class A common stock		104.2		1.0		(104.2	)		(1.0	)		1,313.3			—			—			—			1,313.3
Additional paid-in capital related to tax receivable agreement		—		—		—			—			(58.9	)		—			—			—			(58.9	)
Deferred taxes related to conversion of Class B common stock to Class A common stock		—		—		—			—			(74.7	)		—			—						(74.7	)
Balance, June 30, 2023		159.4		1.5		—			—			1,166.9			110.6			(0.2	)		47.3			1,326.1
Net (loss) income		-		-		-			-			-			(24.5	)		-			6.6			(17.9	)
Stock-based compensation		-		-		-			-			2.0			-			-			0.3			2.3
Stock-based compensation related to deemed contribution		-		-		-			-			2.1			-			-			-			2.1
Deferred taxes related to Class B share conversion to Class A shares		-		-		-			-			0.3			-			-			-			0.3
Adjustment of Series A preferred stock to redemption amount		-		-		-			-			-			(8.6	)		-			-			(8.6	)
Balance, September 30, 2023		159.4	$	1.5		—		$	—		$	1,171.3		$	77.5		$	(0.2	)	$	54.2		$	1,304.3


	Members'			Class A Common Stock				Class B Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Noncontrolling			Total Stockholders' Equity
	Equity			Shares		Amount		Shares		Amount		Capital			Deficit			Income			Interests			(Deficit)
Balance, December 31, 2021	$	147.0		$	—	$	—	$	—	$	—	$	—		$	—		$	0.1		$	1.0		$	148.1
Member contributions		5.0			—		—		—		—		—			—			—			—			5.0
Deemed distribution		(3.7	)		—		—		—		—		—			—			—			—			(3.7	)
THRC Holdings related equity		72.9			—		—		—		—		—			—			—			—			72.9
Net income		19.6			—		—		—		—		—			—			—			0.4			20.0
Foreign currency translation		—			—		—		—		—		—			—			(0.1	)		—			(0.1	)
Balance, March 31, 2022		240.8			—		—		—		—		—			—			—			1.4			242.2
Net income prior to corporate reorganization		54.0			—		—		—		—		—			—			—			—			54.0
Issuance of Class A shares in IPO		—			18.2		0.2		—		—		227.5			—			—			—			227.7
Issuance of Class B shares		—			—		—		101.1		1.0		—			—			—			—			1.0
Effect of corporate reorganization and reclassification to redeemable noncontrolling interest		(294.8	)		20.9		0.2		—		—		(82.9	)		—			—			—			(377.5	)
Adjustment of redeemable noncontrolling interest to redemption amount at IPO		—			—		—		—		—		(146.4	)		(1,291.9	)		—			—			(1,438.3	)
Class A shares issued to settle asset purchase		—			2.1		—		—		—		16.7			—			—			—			16.7
Net income (loss) after corporate reorganization		—			—		—		—		—		—			6.6			—			(8.7	)		(2.1	)
Recognition of Flotek noncontrolling interest		—			—		—		—		—		—			—			—			99.6			99.6
Stock-based compensation		—			—		—		—		—		0.3			—			—			0.5			0.8
Stock-based compensation related to deemed contribution		—			—		—		—		—		11.3			—			—			—			11.3
Additional paid-in capital related to tax receivable agreement		—			—		—		—		—		0.6			—			—			—			0.6
Adjustment of redeemable noncontrolling interest to redemption amount		—			—		—		—		—		(27.1	)		(132.3	)		—			—			(159.4	)
Balance, June 30, 2022		—			41.2		0.4		101.1		1.0		—			(1,417.6	)		—			92.8			(1,323.4	)
Net income		-			-		-		-		-		-			44.0			-			(11.8	)		32.2
Stock-based compensation		-			-		-		-		-		0.6			-			-			0.7			1.3
Stock-based compensation related to deemed contribution		-			-		-		-		-		3.0			-			-			-			3.0
Foreign currency translation		-			-		-		-		-		-			-			-			0.1			0.1
Other		-			-		-		-		-		0.1			-			-			-			0.1
Adjustment of redeemable noncontrolling interest to redemption amount		-			-		-		-		-		(3.7	)		494.3			-			-			490.6
Balance, September 30, 2022	$	-			41.2	$	0.4		101.1	$	1.0	$	-		$	(879.3	)	$	-		$	81.8		$	(796.1	)

	Nine Months Ended September 30,
(In thousands)	2022			2021
Cash flows from operating activities:
Net income (loss)	$	237,581		$	(48,670	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation, depletion and amortization		177,038			105,606
Stock-based compensation		53,230			—
Loss on disposal of assets, net		2,656			7,472
Non-cash loss on extinguishment of debt		10,472			—
Amortization of debt issuance costs		4,683			1,847
Bad debt expense, net of recoveries		5			2,562
Deferred tax expense		2,357			—
Unrealized gain on investments, net		(8,526	)		—
Changes in operating assets and liabilities:
Accounts receivable		(220,467	)		(31,396	)
Inventories		(107,150	)		(14,525	)
Prepaid expenses and other assets		(18,551	)		(1,223	)
Accounts payable		6,332			4,823
Accrued expenses		111,233			11,511
Deferred revenues and other liabilities		5,770			(317	)
Net cash provided by operating activities		256,663			37,690
Cash flows from investing activities:
Investment in property, plant & equipment		(239,477	)		(70,585	)
Proceeds from sale of assets		46,687			17,487
Acquisitions, net of cash acquired		(354,927	)		(2,430	)
Investment in preferred shares of BPC		(47,202	)		—
Initial investment in Flotek		(10,000	)		—
Other investments		(24,839	)		—
Net cash used in investing activities		(629,758	)		(55,528	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		818,758			160,230
Repayments of long-term debt		(515,780	)		(138,887	)
Borrowings from revolving credit agreements		253,683			29,500
Repayments to revolving credit agreements		(322,683	)		(18,500	)
Payment of debt issuance costs		(33,260	)		(1,090	)
Member contribution		5,000			—
Proceeds from issuance of common stock		329,118			—
Payment of THRC related equity		(72,931	)		—
Payment of common stock issuance costs		(27,444	)		—
Net cash provided by financing activities		434,461			31,253
Net increase in cash, cash equivalents, and restricted cash		61,366			13,415
Cash, cash equivalents, and restricted cash beginning of period		5,376			2,952
Cash, cash equivalents, and restricted cash end of period	$	66,742		$	16,367
Supplemental cash flow information:
Cash payments for interest	$	22,239		$	17,311
Cash payments for taxes	$	459		$	110
Non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	26,478		$	7,837
Operating lease liabilities incurred from obtaining right-of-use-assets	$	45,412		$	—

	Redeemable Noncontrolling Interests
(in thousands)	2022
Balance as of January 1, 2022	$	—
Effect of corporate reorganization and reclassification to redeemable noncontrolling interest		382,050
Adjustment of redeemable noncontrolling interest to redemption amount at IPO (1)		1,438,348
Class A Common Stock issued to settle asset purchase		21,361
Net income after corporate reorganization		16,082
Stock-based compensation		660
Stock-based compensation related to deemed contribution		27,597
Accrued distribution related to income taxes		(15,644	)
Adjustment of redeemable noncontrolling interest to redemption amount (2)		154,233
Balance as of June 30, 2022	$	2,024,687
Net income		110,183
Stock-based compensation		1,465
Stock-based compensation related to deemed contribution		7,251
Foreign currency translation adjustments		110
Change in accrued distribution related to income taxes		(5,470	)
Adjustment of redeemable noncontrolling interest to redemption amount (3)		(493,800	)
Balance as of September 30, 2022	$	1,644,426

	September 30, 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		14,644		(2,214	)		12,430		5,905		(589	)		5,316
Intangible assets, net	$	37,144	$	(2,214	)	$	34,930	$	28,405	$	(589	)	$	27,816

	September 30,			December 31,
(In thousands)	2022			2021
Old ABL Credit Facility	$	—		$	69,000
Old Term Loan		—			171,355
First Financial Loan		19,080			30,000
New ABL Credit Facility		—			—
New Term Loan Credit Facility		525,726			—
Best Flow Credit Facility(1)		—			7,101
Best Flow Note(1)		—			10,827
Alpine Promissory Note(1)		—			16,717
Flotek Convertible Notes		12,739			—
Other		10,459			1,695
Total gross debt		568,004			306,695
Less: unamortized debt issuance costs		(23,235	)		(5,129	)
Less: current portion of long-term debt		(60,541	)		(31,793	)
Total long-term debt	$	484,228		$	269,773

	2022		2023		2024		2025		2026		Thereafter		Total
First Financial loan	$	3,789	$	15,291	$	—	$	—	$	—	$	—	$	19,080
New ABL Credit Facility		—		—		—		—		—		—		—
New Term Loan Credit Facility		6,571		26,286		26,286		466,583		—		—		525,726
Flotek Convertible Notes		—		12,739		—		—		—		—		12,739
Other.		4,506		3,038		1,907		543		79		386		10,459
Total	$	14,866	$	57,354	$	28,193	$	467,126	$	79	$	386	$	568,004

	Nine Months Ended September 30,
(Dollars in thousands)	2022
Cash paid for amounts included in the measurement of our lease obligations	$	8,691
Right-of-use assets obtained in exchange for lease obligations	$	45,412
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	$	3,667
2023		13,378
2024		12,642
2025		11,496
2026		11,537
2027		11,812
2028 and thereafter		38,465
Total lease payments		102,997
Less imputed interest		(20,285	)
Total lease liabilities	$	82,712

(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

(In thousands)
Settlement of pre-existing relationships
Accounts payable	$	(2,713	)
Supply Agreement contract liability		(9,874	)
Fair value of previously held interest in 10% Convertible PIK Notes		30,220
Settlement of pre-existing relationships	$	17,633
Assets acquired
Cash and cash equivalents	$	21,725
Restricted cash		40
Accounts receivable		18,853
Inventories		12,210
Assets held for sale		1,805
Other current assets		3,405
Property and equipment		21,551
Operating lease right-of-use assets		3,884
Deferred tax assets		282
Goodwill		82,340
Other long-term assets		17
Total assets acquired		166,112
Liabilities assumed:
Accounts payable and accrued liabilities		24,203
Operating lease liabilities		7,394
Finance lease liabilities		79
Long-term debt		17,101
Other liabilities		85
Total liabilities assumed		48,862
Noncontrolling interests		99,617
Assets acquired less liabilities assumed and noncontrolling interests	$	17,633


	September 30, 2023		December 31, 2022
Raw materials and supplies	$	88.6	$	78.7
Work in process		18.1		9.7
Finished products and parts		165.2		161.1
Total	$	271.9	$	249.5


	September 30, 2023			December 31, 2022
Machinery and equipment	$	2,098.0		$	1,671.7
Mining property and mine development		420.3			172.1
Buildings and leasehold improvements		109.7			62.0
Land		56.8			44.3
Office equipment, software and other		11.9			7.3
Construction in progress		161.8			156.1
Total		2,858.5			2,113.5
Less: accumulated depreciation, depletion and amortization		(1,013.1	)		(717.1	)
Property, plant, and equipment, net	$	1,845.4		$	1,396.4


	September 30, 2023		December 31, 2022
Employee compensation and benefits	$	26.1	$	41.0
Sales, use, and property taxes		22.2		20.1
Insurance		8.2		7.4
Interest		21.6		17.5
Income taxes		4.6		0.7
Tax receivable agreement		3.3		3.3
Other		27.0		25.4
Total accrued expenses	$	113.0	$	115.4


	September 30, 2023			December 31, 2022
Third party:
Term loan	$	808.4		$	519.2
ABL credit facility		135.5			234.3
Monarch note		65.6			87.5
First Financial loan		5.3			16.6
Flotek convertible notes		—			12.7
Other		33.9			26.3
Related party:
REV Note		12.2			39.0
Equify notes		20.0			23.8
Total principal amount		1,080.9			959.4
Less: unamortized debt discounts, premiums, and issuance costs		(23.8	)		(34.0	)
Less: current portion of long-term debt		(122.8	)		(127.6	)
Total long-term debt	$	934.3		$	797.8

(In thousands)	September 30, 2022
	Level 3
BPC Investment		49,752
Total	$	49,752

(In thousands)
	Level 3
Fair value as of January 1, 2022	$	—
Acquisition of Flotek Convertible Notes		20,000
Acquisition of investment in BPC		47,202
Transfer of cost method investment to Level 3 fair value measurement		4,244
Change in fair value of Level 3 fair value measurements		8,100
Fair value as of March 31, 2022	$	79,546
Change in Flotek fair value up to acquisition date		2,120
Elimination of Flotek convertible notes at acquisition date		(30,220	)
Change in BPC fair value		(1,694	)
Fair value as of September 30, 2022	$	49,752

	May 17, 2022			March 31, 2022
Risk-free interest rate		1.82	%		1.63	%
Expected volatility		90.0	%		90.0	%
Term until liquidation (years)		0.72			0.84
Stock price	$	1.29		$	1.26


Balance as of December 31, 2022	$	2,462.9
Class A shares issued in acquisitions		9.5
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
Net loss		(0.2	)
Stock-based compensation		0.1
Stock-based compensation related to deemed contribution		0.6
Foreign currency translation adjustments		—
Adjustment of redeemable noncontrolling interest to redemption amount (2)		57.9
Conversion of Class B common stock to Class A common stock		(1,313.3	)
Balance as of June 30, 2023 and September 30, 2023	$	—


	Fair Value Measurements Using
	Level 1		Level 2		Level 3
As of September 30, 2023:
Assets — Investment in BPC	$	—	$	—	$	37.8

Liabilities:
Earnout payment	$	—	$	—	$	0.0
Munger make-whole provision		—		—		8.8
Warrants		0.1		—		—
Total	$	0.1	$	—	$	8.8

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

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


	September 30, 2023		December 31, 2022
Carrying amount of fixed rate debt	$	97.2	$	142.7
Fair value of fixed rate debt	$	99.5	$	142.5


	September 30, 2023		December 31, 2022
Flying A	$	5.6	$	1.5
Carbo		0.5		0.1
Interstate		0.4		0.3
Other		—		0.2
Total accounts receivable — related party	$	6.5	$	2.1


	September 30, 2023		December 31, 2022
Automatize	$	10.9	$	8.8
Wilks Brothers		4.1		7.1
Wilks Construction		—		7.9
Wilks Earthworks		0.4		—
Related Lessors		0.9		—
Equify		0.7		—
Carbo		0.5		0.2
Total accounts payable — related party	$	17.5	$	24.0


Exhibit Number	Description
3.1
~~2.1^~~		~~Agreement~~Second Amended and ~~Plan~~Restated Certificate of ~~Merger, dated as~~Incorporation 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~~3.1 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on ~~June 24, 2022)~~March 28, 2023).
~~4.1~~3.2	Amended and Restated ~~Placement Agent Warrants~~Bylaws of ProFrac Holding ~~Corp~~Corp., effective as of May 17, 2022 (incorporated by reference to Exhibit ~~10.5~~3.2 to the ~~Company’s~~Registrant's Current Report on Form 8-K filed with the SEC on ~~November 1,~~May 18, 2022).
~~4.2~~3.3	~~Amended and Restated RDO Warrants~~Certificate of ~~ProFrac Holding Corp.~~Designation of Series A Redeemable Convertible Preferred Stock (incorporated by reference to Exhibit ~~10.6~~3.1 to the ~~Company’s~~Registrant’s Current Report on Form 8-K filed with the SEC on ~~November 1, 2022)~~October 2, 2023).
10.1	~~First Amendment to Term Loan Credit~~Severance Agreement, dated ~~as of July 25, 2022,~~September 11, 2023, by and between Mr. Robert Willette and ProFrac Holding Corp.
10.2	Series A Redeemable Convertible Preferred Stock Purchase Agreement, dated September 29, 2023, by and among ~~ProFrac~~the Company and THRC Holdings, ~~II, LLC, ProFrac~~LP and FARJO Holdings, ~~LLC, the guarantors party thereto, the lenders party thereto, and Piper Sandler Finance LLC, as the agent and collateral agent for the lenders~~LP (incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Registrant’s Current Report on Form 8-K filed with the SEC on ~~July 29, 2022).~~
~~10.2~~			First Amendment to Credit Agreement, dated as of July 25, 2022, by and among ProFrac Holdings II, LLC, ProFrac Holdings, LLC, the guarantors party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as the agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 29, 2022).
~~10.3~~†			Second Amendment to Term Loan Credit Agreement, dated as of November 1, 2022, by and 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 Company’s Current Report on Form 8-K filed with the SEC on November 1, 2022).
~~10.4~~†			Second Amendment to Credit Agreement, dated as of November 1, 2022, by and among ProFrac Holdings II, LLC, ProFrac Holdings, LLC, the guarantors party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as the agent and collateral agent for the lenders (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2022).
~~10.5~~			Amended and Restated Series A Warrant Agreement, dated November 1, 2022, between ProFrac Holding Corp. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2022).
~~10.6~~			Amended and Restated SPAC Warrant Agreement, dated November 1, 2022, between ProFrac Holding Corp. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2022).
~~10.7~~			Amendment No. 1 to Amended and Restated Series A Warrant Agreement, dated November 1, 2022, between ProFrac Holding Corp., Continental Stock Transfer & Trust Company and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2022).
~~10.8~~			Amendment No. 1 to Amended and Restated SPAC Warrant Agreement, dated November 1, 2022, between ProFrac Holding Corp., Continental Stock Transfer & Trust Company and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2022)October 2, 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.
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.
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.

9595		Mine Safety Disclosure Exhibit.
~~101.INS~~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~~101.SCH*		Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
~~101.CAL~~101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
~~101.DEF~~101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.
~~101.LAB~~101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.
~~101.PRE~~101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
~~104~~104*		Cover Page Interactive Data File ~~(embedded within~~(formatted as the Inline XBRL ~~document)~~


	ProFrac Holding Corp.

~~Date: November 14, 2022~~	By:	/s/ Matthew D. Wilks
		Name: Matthew D. Wilks
		Title: Executive Chairman and Director (Principal Executive Officer)

~~Date: November 14, 2022~~	By:	~~/s/~~/s/ Lance Turner
		Lance Turner
		Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)