Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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.

Overview

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 four reportable business segments: Stimulation Services, Proppant Production, Manufacturing and Flotek. Our Stimulation Services segment, which primarily relates to ProFrac LLC, 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, which primarily relates to Alpine, provides proppant to oilfield service providers and E&P companies. Our Manufacturing segment sells products such as high horsepower pumps, valves, piping, swivels, large-bore manifold systems, and fluid ends. Flotek is a leading chemistry and data technology company focused on servicing the E&P industry.

Summary Financial Results

2026 Developments

In January 2026, ProFrac Holdings II, LLC issued an additional $25.0 million aggregate principal amount of its 2029 Senior Notes at par to Beal Bank USA in a private placement to fund capital expenditures with any remaining proceeds used for general corporate purposes. These notes were issued as additional notes pursuant to the original indenture as amended. These new notes and the notes previously issued under the indenture are treated as a single series of securities under the indenture and the new notes have substantially identical terms, other than the issue date, issue price and first payment date, as the existing notes and are secured by a security interest in the same collateral.

On March 3, 2026, we entered into an amendment to the 2022 ABL Credit Facility pursuant to which, among other changes, (a) the maximum availability under the facility was reduced to $275.0 million, (b) the scheduled maturity date of the facility was extended six months to September 3, 2027, (c) the applicable margin for SOFR rate loans was revised to range from 1.75% to 2.25%, subject to step-ups of 0.25% at three month intervals following the amendment effective date, up to a range from 3.00% to 3.50%, (d) the unused line fee was revised to 0.375% at all times, (e) certain negative covenant exceptions were curtailed or removed and (f) the $15.0 million minimum liquidity covenant was replaced with a $45.0 million minimum availability covenant.

Recent Trends and Outlook

Our business depends on the willingness of E&P companies to make expenditures to explore for, develop, and produce oil and natural gas in the United States. The willingness of E&P companies to undertake these activities is predominantly influenced by current and expected future prices for oil and natural gas. Although adverse weather impacted our results early in the first quarter of 2026, our results improved in February and March on a relative basis. We believe the conflict in the

Middle East has created supply disruptions that have meaningfully shifted market dynamics in our industry and we are in active discussions with customers regarding improved pricing for our products and services.

In the second half of 2025, we implemented initiatives to enhance the resiliency of the platform resulting in lower cash operating expenses and capital expenditures. We remain focused on financial and operational discipline and optimizing our asset base.

We actively monitor the effects of inflation on our business. In the first quarter we noted initial indications of certain increased costs as a result of the conflict in the Middle East; however, the potential effects and duration of inflation on our business remain uncertain at this time.

Results of Operations

Revenues

Revenues by reportable segment are as follows:

Stimulation Services. Stimulation Services revenues for the three months ended March 31, 2026 decreased $117.5 million, or 22%, from the same period in 2025. The decrease was primarily due to a decrease in average active fleets and lower average pricing for our services in the first quarter of 2026 compared to the same period in 2025 as well as cold weather related work disruptions in January 2026. The decrease was partially offset by increased proppant revenue volumes in 2026.

Proppant Production. Proppant Production revenues for the three months ended March 31, 2026 increased $52.3 million, or 78%, from the same period in 2025. The increase was primarily due to higher average pricing for our proppant in 2026 compared to the same period last year, which was due to a shift in intercompany sales mix from mine-gate pricing to wellsite pricing that began in the second quarter of 2025.

Additionally, revenue recognized for the amortization of acquired off-market contracts for the three months ended March 31, 2026 was zero compared to $5.7 million in the same period in 2025. Refer to Item 8 "Financial Statements and Supplementary Data" in our Annual Report for information about our acquired contract liabilities. During the three months ended March 31, 2026, approximately 88% of the Proppant Production segment's revenues were intercompany, compared with 36% in the same period in 2025.

Manufacturing. Manufacturing revenues for the three months ended March 31, 2026 decreased by $17.4 million, or 26%, from the same period last year. The decrease was due to decreased intercompany demand for manufacturing products. During the three months ended March 31, 2026, approximately 86% of the Manufacturing segment's revenues were intercompany, compared with 87% in the same period in 2025.

Flotek. Flotek revenues for the three months ended March 31, 2026 increased by $15.5 million, or 27%, from the same period last year. The increase was primarily due to increased volume of intercompany sales to the Stimulation Services segment. Flotek recorded contract shortfall revenue of $2.7 million and $7.5 million for the three months ended March 31, 2026 and 2025, respectively, related to contract shortfalls with the Stimulation Services segment. During the three months ended March 31, 2026, approximately 75% of Flotek revenues were intercompany, compared with 57% in the same period in 2025.

Other. Other revenues for the three months ended March 31, 2026 decreased by $2.5 million, or 46%, from the same period in 2025. The decrease was due to lower intercompany sales for Livewire. During the three months ended March 31, 2026, approximately 100% of other revenues were intercompany, compared with 98% in the same period in 2025.

Cost of Revenues

Cost of revenues by reportable segment is as follows:

Stimulation Services. Stimulation Services cost of revenues for the three months ended March 31, 2026 decreased by $38.5 million, or 10%, from the same period in 2025. The decrease was primarily due to a decrease in average active fleets in the first quarter of 2026 compared to the same period last year. This decrease was partially offset by the cost of increased proppant volumes. Cost of revenues for this segment included intercompany supply commitment charges of $2.7 million and $7.5 million for the three months ended March 31, 2026 and 2025, respectively, because the Stimulation Services segment did not purchase the minimum contractual commitment of chemistry products from Flotek.

Proppant Production. Proppant Production cost of revenues for the three months ended March 31, 2026 increased by $65.3 million, or 151%, from the same period in 2025. The increase was primarily due to increased costs to support the shift in intercompany sales mix from mine-gate pricing to wellsite pricing, which began in the second quarter of 2025. Additionally, costs of revenues also increased due to a mix shift towards brokered volumes in 2026.

Manufacturing. Manufacturing cost of revenues for the three months ended March 31, 2026 decreased by $17.2 million, or 31%, from the same period in 2025. The decrease in the first quarter was due to decreased volumes of products sold to intercompany customers in the first quarter of 2026.

Flotek.. Flotek cost of revenues for the three months ended March 31, 2026 increased by $11.1 million, or 26%, from the same period in 2025. The increase was primarily due to increased volume of intercompany sales.

Other. Other cost of revenues for the three months ended March 31, 2026 decreased by $2.0 million, or 40%, from the same period in 2025. The decrease was due to lower intercompany sales for Livewire.

Selling, General and Administrative

Selling, general and administrative expenses are comprised of the following:

Selling, general and administrative expenses for the three months ended March 31, 2026 decreased by $10.0 million, or 19%, from the same period in 2025. The decrease was primarily due to lower labor and non-labor costs resulting from cost control measures. These decreases were partially offset by increased expense at Flotek.

Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization for the three months ended March 31, 2026 decreased by $8.9 million from the same period in 2025 due to certain assets becoming fully depreciated.

Other Operating Expense, Net

The following table summarizes our other operating expenses, net:

Litigation expenses 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 periods presented, substantially all of these costs represent litigation costs incurred in connection with certain patent infringement lawsuits.

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

Interest Expense, Net

Interest expense, net of interest income, for the three months ended March 31, 2026 was $32.8 million compared to $35.9 million in the same period in 2025. These decreases were due to lower average outstanding debt balances and interest rates in 2026.

Other Income, Net

For the three months ended March 31, 2025, we recognized other income, net of $4.8 million which was primarily attributable to a decrease in the fair value of our Munger make-whole provision.

Income Taxes

Income taxes expense was $1.6 million and $0.3 million for the three months ended March 31, 2026 and 2025, respectively. Our effective tax rate was for the three months ended March 31, 2026 was negative 2.0%, compared with negative 2.0% in the same period in 2025.

For the three months ended March 31, 2025 and 2026, the difference between our effective tax rate and the federal statutory rate related to changes in the valuation allowance on our net deferred tax assets.

Liquidity and Capital Resources

Sources of Liquidity

Historically, our primary sources of liquidity are cash flows from operations and availability under our revolving credit facility. In the three months ended March 31, 2026, we also issued $25.0 million of 2029 Senior Notes. While Flotek is included in our unaudited condensed consolidated financial statements, 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 following discussion of our liquidity and capital resources. See "Note 1. Organization and Description of Business" in the notes to our unaudited condensed consolidated financial statements for discussion of our ownership of Flotek.

Our Alpine 2023 Term Loan requires us to segregate collateral associated with Alpine and limits our ability to use Alpine's cash or assets to satisfy our obligations or the obligations of our other subsidiaries. We have limited ability to provide Alpine with liquidity to satisfy its obligations. Refer to our Annual Report and "Note 4. Debt" in the notes to our unaudited condensed consolidated financial statements for more information regarding the Alpine 2023 Term Loan.

At March 31, 2026, we had $27.8 million of cash and cash equivalents, excluding Flotek, and $80.0 million available for borrowings under our revolving credit facility, which resulted in a total liquidity position of $107.8 million. Refer to our Annual Report for more information regarding our revolving credit facility.

We believe that our cash and cash equivalents, cash provided by operations, and the availability under our revolving credit facility will be sufficient to fund our capital expenditures, satisfy our obligations, and remain in compliance with our existing debt covenants for at least the next 12 months. The market for our services is cyclical and if our customers unexpectedly reduce activity levels or the pricing of our products and services unexpectedly declines, we may need to take action to improve our liquidity, which may include selling assets or seeking additional sources of capital. In addition, Alpine is closely monitoring its forthcoming debt covenant compliance obligation that commences in the fiscal quarter ending March 31, 2028. While there can be no assurance, Alpine believes that it will be able to meet, modify, or further defer this debt covenant. See "Note 4. Debt" in the notes to our unaudited condensed consolidated financial statements for more information about this forthcoming debt covenant.

Cash Flows

Cash flows provided by (used in) each type of activity were as follows:

Operating Activities. Net cash provided by operating activities was $9.3 million and $38.7 million for the three months ended March 31, 2026 and 2025, respectively. Cash flows from operating activities consist of net income or loss adjusted for non-cash items and changes in net working capital. Net income or loss adjusted for non-cash items for the three months ended March 31, 2026 resulted in a cash increase of $19.4 million compared with a cash increase of $88.9 million in the same period of 2025. This change was primarily due to lower earnings in 2026. Changes in net working capital for the three months ended March 31, 2026 resulted in a cash decrease of $10.1 million compared with a cash decrease of $50.2 million in the same period in 2025.

Investing Activities. Net cash used in investing activities was $34.5 million and $51.7 million for the three months ended March 31, 2026 and 2025, respectively. This change was primarily due to decreased capital expenditures in 2026.

Financing Activities. Net cash provided by financing activities was $35.8 million for the three months ended March 31, 2026, compared with cash provided by financing activities of $14.2 million for the same period in 2025. This change was primarily due to increased net borrowings in 2026.

Cash Requirements

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

Debt Service Obligations

As of March 31, 2026 we have $1,085.6 million in aggregate principal amount of long-term debt outstanding, with $156.2 million coming due over the next twelve months. For additional information about our long-term debt, see "Note 4. Debt" in the notes to our unaudited condensed consolidated financial statements and Item 8 "Financial Statements and Supplementary Data" in our Annual Report.

Both the 2029 Senior Notes and the ABL Credit Facility contain certain customary representations and warranties and affirmative and negative covenants. As of March 31, 2026, we were in compliance with these covenants and expect to be compliant for at least the next twelve months.

The Alpine 2023 Term Loan contains a covenant commencing with the fiscal quarter ending March 31, 2028, requiring Alpine not to exceed a maximum Total Net Leverage Ratio (as defined in the Alpine Term Loan Credit Agreement) of 2.00 to 1.00. This ratio is generally the consolidated total debt of Alpine divided by Alpine's adjusted EBITDA. Alpine is closely monitoring its forthcoming compliance obligations with this covenant. While there can be no assurance, Alpine believes that it will be able to meet, modify, or further defer this debt covenant.

Capital Expenditures

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 three months ended March 31, 2026 our capital expenditures were $40.7 million, consisting of maintenance capital expenditures for our hydraulic fracturing fleet, upgrades to legacy pumps, expenditures to maintain efficient operations at our sand mines, and investments in next generation technology.

For the full year of 2026, we estimate capital expenditures will range from $80 million to $100 million in maintenance related expenditures and an additional $75 million to $85 million for growth initiatives. Growth initiatives in 2026 relate to upgrades to our hydraulic fracturing fleet, investments in next generation technology and sand mine improvements.

We continually evaluate our capital expenditures and the amount that we ultimately spend will depend on a number of factors, including our liquidity position, customer demand for fleets, and expected industry activity levels.

Purchase Commitments

As of March 31, 2026, we had purchase commitments of $6.4 million.

Tax Receivable Agreement

As of March 31, 2026 we have $86.6 million of estimated tax receivable agreement obligations, with an estimated $4.6 million coming due over the next twelve months. This obligation will generally be paid under the tax receivable agreement as the Company realizes actual cash tax savings from the tax benefits covered by the tax receivable agreement in future tax years. We do not expect a significant increase in the estimate of this liability in future periods. For additional information about our tax receivable agreement, please see Item 8 "Financial Statements and Supplementary Data" in our Annual Report.

Acquisitions of Strategic Businesses

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

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