Flowco Holdings Q3 2026 revenue rises to $259M
Valiant contributed $76.9 million in net sales and $16.4 million in net income from March 2 through September 30.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Flowco Holdings Inc. reported third-quarter 2026 revenue of $258.6 million, compared with $176.9 million a year earlier. Rental revenue was $141.8 million and sales revenue was $116.9 million. Operating income was $47.9 million versus $34.6 million, while net income was $40.7 million versus $34.3 million; $20.1 million of 2026 net income was attributable to Flowco Holdings.
For the nine months ended September 30, revenue was $704.0 million versus $562.5 million, and cash provided by operating activities was $277.0 million versus $207.2 million. Cash and cash equivalents were $137.8 million and long-term debt, net, was $363.4 million as of September 30, 2026.
Flowco completed its Valiant acquisition on March 2, 2026, for approximately $316.0 million: $283.1 million in cash and 1,454,849 Class A shares. Valiant contributed $76.9 million in net sales and $16.4 million in net income from acquisition through September 30. Cash consideration was funded through available capacity under the Revolving Credit Facility. Flowco’s Tax Receivable Agreement provides for payments to participants of 85% of certain tax benefits realized or deemed realized.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter revenue was $258.6 million, versus $176.9 million in 2025.
- Moderate pointThird-quarter net income was $40.7 million, versus $34.3 million in 2025.
- Moderate pointNine-month operating cash flow was $277.0 million, compared with $207.2 million in 2025.
- Moderate pointValiant contributed $76.9 million in net sales after closing.
Negative
- None.
Filing Explained
At September 30, 2026, holders of 50.3% of Flowco LLC’s economics retained redemption rights, with Flowco choosing cash or Class A shares.
At
The balance sheet listed
Key Figures
Key Terms
Up-C structure financial
Tax Receivable Agreement financial
redeemable non-controlling interests financial
measurement period adjustments technical
purchase price allocation financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did FLOC report in Q3 2026?
How much did FLOC pay for Valiant?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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NYSE Texas, Inc. |
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of October 30, 2026, the number of shares of the registrant’s Class A common stock outstanding was
1
Table of Contents
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Page |
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (Unaudited) |
8 |
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Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 |
9 |
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Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2026 and 2025 |
10 |
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Condensed Consolidated Statements of Redeemable Non-Controlling Interests and Stockholders’ Equity for the three and nine months ended September 30, 2026 and 2025 |
11 |
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Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025 |
13 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
14 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
47 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
60 |
Item 4. |
Controls and Procedures |
60 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
63 |
Item 1A. |
Risk Factors |
63 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
63 |
Item 3. |
Defaults Upon Senior Securities |
63 |
Item 4. |
Mine Safety Disclosures |
63 |
Item 5. |
Other Information |
63 |
Item 6. |
Exhibits |
64 |
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Signatures |
66 |
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1
BASIS OF PRESENTATION
Certain Definitions
The following is a listing of certain abbreviations, acronyms, and other industry terminology that may be used throughout this Quarterly Report on Form 10-Q (“Quarterly Report”):
2
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are neither historical facts nor assurances of future performance and may include words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “goal”, “intend”, “likely”, “may”, “plan”, “project”, “strategy” and other words and terms of similar meaning. Although we believe that our expectations regarding future events are based on reasonable assumptions, we can give no assurance that such expectations or assumptions will be achieved. Important factors that could cause actual
3
results to differ materially from those in the forward-looking statements are described under Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 (“Annual Report”).
About this Quarterly Report
Flowco MergeCo LLC. (“Flowco LLC”), including its predecessor and subsidiaries, is the accounting predecessor of Flowco Holdings Inc. (“Flowco Holdings”) for financial reporting purposes. Flowco Holdings was formed to serve as the issuer in the IPO, which was consummated on January 15, 2025. Concurrent with the completion of the IPO, Flowco Holdings became the new parent holding company of Flowco LLC and its subsidiaries. As a result, the unaudited condensed consolidated financial statements of the combined entity represents a continuation of the financial position and results of operations of Flowco LLC and is fully consolidated under Flowco Holdings.
Certain monetary amounts, percentages, and other figures included in this Quarterly Report have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Quarterly Report. Certain other amounts that appear in this Quarterly Report may not sum due to rounding.
The Transactions
Flowco Holdings, formed as a Delaware corporation on July 25, 2024, is a holding company, and its principal asset consists of LLC Interests in Flowco LLC. Prior to the IPO, all of our business operations were conducted through Flowco LLC, and the Original Equity Owners were the only members of Flowco LLC.
IPO and Reorganization Transactions
In connection with the IPO and pursuant to the Master Reorganization Agreement and related documents (including an Omnibus Agreement entered into following the IPO described below), we consummated the following organizational transactions, described below, to reorganize our corporate structure:
4
Post-IPO Organizational Structure
Described below are the details of our organizational structure immediately following the IPO:
5
As the sole managing member of Flowco LLC, we operate and control all the business and affairs of Flowco LLC and, through Flowco LLC and its direct and indirect subsidiaries, conduct our business. Following the IPO, we have a minority economic interest in Flowco LLC but control the management of Flowco LLC as its sole managing member. As a result, we consolidate Flowco LLC and record a significant non-controlling interest in a consolidated entity in our consolidated financial statements for the economic interest in Flowco LLC held by the Continuing Equity Owners.
As of September 30, 2026, we own 49.7% of economic interests in Flowco LLC.
Up-C Structure and Tax Receivable Agreements
Our post-IPO and current corporate structure is commonly referred to as an umbrella partnership-C corporation (“Up-C”) structure, which is often used by partnerships and limited liability companies when they undertake an initial public offering of their business. The Up-C structure allows the Tax Receivable Agreement Participants (“TRA Participants”) to retain their equity ownership in Flowco LLC and to continue to realize tax benefits associated with owning interests in an equity that is treated as a partnership, or “flow-through” entity, for U.S. federal income tax purposes. Investors in and after the IPO, by contrast, continued to hold their equity ownership in the Company, a Delaware corporation that is a domestic corporation for U.S. federal income tax purposes, in the form of shares of Class A common stock. One of the tax benefits to the TRA Participants associated with this structure is that future taxable income of Flowco LLC that is allocated to the TRA Participants will be taxed on a flow-through basis and, therefore, will not be subject to corporate taxes at the entity level. The Up-C structure also provides the TRA Participants with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded. The TRA Participants and Flowco Holdings also expect to benefit from the Up-C structure as a result of certain cash tax savings arising from redemptions or exchanges of the TRA Participants’ LLC Interests for Class A common stock or cash, and certain other tax benefits covered by the Tax Receivable Agreement discussed under Part I, Item 1A. Risk Factors – Risk Factors Related to our Organizational Structure in our Annual Report.
In general, the TRA Participants expect to receive payments under the Tax Receivable Agreement of 85% of the amount of certain tax benefits, and Flowco Holdings expects to benefit in the form of cash tax savings in amounts equal to 15% of certain tax benefits. Any payments made by us to the TRA Participants under the Tax Receivable Agreement will reduce cash otherwise arising from such tax savings. We expect such payments will be substantial.
Prior to the completion of the IPO, we entered into the Tax Receivable Agreement with Flowco LLC and the TRA Participants that provides for the payment by Flowco Holdings to the TRA Participants of 85% of the amount of tax benefits, if any, that Flowco Holdings actually realizes (or in some circumstances is deemed to realize) as a result of (i) Basis Adjustments, (ii) Section 704(c) Allocations, and (iii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement.
6
Redemption Rights of Holders of LLC Interests
The Continuing Equity Owners may, subject to certain exceptions, from time to time at each of their options require Flowco LLC to redeem all or a portion of their LLC Interests in exchange for, at our election, newly-issued shares of our Class A common stock on a one-for-one basis or a cash payment equal to a volume weighted average market price of one share of our Class A common stock for each LLC Interest redeemed, in each case, in accordance with the terms of the Flowco LLC Agreement; provided that, at our election, we may effect a direct exchange by Flowco Holdings of such Class A common stock or such cash, as applicable, for such LLC Interests. The Continuing Equity Owners may, subject to certain exceptions, exercise such redemption right for as long as their LLC Interests remain outstanding. Simultaneously with the payment of cash or shares of Class A common stock, as applicable, in connection with a redemption or exchange of LLC Interests pursuant to the terms of the Flowco LLC Agreement, a number of shares of our Class B common stock registered in the name of the redeeming or exchanging Continuing Equity Owner will automatically be transferred to us and will be canceled for no consideration on a one-for-one basis with the number of LLC Interests redeemed or exchanged.
7
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Remainder of this page intentionally left blank.
8
Flowco Holdings Inc.
Condensed Consolidated Balance Sheets
(unaudited)
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As of |
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September 30, |
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December 31, |
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(in thousands except share and per share amounts) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowances for credit losses of $ |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Finance lease right-of-use assets |
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Intangible assets, net (Note 8) |
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Goodwill (Note 8) |
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Deferred tax asset, net |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities, redeemable non-controlling interests and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of tax receivable agreement liability |
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Current portion of operating lease obligations |
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Current portion of finance lease obligations |
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Deferred revenue |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt, net |
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Tax receivable agreement liability |
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Operating lease obligations, net of current portion |
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Finance lease obligations, net of current portion |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 16) |
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Redeemable non-controlling interests |
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Stockholders' equity: |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Total stockholders' equity to Flowco Holdings Inc. |
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Total liabilities, redeemable non-controlling interests and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
Flowco Holdings Inc.
Condensed Consolidated Statements of Operations
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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2026 |
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2025 |
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2026 |
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2025 |
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(in thousands except share and per share amounts) |
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Revenues: |
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Rentals |
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$ |
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$ |
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$ |
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$ |
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Sales |
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Total revenues |
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Operating expenses: |
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Cost of rentals (exclusive of depreciation and |
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Cost of sales (exclusive of depreciation and |
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Selling, general and administrative expenses |
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Depreciation and amortization |
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Loss on sale of equipment |
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Income from operations |
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Other expenses: |
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Interest expense, net |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Other income (expense), net |
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( |
) |
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( |
) |
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Total other expenses |
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( |
) |
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( |
) |
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( |
) |
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( |
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Income before provision for income taxes |
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Income tax benefit (provision) |
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( |
) |
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( |
) |
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( |
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Net income |
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Net income attributable to redeemable |
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Net income attributable to Flowco Holdings Inc. |
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$ |
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$ |
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$ |
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$ |
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Three Months Ended |
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Nine Months Ended |
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2026 |
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2025 |
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2026 |
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2025 |
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Earnings per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10
Flowco Holdings Inc.
Condensed Consolidated Statements of Redeemable Non-Controlling Interests and Stockholders’ Equity
(unaudited)
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Flowco LLC Members' Equity |
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Flowco Holdings Stockholders' Equity |
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(in thousands, except |
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Redeemable |
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Common Units |
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Class A Units |
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Members' |
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Class A |
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Class B |
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Additional |
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Retained |
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Treasury |
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Total |
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Interests |
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Units |
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Amount |
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Units |
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Amount |
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Equity |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Earnings |
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Stock |
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Equity |
|||||
Balance as of |
|
$ |
|
— |
|
$ |
— |
|
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
— |
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$ |
||||||||
Net income |
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|
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|||
Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
|
— |
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— |
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— |
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— |
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Distributions to Members |
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|
( |
|
— |
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|
— |
|
— |
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|
— |
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— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
Issuance of common stock, net |
|
|
— |
|
— |
|
|
— |
|
— |
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|
— |
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— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
|
— |
|
|
— |
|
|
( |
Stock-based compensation |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
||||
Dividends declared |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
( |
|
|
— |
|
|
( |
Activity in deferred |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
|
— |
|
|
— |
|
|
( |
Class A common stock |
|
|
( |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
|
( |
|
|
( |
|
|
|
|
— |
|
|
— |
|
|
||||
Valiant acquisition consideration |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|||
Retirement of Class A |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
( |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
|
— |
|
|
— |
|
|
( |
Subsequent measurement of |
|
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
|
( |
|
$ |
— |
|
|
( |
|
Balance as of |
|
$ |
|
— |
|
$ |
— |
|
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
— |
|
$ |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of |
|
$ |
— |
|
— |
|
$ |
— |
|
|
$ |
— |
|
$ |
|
— |
|
$ |
— |
|
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
||
Net loss prior to the |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
Reorganization transactions |
|
|
|
— |
|
|
— |
|
( |
|
|
— |
|
|
( |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
||||
Equity-based compensation |
|
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
IPO and the Transactions |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
|
( |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
||||
Increase in deferred tax |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
|
— |
|
|
— |
|
|
( |
Net income subsequent to |
|
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|||
Foreign currency translation |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
|
— |
|
|
|
|
|
( |
Distribution to Members |
|
|
( |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
— |
Stock-based compensation |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|||
Dividends declared |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
( |
|
|
|
|
|
( |
Class A common stock |
|
|
( |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
( |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|||
Repurchase of Class A |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
|
|
( |
Retirement of Class A |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
( |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
|
— |
|
|
|
|
— |
|
Subsequent measurement of |
|
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
( |
|
|
|
|
— |
|
|
( |
||
Balance as of |
|
$ |
|
— |
|
$ |
— |
|
— |
|
|
— |
|
$ |
— |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
— |
|
$ |
||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
11
Flowco Holdings Inc.
Condensed Consolidated Statements of Redeemable Non-Controlling Interests and Stockholders’ Equity
(unaudited)
|
|
|
|
|
|
|
Flowco Holdings Stockholders' Equity |
|
||||||||||||||||||||||||||||||||||||
(in thousands, except |
|
|
Redeemable |
|
|
|
Class A |
|
|
Class B |
|
|
|
Additional |
|
|
|
Retained |
|
|
|
Treasury |
|
|
|
Total |
|
|||||||||||||||||
|
|
|
Interests |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
|
Capital |
|
|
|
Earnings |
|
|
|
Stock |
|
|
|
Equity |
|
|||||||||||
Balance as of |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
||||||||
Net income |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||
Foreign currency translation |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
||
Distributions to Members |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Stock-based compensation |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Dividends declared |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Activity in deferred |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
Class A common stock |
|
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|||
Subsequent measurement of |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
|
|
||
Balance as of |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance as of |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|||||||
IPO and the Transactions |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
Increase in deferred tax |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
Net income subsequent to |
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||
Foreign currency translation |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
|
|
|
( |
) |
|
Distribution to Members |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
Stock-based compensation |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|||
Dividends declared |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
( |
) |
|
Class A common stock |
|
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
||||
Repurchase of Class A |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Retirement of Class A |
|
|
|
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
||
Subsequent measurement of |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
— |
|
|
|
|
|
||
Balance as of |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12
Flowco Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
|
Nine Months Ended |
|
|||||||
|
|
2026 |
|
|
2025 |
|
||||
|
|
(in thousands) |
|
|||||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
|
$ |
|
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
|
|
||
Provision for inventory obsolescence |
|
|
|
|
|
|
|
|
||
Amortization of operating right-of-use assets |
|
|
|
|
|
|
|
|
||
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
||
Loss on sale of equipment |
|
|
|
|
|
|
|
|
||
Gain on lease termination |
|
|
|
( |
) |
|
|
|
( |
) |
Stock-based compensation |
|
|
|
|
|
|
|
|
||
Provision for deferred income taxes |
|
|
|
|
|
|
|
( |
) |
|
Allowance for credit losses |
|
|
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
( |
) |
|
|
|
( |
) |
Inventory |
|
|
|
( |
) |
|
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
|
( |
) |
|
|
|
|
|
Other assets and liabilities |
|
|
|
( |
) |
|
|
|
( |
) |
Accounts payable - trade |
|
|
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
( |
) |
|
|
|
( |
) |
Finance lease liabilities |
|
|
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
|
|
|
||
Net cash paid in Valiant acquisition |
|
|
|
( |
) |
|
|
|
|
|
Asset acquisition |
|
|
|
|
|
|
|
( |
) |
|
Additions to property, plant and equipment |
|
|
|
( |
) |
|
|
|
( |
) |
Payment of contingent consideration related to a business combination |
|
|
|
|
|
|
|
( |
) |
|
Proceeds from sale of property, plant and equipment |
|
|
|
|
|
|
|
|
||
Payment for capitalized patent costs |
|
|
|
( |
) |
|
|
|
( |
) |
Net cash used in investing activities |
|
|
|
( |
) |
|
|
|
( |
) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
||
Issuance of Class A common stock in IPO, net of underwriting discount |
|
|
|
|
|
|
|
|
||
Payment of offering costs |
|
|
|
|
|
|
|
( |
) |
|
Repurchase of Class A common stock |
|
|
|
( |
) |
|
|
|
( |
) |
Payments on long-term debt |
|
|
|
( |
) |
|
|
|
( |
) |
Proceeds from long-term debt |
|
|
|
|
|
|
|
|
||
Payments on finance lease obligations |
|
|
|
( |
) |
|
|
|
( |
) |
Proceeds on finance lease terminations |
|
|
|
|
|
|
|
|
||
Purchase of LLC Interests from Continuing Equity Owners |
|
|
|
|
|
|
|
( |
) |
|
Payment of debt issuance costs |
|
|
|
|
|
|
|
( |
) |
|
Payment of dividend equivalent units |
|
|
|
( |
) |
|
|
|
( |
) |
Payment of tax withheld on stock-based compensation |
|
|
|
|
|
|
|
( |
) |
|
Payments of selling commissions and fees |
|
|
|
( |
) |
|
|
|
|
|
Distributions to members of Flowco LLC |
|
|
|
( |
) |
|
|
|
( |
) |
Dividends paid to Flowco Holdings Inc. shareholders |
|
|
|
( |
) |
|
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
( |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
|
|
|
||
End of period |
|
$ |
|
|
|
$ |
|
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
13
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 – Nature of Organization and Background
Nature of Operations and Organization
Flowco Holdings Inc. (the “Company”) was incorporated as a Delaware corporation on
The Company is a leading provider of production optimization, artificial lift and emissions management and monetization solutions for the oil and natural gas industry. The Company’s products and services include a full range of equipment and technology solutions that enable real-time remote monitoring and control to maximize efficiencies of its products and services. The Company generates revenues throughout the long producing lives of oil and gas wells. The Company’s core technologies include high pressure gas lift (“HPGL”), electric submersible pumps (“ESP”), conventional gas lift, plunger lift and vapor recovery unit (“VRU”) solutions. As of September 30, 2026, the Company operates a fleet of over
The Company is headquartered in Houston, Texas with major service facilities and operations in Midland, Texas; Carlsbad, New Mexico; and Williston, North Dakota. The Company operates manufacturing and repair facilities in El Reno, Oklahoma; Houston, Fort Worth, Kilgore, Midland and Pampa, Texas; and Lafayette, Louisiana.
The Company provides its products and services through
Initial Public Offering and Reorganization Transactions
On January 15, 2025, the Company consummated the IPO of
In connection with the IPO, the Company amended and restated the existing limited liability company agreement of Flowco LLC (“LLC Agreement”) to, among other things, (i) recapitalize all existing ownership interests in Flowco LLC held by the existing members of Flowco LLC into a new single class of LLC Interests; and (ii) issue a non-economic member interest and appoint the Company as the sole managing member of Flowco LLC upon its acquisition of the LLC interests.
Simultaneously with the IPO, the Company amended and restated its certificate of incorporation to, among other things, provide:
14
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Simultaneously with the IPO, the Company acquired the LLC Interests held by certain of the existing indirect owners of Flowco LLC in exchange for
Subsequent to the IPO, the Company used the net proceeds from the IPO to purchase
As of September 30, 2026, the Company owns
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a)(19) of the Exchange Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, an emerging growth company may take advantage of certain reduced reporting and other requirements that are otherwise generally applicable to public companies. These provisions include, but are not limited to:
The Company has elected to use the extended transition period for complying with new or revised accounting standards, and as a result, the Company’s condensed consolidated financial statements may not be comparable to those of companies that comply with such new or revised accounting standards as of the effective dates applicable to public companies.
The Company will remain an emerging growth company until the earliest of: (i) the last day of the fiscal year in which it has total annual gross revenues of $
15
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
during the previous three-year period; or (iv) the date on which the Company is deemed to be a “large accelerated filer,” which means the market value of the Company’s Class A common stock that is held by non-affiliates exceeds $
Basis of Presentation
The unaudited condensed consolidated financial statements accompanying these notes include the financial statements of the Company, all entities that are wholly owned by the Company and all entities in which the Company has a controlling financial interest. All intercompany transactions and balances have been eliminated in the consolidation process. The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position, results of operations, and cash flows for the periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company, Flowco LLC and its consolidated subsidiaries. Flowco LLC meets the definition of a variable interest entity (“VIE”) for which the Company is considered the primary beneficiary due to its sole decision-making authority that controls significant activities of Flowco LLC and its obligation to absorb losses and receive benefits of the operations of Flowco LLC.
The redeemable non-controlling interests in the condensed consolidated statements of income for the three and nine months ended September 30, 2026, represent the portion of earnings attributable to the economic interest in Flowco LLC held by the Continuing Equity Owners. The redeemable non-controlling interests in the condensed consolidated balance sheets as of September 30, 2026, represents the portion of the net assets of the Company attributable to the Continuing Equity Owners, based on the portion of the LLC Interests owned by such unit holders. As of September 30, 2026, the combined economic interest of redeemable non-controlling interests was
Note 2 – Summary of Significant Accounting Policies
Our accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. These statements have been prepared in accordance with U.S. GAAP and reflect all adjustments that, in our opinion, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”).
Use of Estimates
In preparing financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
16
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Items subject to estimates and assumptions include revenue recognition, allowance for credit losses, inventory reserve, impairment of goodwill, intangible assets and long-lived assets, stock-based compensation, useful lives of property, plant and equipment and intangible assets, estimation of contingencies, the incremental borrowing rate applied in lease accounting, the fair value of equity awards, tax valuation allowance and probability of making payments under the TRA (as defined in Note 11 – Income Taxes and Tax Receivable Agreement), among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities, and measurement of revenues and expenses. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, the Company’s condensed consolidated financial statements will be affected.
Revisions of Previously Issued Financial Information
As previously disclosed in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, management identified errors in the classification and presentation of certain equity activity. Cash distributions made by Flowco LLC to the Continuing Equity Owners were recorded as reductions of retained earnings rather than redeemable noncontrolling interest. Correcting the distributions also changed the allocation and presentation of related subsequent-measurement adjustments among redeemable noncontrolling interest, additional paid-in capital and retained earnings. The revisions also corrected the classification of certain first-quarter 2025 remeasurement activity within the statements of equity.
Management evaluated the errors under SEC Staff Accounting Bulletin Nos. 99 and 108 and Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections, and concluded that they were not material, individually or in the aggregate, to the previously issued financial statements.
The Company has revised the affected comparative financial information presented in this Quarterly Report. The revisions decreased additional paid-in capital and increased retained earnings by $
The effects of the revisions on the previously reported condensed consolidated statements of redeemable noncontrolling interests and stockholders'/members' equity are summarized below (in thousands):
Three Months Ended September 30, 2025
Three Months |
|
As Reported |
|
As Revised |
||||||||||||||
|
Redeemable Non-Controlling Interests |
|
Additional |
|
Retained Earnings |
|
Redeemable Non-Controlling Interests |
|
Additional |
|
Retained Earnings |
|||||||
Distribution to Members |
|
$ |
|
$ |
|
$ |
( |
|
$ |
( |
|
$ |
|
$ |
||||
Subsequent measurement of |
|
$ |
( |
|
$ |
|
$ |
|
$ |
( |
|
$ |
( |
|
$ |
|||
17
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2025
Nine Months |
|
As Reported |
|
As Revised |
||||||||||||||
|
Redeemable Non-Controlling Interests |
|
Additional |
|
Retained Earnings |
|
Redeemable Non-Controlling Interests |
|
Additional |
|
Retained Earnings |
|||||||
IPO and the Transactions |
|
$ |
|
$ |
|
|
|
$ |
|
$ |
|
$ |
||||||
Distribution to Members |
|
$ |
|
$ |
|
$ |
( |
|
$ |
( |
|
$ |
|
$ |
||||
Subsequent measurement of |
|
$ |
|
$ |
( |
|
$ |
|
$ |
|
$ |
( |
|
$ |
||||
The Company will revise other affected prior-period financial information when next presented.
Fair Value Measurements
Accounting standards applicable to fair value measurements establish a framework for measuring fair value and stipulate disclosures about fair-value measurements. The standards apply to recurring and non-recurring financial and non-financial assets and liabilities that require or permit fair-value measurements. Among the required disclosures is the fair-value hierarchy of inputs the Company uses to value an asset or a liability. The three levels of the fair-value hierarchy are described as follows:
As of September 30, 2026, and December 31, 2025, the Company’s financial instruments primarily consisted of cash and cash equivalents, trade accounts receivable, trade accounts payable, and long-term debt. The book values of cash and cash equivalents, trade accounts receivable, and trade accounts payable are representative of fair value due to their short-term maturities. Our five-year senior secured revolving credit facility (the “Revolving Credit Facility”) applies floating interest rates to amounts drawn under the facility; therefore, the carrying amount of our Revolving Credit Facility also approximates its fair value. The estimated fair value of the Revolving Credit Facility is classified within Level 2 of the fair value hierarchy.
Recurring Fair Value Measurements
The Company did not have any assets or liabilities that were measured at fair value on a recurring basis as of September 30, 2026.
Non-Recurring Fair Value Measurements
The Company’s nonrecurring fair value measurements as of September 30, 2026 primarily relate to assets acquired and liabilities assumed in the Valiant transaction. These assets and liabilities were recorded at their estimated fair values as of their acquisition date. For more information, see Note 3 – Business Combination and Asset Acquisition.
Property, Plant and Equipment, Net
Property, plant and equipment, net are stated at cost, net of accumulated depreciation. Depreciation of property, plant and equipment is provided over the estimated useful lives of the respective assets or groups of assets, using the straight-line method. Any property, plant and equipment acquired in connection with a business combination will be recorded at its fair value as of the acquisition date and depreciated over its remaining economic useful life using the
18
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
straight-line method.
Expenditures for additions, major renewals, and betterments are capitalized, and expenditures for maintenance and repairs are charged to earnings as incurred.
Buildings |
|
|
Compressor and related equipment |
|
|
Machinery and equipment |
|
|
Furniture, fixtures and office equipment |
|
|
Software |
|
|
Vehicles |
|
|
Land |
|
Unlimited |
Leasehold improvements |
|
Lesser of useful life or lease term |
When assets are retired or otherwise disposed of, the cost and the applicable accumulated depreciation is removed from the respective accounts and the resulting gain or loss is reflected in earnings.
Intangible Assets Other Than Goodwill
Intangible assets that have finite useful lives are measured at cost less accumulated amortization and impairment losses, if any. Subsequent expenditures for intangible assets are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets.
Trade Names |
|
|
Customer Relationships |
|
|
Customer Contracts |
|
|
Non-compete agreement |
|
|
Patent |
|
|
Developed Technology |
|
IEEPA Tariff Refunds
The Company previously paid tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”) on certain products imported into the United States. Following legal and administrative developments affecting these tariffs, the Company filed claims with U.S. Customs and Border Protection (“CBP”) seeking refunds of previously paid amounts. The Company accounts for these recoveries under the gain contingency model in ASC 450, Contingencies (“ASC 450”), and recognizes refunds when they are realized or realizable.
During the three and nine months ended September 30, 2026, the Company received approximately $
The Company evaluates tariff refund recoveries under the gain contingency guidance in ASC 450, except for amounts that qualify as measurement period adjustments to assets acquired and liabilities assumed in a business combination under ASC 805, Business Combinations (“ASC 805”). The Company determined that tariff refunds attributable to Valiant related to facts and circumstances existing as of March 2, 2026, the acquisition date. Accordingly, the
19
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Company recognized measurement period adjustments to the preliminary purchase price allocation. These adjustments resulted in an increase of approximately $
The Company continues to evaluate outstanding refund claims and will recognize additional recoveries when they become realized or realizable in accordance with its accounting policy.
Recently Adopted Accounting Standard
In July 2025, the Financial Accounting Standards Board (“FASB”) issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide an optional practical expedient for estimating expected credit losses on current accounts receivable and current contract assets arising from transactions accounted under ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”). Under the practical expedient, entities may assume that conditions existing at the balance sheet date remain unchanged over the remaining life of those assets when developing reasonable and supportable forecasts. The practical expedient is available to all entities. The amendments also provide a separate accounting policy election allowing entities other than public business entities to consider collection activities after the balance sheet date when estimating expected credit losses. This separate election is not available to the Company. The amendments are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual reporting periods, with early adoption permitted. Accordingly, the amendments became effective for the Company on January 1, 2026. Entities electing the practical expedient apply the amendments prospectively. Effective
New Accounting Pronouncements to be Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, companies will need to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company is still considering the impact of ASU 2024-03 on its consolidated financial statements.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. ASU 2025-03 provides clarifying guidance on determining the accounting acquirer in certain transactions involving VIEs. This update aims to improve consistency and comparability in financial reporting and will be effective for annual periods beginning after December 15, 2026, including interim periods within those annual periods. Early adoption is permitted. Implementation of ASU 2025-03 requires a prospective application. The Company is currently reviewing the provisions of this update and does not expect the adoption of ASU 2025-03 to have a material impact on its consolidated financial statements.
20
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 aims to better align current software development processes when considering capitalization of internal-use software costs. ASU 2025-06 is effective for public business entities for fiscal years beginning after December 15, 2027 and interim periods within those annual periods. The Company is currently evaluating the impact on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The amendments clarify interim disclosure requirements and the applicability, form, and content of interim financial statements, including a principle addressing disclosure of events since the last annual reporting period that have a material impact on an entity. The amendments are effective for the Company beginning with the quarter ending March 31, 2028, with early adoption permitted, and may be applied prospectively or retrospectively. The Company is evaluating the effect of the amendments on its interim disclosures but does not expect adoption to have a material impact on its consolidated financial statements and related disclosures.
The Company considers the applicability and impact of all ASUs. ASUs not listed above were evaluated and determined to either be not applicable, already adopted and disclosed or not material upon adoption.
Note 3 – Business Combination and Asset Acquisition
Valiant Business Combination
On March 2, 2026, the Company closed on the acquisition of all of the issued and outstanding equity interests of Riverstone Oilfield Services and Equipment, Inc., a Delaware corporation (the “Acquired Company”), from Riverway Group, a Cayman Islands exempted company with limited liability (the “Seller”) pursuant to the Stock Purchase Agreement dated as of February 1, 2026 (the “Purchase Agreement”) by and between the Company and the Seller. The Acquired Company is the parent company of its wholly owned subsidiary, Valiant Artificial Lift Solutions, LLC (“Valiant”).
Valiant was one of the largest private, pure-play providers of ESP systems in the U.S., providing linear ESP systems, surface fluid transfer systems, and well surveillance solutions to operators primarily in the Permian Basin. Strategically, this transaction (the “Valiant Acquisition”) is expected to afford the Company with opportunities to realize significant synergies with its existing product and service offerings. The Valiant Acquisition is expected to enhance the Company’s ability to support customers earlier in the well’s production lifecycle and maintain ongoing involvement as operating conditions evolve, creating additional operational opportunities throughout the life of the well. The Company also expects to leverage its expanded footprint and customer relationships to cross-sell these complementary technologies across its combined customer base, supporting continued growth in the Permian Basin and other U.S. basins.
In connection with the consummation of the Valiant Acquisition, the Company paid aggregate consideration of approximately $
The Company accounted for the Valiant Acquisition as a business combination pursuant to ASC 805, which requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their acquisition date fair value. Any excess of consideration transferred over the estimated fair value of assets acquired, net of liabilities assumed, is recorded as goodwill. Determining the fair value of acquired assets and liabilities assumed requires
21
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
management to make estimates, assumptions and judgments, and in some cases, management may also utilize third-party specialists to assist and advise on those estimates.
The purchase price allocation presented below remains preliminary as the Company finalizes its valuation of certain assets acquired and liabilities assumed as of the acquisition date. The provisional amounts relate primarily to property and equipment, identifiable intangible assets, deferred income taxes and the resulting goodwill. Based on the information currently available, the Company does not expect any further refinements to the preliminary purchase price allocation to be material. The Company will finalize the purchase price allocation within the measurement period, but no later than one year from the acquisition date.
During the three months ended September 30, 2026, the Company recognized measurement period adjustments to the preliminary purchase price allocation in connection with refunds of tariffs previously paid by Valiant. Based on management's evaluation of the underlying tariff costs and their relationship to assets acquired and liabilities assumed as of the acquisition date, the Company adjusted the amounts assigned to inventories, other current assets, property, plant and equipment, and accrued expenses. These adjustments resulted in an increase of approximately $
The following table presents the adjusted preliminary purchase price allocation of the acquisition date fair value of the major classes of the assets acquired and liabilities assumed as of March 2, 2026 (in thousands):
|
As of March 2, |
|
||
Assets acquired: |
|
|
|
|
Cash and cash equivalents |
$ |
|
|
|
Accounts receivable, net |
|
|
|
|
Inventories (1) |
|
|
|
|
Other current assets (1) |
|
|
|
|
Property, plant and equipment (1) |
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
Finance lease right-of-use assets |
|
|
|
|
Intangible assets |
|
|
|
|
Total assets acquired |
|
|
|
|
Liabilities assumed: |
|
|
|
|
Accounts payable |
|
|
|
|
Accrued expenses (1) |
|
|
|
|
Deferred revenue |
|
|
|
|
Operating lease obligations |
|
|
|
|
Finance lease obligations |
|
|
|
|
Deferred tax liability |
|
|
|
|
Total liabilities assumed |
|
|
|
|
Total identifiable net assets |
|
|
|
|
Goodwill (1) |
|
|
|
|
Total purchase price |
$ |
|
|
|
____________________________
(1)
22
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The fair value of the assets acquired and liabilities assumed are categorized in the following levels:
Property, plant and equipment acquired consists primarily of (i) leased fleet assets such as cable, pumps, transformers, variable speed drives and (ii) machinery equipment and manufacturing fixtures. These assets will be depreciated on a straight-line basis over the estimated useful lives of the assets.
Preliminary value of identifiable intangible assets relates to contract-based customer relationship, trade name and non-compete agreement with certain executives of Valiant and will be amortized over the period of expected benefit for each respective asset.
|
Cost Basis |
|
|
Useful Life (years) |
||
Non-compete agreement |
$ |
|
|
|
||
Trade name |
|
|
|
|
||
Customer relationships |
|
|
|
|
||
Customer contract |
|
|
|
|
||
|
$ |
|
|
|
|
|
The significant assumptions used by management in determining the fair values of intangible assets include future revenues, margins, discount rates, customer attrition rates, royalty rates, and terminal growth rates. The discount rate used was
The preliminary allocation of purchase price above includes approximately $
The following table sets forth the acquisition consideration for the Valiant Acquisition as of March 2, 2026 (in thousands):
|
As of March 2, |
|
||
Cash consideration, excluding Valiant's cash on hand |
$ |
|
|
|
Cash consideration for Valiant's cash on hand |
|
|
|
|
Equity consideration |
|
|
|
|
Total purchase price |
$ |
|
|
|
Net Sales and net income of Valiant included in the accompanying condensed consolidated statements of operations for the period from March 2, 2026 to September 30, 2026 were $
23
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
following table sets forth the unaudited supplemental pro forma financial information for the three and nine months ended September 30, 2026 and 2025, as if the Company had completed the Valiant Acquisition on January 1, 2025 (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Pro forma revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Pro forma net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Archrock Asset Acquisition
On
The purchase price allocation related to the Archrock acquisition, excluding $
|
Cost Basis |
|
|
Useful Life (years) |
|
||||
Property, plant and equipment |
$ |
|
|
|
|
|
|||
Intangible assets - customer contracts |
|
|
|
|
|
|
|
||
Inventory |
|
|
|
|
|
N/A |
|
||
Total consideration transferred |
$ |
|
|
|
|
|
|
||
Note 4 – Revenue Recognition
The Company’s revenues are derived from multiple sources. The following are descriptions of its principal revenue generating activities.
Rental Revenue
The Company earns rental revenue from leasing production equipment, primarily artificial lift and compression systems, under operating leases in accordance with the authoritative guidance for leases (“ASC 842”).
Sales Revenue
Sales revenue is recognized in accordance with ASC 606, which follows a five-step model to determine when and how revenue is recorded. Typically, contracts involve a single performance obligation, and revenue is recognized at a
24
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
point in time when control of the product transfers to the customer. Sales revenue is measured as the fixed consideration expected from the customer, with payments generally collected within 15 to 70 days. Since the time between the sale and payment does not exceed a year, the Company does not include a financing component in its contracts. Additionally, there are no material costs associated with obtaining contracts, no right of return, and no significant post-delivery obligations.
The Company’s sales revenue primarily comes from three categories: (i) equipment and compressors, (ii) oil & gas products and parts, and (iii) maintenance and repair services:
Disaggregation of Revenues
The following table presents the Company's revenue disaggregated by reportable segment (see Note 17 – Segment Information), major product and service lines, revenue recognition characteristics, and geographical markets for the three and nine months ended September 30, 2026 (in thousands):
|
|
Three Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2026 |
|
||||||||||||||||||||||||||||||||||
Segments |
|
Production |
|
|
Natural Gas |
|
|
Other and Eliminations |
|
|
Total |
|
|
Production |
|
|
Natural Gas |
|
|
Other and Eliminations |
|
|
Total |
|
||||||||||||||||
Major Product/Service Lines |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Surface equipment (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||||
Downhole components (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vapor recovery (2) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||||
Natural gas systems |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||||
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
Timing of Revenue Recognition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Goods and services transferred at a point in time |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
Services transferred over time |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
Geographical Markets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
United States |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
____________________________
(1)
(2)
25
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table presents the Company's revenue disaggregated by reportable segment (see Note 17 – Segment Information), major product and service lines, revenue recognition characteristics, and geographical markets for the three and nine months ended September 30, 2025 (in thousands):
|
|
Three Months Ended September 30, 2025 |
|
|
Nine Months Ended September 30, 2025 |
|
||||||||||||||||||||||||||||||||||
Segments |
|
Production |
|
|
Natural Gas |
|
|
Other and Eliminations |
|
|
Total |
|
|
Production |
|
|
Natural Gas |
|
|
Other and Eliminations |
|
|
Total |
|
||||||||||||||||
Major Product/Service Lines |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Surface equipment (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||||
Downhole components (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vapor recovery (2) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||||
Natural gas systems |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||||
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
Timing of Revenue Recognition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Goods and services transferred at a point in time |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
Services transferred over time |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
Geographical Markets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
United States |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||||
___________________________
(1)
(2)
Deferred Revenue
As of September 30, 2026, the Company had a deferred revenue balance of $
Note 5 – Inventory
Inventory consists of the following as of September 30, 2026 and December 31, 2025 (in thousands):
|
|
As of |
|
|
As of |
|
||||
|
|
2026 |
|
|
2025 |
|
||||
Components, parts and materials |
|
$ |
|
|
|
$ |
|
|
||
Finished goods |
|
|
|
|
|
|
|
|
||
Work in progress |
|
|
|
|
|
|
|
|
||
Inventory |
|
|
|
|
|
|
|
|
||
Less: inventory allowance |
|
|
|
( |
) |
|
|
|
( |
) |
Inventory, net |
|
$ |
|
|
|
$ |
|
|
||
26
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 6 – Property, Plant and Equipment
Property, plant and equipment consist of the following as of September 30, 2026 and December 31, 2025 (in thousands):
|
|
As of |
|
|
As of |
|
||||
|
|
2026 |
|
|
2025 |
|
||||
Land |
|
$ |
|
|
|
$ |
|
|
||
Buildings |
|
|
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
|
|
||
Vehicles |
|
|
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
|
|
||
Property, plant and equipment |
|
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
|
( |
) |
|
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
|
$ |
|
|
||
The Company’s rental fleet included in machinery and equipment was $
Depreciation expense for the three months ended September 30, 2026 and 2025 was approximately $
The Company reviews long-lived tangible assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events and changes may include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in our business strategy, among others. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to estimated future undiscounted net cash flows expected to be generated by the asset. Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its fair value estimated using future discounted net cash flows.
27
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 7 – Leases
Amounts Recognized in the Condensed Consolidated Balance Sheets
The condensed consolidated balance sheets consist of the following amounts relating to operating and finance leases (in thousands):
|
|
As of |
|
|
As of |
|
||||
|
|
2026 |
|
|
2025 |
|
||||
Operating right-of-use assets |
|
|
|
|
|
|
|
|
||
Real property |
|
$ |
|
|
|
$ |
|
|
||
|
|
$ |
|
|
|
$ |
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
|
|
||
Current |
|
$ |
|
|
|
$ |
|
|
||
Non-current |
|
|
|
|
|
|
|
|
||
|
|
$ |
|
|
|
$ |
|
|
||
|
|
As of |
|
|
As of |
|
||||
|
|
2026 |
|
|
2025 |
|
||||
Finance right-of-use assets |
|
|
|
|
|
|
|
|
||
Vehicles |
|
$ |
|
|
|
$ |
|
|
||
|
|
$ |
|
|
|
$ |
|
|
||
Finance lease liabilities |
|
|
|
|
|
|
|
|
||
Current |
|
$ |
|
|
|
$ |
|
|
||
Non-current |
|
|
|
|
|
|
|
|
||
|
|
$ |
|
|
|
$ |
|
|
||
Additions to operating right-of-use assets during the nine months ended September 30, 2026 and 2025, were approximately $
The weighted average lessee’s incremental borrowing rate applied to the operating and finance lease liabilities as of September 30, 2026 was
28
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Amounts Recognized in the Condensed Consolidated Statements of Operations
The condensed consolidated statements of operations consist of the following amounts relating to leases (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Amortization of real property operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(included in general and administrative expenses) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Interest expense (recovery) of vehicles finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(included in interest expense) |
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|||
Depreciation of vehicles finance right-of-use assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(included in depreciation and amortization) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable lease expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Short-term lease expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
The table below shows the total cash outflows for leases for the periods presented (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Operating cash flows from operating leases |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Financing cash flows from finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash outflows for leases |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
The table below reconciles the undiscounted future minimum operating and finance lease payments to the operating and finance lease liabilities recorded on the balance sheet as of September 30, 2026 (in thousands):
|
|
Operating |
|
|
Finance |
|
||||
Remainder of 2026 |
|
$ |
|
|
|
$ |
|
|
||
2027 |
|
|
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
|
|
||
Total future minimum lease payments |
|
|
|
|
|
|
|
|
||
Less: Amount of lease payments representing |
|
|
|
( |
) |
|
|
|
( |
) |
Present values of future minimum lease payments |
|
$ |
|
|
|
$ |
|
|
||
Lessor Accounting
Rental agreements are for the rental of our compression and ESP systems to customers. Rental revenue for the nine months ended September 30, 2026 and 2025, were approximately $
29
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
On September 1, 2026, a certain customer exercised its contractual right to early terminate operating leases for several compressor units, effective October 1, 2026. The Company accounted for the termination as a lease modification under ASC 842 and included the contractual early termination fee in the revised lease consideration, which is recognized on a straight-line basis over the shortened lease term. As a result, the Company recognized approximately $
Scheduled future minimum lease payments to be received by the Company as of September 30, 2026 for each of the next five years is as follows (in thousands):
|
|
Amount |
|
||
Remainder of 2026 |
|
$ |
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
2029 |
|
|
|
|
|
2030 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
|
Note 8 – Goodwill and Intangible Assets, Net
Goodwill
The following table summarizes the activity in goodwill balance for periods presented below (in thousands):
|
|
Natural Gas Technologies |
|
|
Production Solutions |
|
|
Total |
|
||||||||||||||||||||||||||
|
|
Goodwill |
|
|
Accumulated |
|
|
Goodwill, net of |
|
|
Goodwill |
|
|
Accumulated |
|
|
Goodwill, net of |
|
|
Goodwill, net of |
|
||||||||||||||
Balance as of December 31, 2024 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
||||||
Additions to goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Goodwill impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance as of September 30, 2025 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance as of December 31, 2025 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
||||||
Additions to goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Goodwill impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance as of September 30, 2026 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
||||||
As discussed in Note 3 – Business Combination and Asset Acquisition, the Company accounted for the Valiant Acquisition as a business combination pursuant to ASC 805, and recorded excess consideration above the fair value of identifiable assets acquired, net of liabilities assumed, as goodwill in the amount of $
Goodwill is not subject to amortization but is tested for impairment on an annual basis or more frequently if indicators arise. No events or changes in circumstances were present as of September 30, 2026, which indicated the fair value of the Company's reporting unit was below the respective carrying amount. As such,
30
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Intangible Assets
Intangible assets, net, consist of the following as of September 30, 2026 and December 31, 2025 (in thousands):
|
|
As of September 30, 2026 |
|
|
As of December 31, 2025 |
|
||||||||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||||||||||
Developed technology |
|
$ |
|
|
|
|
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
Trade name |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||
Customer relationships |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||
Non-compete agreement |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||
Patent |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||
Customer contracts |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
||||
Amortization expense totaled $
The Company reviews finite-lived identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. If such indicators are present, the Company performs a recoverability test by comparing the estimated future undiscounted net cash flows expected to be generated by the asset group to its carrying amount. If the carrying amount of the asset group exceeds the estimated future undiscounted net cash flows, an impairment loss is recognized in the period in which the impairment occurs and represents the excess of the asset carrying value over its estimated fair value. During the nine months ended September 30, 2026 and 2025, the Company did
As of September 30, 2026, the weighted average remaining useful lives for the Company's intangible assets are as follows:
Developed technology |
|
|
Trade name |
|
|
Customer relationships |
|
|
Non-compete agreement |
|
|
Patent |
|
|
Customer contracts |
|
Amortization expense is classified in operating expenses on the accompanying consolidated statements of operations.
Remainder of 2026 |
$ |
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
|
$ |
|
|
31
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 9 – Supplemental Information to the Condensed Consolidated Financial Statements
Allowance for Credit Losses
The following table summarizes the change in the accounts receivable allowance for credit losses for the periods presented (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Accounts receivable allowance for credit losses, |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Write-offs |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts receivable allowance for credit losses, |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Contract Balances
The following table provides information about accounts receivable and deferred revenues from contracts with customers (in thousands):
|
|
As of |
|
|
As of |
|
||||
|
|
2026 |
|
|
2025 |
|
||||
Accounts receivable, net |
|
$ |
|
|
|
$ |
|
|
||
Deferred revenue |
|
$ |
|
|
|
$ |
|
|
||
The Company does not disclose the aggregate transaction price for remaining performance obligations, generally because either the revenue from the satisfaction of the performance obligations is recognized in the amount invoiced or the original expected duration of the contract is one year or less.
Contract liabilities represent consideration received or consideration which is unconditionally due from customers prior to transferring goods or services to the customer under the terms of the contract and is included within deferred revenue in the accompanying consolidated balance sheets.
The following table presents a reconciliation of contract liabilities for the periods presented (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Deferred revenue, beginning of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Acquired from Valiant Business Combination |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
Deposits received |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue recognized |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Adjustment to acquired deferred revenue from |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
Deferred revenue, end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
During the three and nine months ended September 30, 2026, the Company recognized $
32
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Accrued Liabilities
Accrued liabilities as of September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
|
|
As of |
|
|
As of |
|
||||
|
|
2026 |
|
|
2025 |
|
||||
Accrued payroll and employee expenses |
|
$ |
|
|
|
$ |
|
|
||
Accrued taxes |
|
|
|
|
|
|
|
|
||
Customer deposits |
|
|
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
|
|
||
Accrued legal claims |
|
|
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
|
$ |
|
|
||
Supplemental Cash Flow Information (in thousands)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Supplemental disclosures of investing and financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Cash paid for income taxes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Supplemental schedule of non-cash activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Establishment of deferred tax asset under Tax |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
||||
Establishment of liabilities under Tax Receivable |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
||||
Lease liabilities arising from obtaining operating |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Lease liabilities arising from obtaining financing |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Note 10 – Long-Term Debt
Long-term debt consists of the following as of September 30, 2026 and December 31, 2025 (in thousands):
|
|
As of |
|
|
As of |
|
||||
|
|
2026 |
|
|
2025 |
|
||||
Revolving Credit Facility |
|
$ |
|
|
|
$ |
|
|
||
Total debt |
|
|
|
|
|
|
|
|
||
Less: Current maturities |
|
|
|
|
|
|
|
|
||
Total long-term debt, net |
|
$ |
|
|
|
$ |
|
|
||
Revolving Credit Facility
On August 20, 2024, Flowco LLC and its subsidiaries (the “Borrowers”) entered into a credit agreement, as amended to date, (the “Credit Agreement”), which provides for a $
33
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
$
The Revolving Credit Facility matures on
The borrowing base is determined by eligible accounts receivable, inventory, and equipment values, subject to reserves. Borrowing availability depends on the lesser of the aggregate revolving commitment or borrowing base, minus outstanding loans and letters of credit. Borrowings can be based on either an alternate base rate or a term SOFR rate, with interest margins ranging from
The Revolving Credit Facility contains financial covenants with respect to minimum interest coverage ratio and maximum total leverage ratio, as detailed below.
The Borrowers were in compliance with all covenants as of September 30, 2026.
The debt issuance costs are being amortized to interest expense over the life of the Revolving Credit Facility. Unamortized debt issuance costs are included in other assets in the accompanying condensed consolidated balance sheets. The Company recorded $
The schedule of future maturities of long-term debt as of September 30, 2026, consists of the following (in thousands):
|
|
Amount |
|
||
Remainder of 2026 |
|
$ |
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
2029 |
|
|
|
|
|
2030 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total debt |
|
$ |
|
|
|
Note 11 – Income Taxes and Tax Receivable Agreement
Provision for Income Taxes
The Company is organized as a corporation for income tax purposes and is subject to federal, state and local taxes on its income, which is primarily sourced from its membership interest in Flowco LLC held for any given reporting period. Flowco LLC is a partnership for U.S. federal and state income tax purposes and is considered as a pass-through entity. As such, its net taxable income and related tax credits, if any, are passed through to its members and included in the members' tax returns. The income or losses attributable to the non-controlling interest holders are not included
34
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
in the Company’s federal or state income tax returns. Consequently, the tax effects of the redeemable non-controlling interests are reflected as a permanent difference in the Company’s effective tax rate reconciliation.
For the three and nine months ended September 30, 2026, the Company recorded income tax provision of $
For the three months ended September 30, 2025 and the period from January 16, 2025, to September 30, 2025, the Company recorded income tax benefit of $
Significant reconciling items between this effective rate and the U.S. federal statutory tax rate of
Tax Receivable Agreement
In connection with the IPO and the Transactions in January 2025, the Company entered into the Tax Receivable Agreement (“TRA”) with the Continuing Equity Owners that provides for the payment by the Company to the Continuing Equity Owners of
The TRA liability is calculated by determining the tax basis subject to the TRA and applying a blended tax rate to the basis differences and calculating the resulting iterative impact. The blended tax rate consists of the U.S. federal income tax rate and an assumed combined state and local income tax rate driven by the apportionment factors applicable to each state. Subsequent changes to the measurement of the TRA liability are recognized in the statements of income as a component of other expense, net.
During the three and nine months ended September 30, 2026, the Company acquired an aggregate of
As of September 30, 2026, the total amount due under the TRA was $
35
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Valiant Acquisition
On March 2, 2026, the Company completed the Valiant Acquisition, see Note 3 – Business Combination and Asset Acquisition. The Company accounted for the Valiant Acquisition as a business combination pursuant to ASC 805, which required, among other things, that identifiable assets acquired and liabilities assumed be recognized at their acquisition date fair value. Any excess of consideration transferred over the estimated fair value of assets acquired, net of liabilities assumed, was recorded as goodwill. Additionally, the tax basis of the acquired net assets differed from their respective book bases, which was calculated at their acquisition date fair value. Accordingly, certain assets and liabilities retained their historical tax basis, while their fair values were stepped-up for financial reporting purposes in accordance with ASC 805. This resulted in temporary differences, related to identifiable assets and other fair value adjustments recognized in purchase accounting. As a result of these differences, the Company recorded a deferred tax liability of $
Note 12 – Stockholders’ Equity and Redeemable Non-Controlling Interests
Equity Structure Prior to the IPO
Prior to the IPO, members’ equity was inclusive of additional paid-in capital and retained earnings of Flowco LLC. The capital structure of Flowco LLC consisted of only one class of limited partnership interests, Class A units. As of January 15, 2025, Flowco LLC had
Post IPO and Current Equity Structure
The following table summarizes the capitalization and voting rights of the Company’s classes of stock as of September 30, 2026:
|
|
Authorized |
|
|
Issued & Outstanding |
|
|
Votes per Share |
|
Economic Rights |
||
Preferred stock |
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||
Common stock: |
|
|
|
|
|
|
|
|
|
|
||
Class A |
|
|
|
|
|
|
|
|
||||
Class B |
|
|
|
|
|
|
|
|
||||
The Company’s board of directors (“Board of Directors”) is authorized to direct the Company to issue shares of preferred stock in one or more series at its discretion to determine the number and designation of such series and the powers, rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Through September 30, 2026, no series of preferred stock have been issued.
Holders of shares of Class A common stock are entitled to receive dividends when and if declared by the Board of Directors out of funds legally available therefore, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock. Upon dissolution or liquidation, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of Class A common stock will be entitled to receive pro rata the remaining assets available for distribution. Holders of shares of Class A common
36
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
stock do not have preemptive, subscription, redemption, or conversion rights. There are no redemption or sinking fund provisions applicable to the Class A common stock.
Except in certain limited circumstances, holders of Class B common stock do not have any right to receive dividends or to receive a distribution upon dissolution or liquidation. Additionally, holders of shares of Class B common stock do not have preemptive, subscription or redemption rights. There are no redemption or sinking fund provisions applicable to the Class B common stock. Any amendment of the Company’s amended and restated certificate of incorporation that gives holders of Class B common stock (1) any rights to receive dividends or any other kind of distribution, (2) any right to convert into or be exchanged for shares of Class A common stock, or (3) any other economic rights (except for payments in cash-in-lieu of receipt of fractional stock) will require, in addition to any stockholder approval required by applicable law, the affirmative vote of holders of a majority of the voting power of the outstanding shares of Class A common stock voting separately as a class. The Company must, at all times, maintain (i) a one-to-one ratio between the number of shares of Class A common stock issued by the Company and the number of LLC Interests owned by the Company, and (ii) maintain a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing Equity Owners and the number of LLC Interests owned by such Continuing Equity Owners.
Shares of Class B common stock will be issued in the future only to the extent necessary to maintain a one-to-one ratio between the number of LLC Interests held by the Continuing Equity Owners and the number of shares of Class B common stock issued to the Continuing Equity Owners. Shares of Class B common stock are transferable only together with an equal number of LLC Interests. Only permitted transferees of LLC Interests held by the Continuing Equity Owners will be permitted transferees of Class B common stock. Shares of Class B common stock are automatically transferred to Flowco Holdings upon the redemption or exchange of their LLC Interests pursuant to the terms of the Flowco LLC Agreement and such shares of Class B common stock will be canceled and may not be reissued.
The LLC Interests held by Continuing Equity Owners include a redemption right which may be settled by the Company, through the (1) issuance of a new share of Class A common stock for each LLC Interest redeemed or (2) settled by cash proceeds received from a qualifying offering of Class A common stock. The LLC Interests are classified as temporary equity as the cash settlements are not at the sole discretion of the Company.
Redemptions of LLC Interests
During the nine months ended September 30, 2026, certain Continuing Equity Owners redeemed
As of September 30, 2026, the Company holds a
Share Repurchase Program
On June 11, 2025, the Board of Directors authorized a $
37
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
at any time. The timing of purchases and the number of shares repurchased under the Repurchase Program will depend on a variety of factors including price, trading volume, market conditions and corporate and regulatory requirements.
During the nine months ended September 30, 2026, the Company repurchased
As of September 30, 2026, the remaining total available authorization under the Repurchase Program was approximately $
Redeemable Non-Controlling Interests
After the IPO, the Company became the sole managing member of Flowco LLC, and has the sole voting interest in, and control of the management of, Flowco LLC. As a result, the Company consolidates the financial results of Flowco LLC. The redeemable non-controlling interests on the accompanying condensed consolidated balance sheets represents the economic interest in Flowco LLC held by the Continuing Equity Owners, adjusted to equal the greater of (i) the carrying value of the redeemable non-controlling interest adjusted each reporting period for income or loss attributable to the redeemable non-controlling interest or (ii) the redemption value. The redemption value is calculated based on the arithmetic average of the volume weighted average prices of Class A common stock on the trading day immediately prior to the end of each reporting period. Remeasurements to the redemption value of the redeemable non-controlling interest are performed at each reporting period and any required adjustments are recorded as an allocation between permanent equity and temporary equity within the condensed consolidated balance sheets. The portion of the net income or loss attributable to redeemable non-controlling interest is reported as net income or loss attributable to non-controlling interests on our condensed consolidated statements of operations.
The ownership of the LLC Interests as of September 30, 2026, is summarized as follows:
|
|
September 30, 2026 |
|
December 31, 2025 |
||||||||||||||||||
|
|
Shares |
|
|
Ownership % |
|
Shares |
|
|
Ownership % |
||||||||||||
Flowco Holdings interest in |
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
% |
||||
Continuing Equity Owners' |
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
% |
||||
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
% |
||||
Distributions to Members
As a limited liability company treated as a partnership for income tax purposes, Flowco LLC does not incur significant federal, state or local income taxes, as these taxes are primarily the obligations of its members. Under the LLC Agreement, Flowco LLC is required to distribute cash, to the extent that Flowco LLC has cash available, on a pro rata basis to its members, including the Company, to the extent necessary to cover the Company’s tax liabilities, if any, with respect to each member’s share of Flowco LLC’s taxable earnings. Additionally, the Company may also, from time to time, make supplemental tax distributions to the extent a member, other than the Company, has an assumed tax liability in excess of the distributions made; however, these supplemental distributions must be made on a pro rata basis to all members, including the Company.
38
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table summarizes total distributions made by Flowco LLC to the Continuing Equity Owners and the Company during the three and nine months ended September 30, 2026 and 2025 (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended September 30, |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Distributions to Continuing Equity Owners |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Distributions to the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Note 13 – Earnings per Share
Basic earnings per share is computed by dividing net income attributable to the Company by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share is computed by adjusting the net income available to the Company and the weighted average shares outstanding to give effect to potentially dilutive securities. Shares of Class B common stock are not entitled to receive any distributions or dividends and are therefore excluded from this presentation since they are not participating securities.
Earnings per share is presented for the three and nine months ended September 30, 2026, the three months ended September 30, 2025 and the period from after the IPO, January 16, 2025, to September 30, 2025. Prior to the IPO the membership structure consisted of Common Units and Class A Units. Flowco Holdings’ current capital structure is not reflective of the capital structure of Flowco LLC prior to the IPO and the Transactions. Therefore, earnings per share for the three and nine months ended September 30, 2025, has been calculated based solely on the post-IPO period, as earnings per share is not meaningful for the period from January 1, 2025 to January 15, 2025, due to the different capital structure.
39
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted net income per share of Class A common stock for the periods following the Transactions:
(in thousands, except share and per share data) |
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Flowco Holdings, Basic |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Add: Net income impact from assumed redemption of all LLC Interests to common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Income tax expense on net income attributable to NCI at |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Net income attributable to Flowco Holdings, Diluted |
|
$ |
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$ |
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$ |
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$ |
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||||
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||||
Denominator: |
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||||
Weighted average shares of common stock outstanding, Basic |
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||||
Dilutive effects of: |
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||||
LLC Interests that are exchangeable to common stock |
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||||
Unvested RSUs and PRSUs |
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||||
Weighted average shares of common stock outstanding, Diluted |
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||||
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||||
Basic earnings per share |
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$ |
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|
$ |
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$ |
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$ |
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|
||||
Diluted earnings per share |
|
$ |
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|
$ |
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$ |
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$ |
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|
||||
For the three and nine months ended September 30, 2026, the three months ended September 30, 2025, and for the period from January 16, 2025 to September 30, 2025, the assumed redemption of LLC Interests in exchange for shares of Class A common stock was dilutive under the if-converted method. Accordingly, the related net income attributable to redeemable non-controlling interests, adjusted for applicable income tax effects, was included in the numerator, and the corresponding incremental weighted-average shares of Class A common stock were included in the denominator in the computation of diluted earnings per share for each period presented.
The impact of unvested RSUs was dilutive and has been included using the treasury stock method for the three and nine months ended September 30, 2026, the three months ended September 30, 2025, and for the period from January 16, 2025 to September 30, 2025.
Note 14 – Stock-Based Compensation
The Company’s 2025 Equity and Incentive Plan (the “Equity Plan”) provides common-stock-based awards to both employees and non-employee directors. The Equity Plan is administered by the Company’s Board of Directors and by the compensation committee with respect to other participants and authorizes the Company to grant incentive stock-based awards. To date, no more than
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”). The Company recognizes compensation expense on all stock-based awards on a straight-line basis, measured using their respective grant-date fair value. The Company accounts for forfeitures when they occur and recognize the impact to compensation expense accordingly.
40
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The maximum number of shares that are subject to awards under the Equity Plan is subject to an annual increase equal to the lesser of
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||
|
|
2026 |
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2025 |
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2026 |
|
|
2025 |
|
||||||||
RSUs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
PRSUs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total compensation expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Restricted Stock Units
The RSU awards granted to the Company’s executives and employees generally vest over a three-year period, either vesting ratably in equal tranches over the vesting period or cliff vest on the third anniversary of the award grant date, with accelerated vesting upon a qualifying change in control of the Company. The RSU awards granted to non-employee directors vest in twelve equal installments on each of the first twelve quarterly anniversaries following the grant date of the award, subject to such non-employee director continuing in service through such date. Each RSU represents a contingent right to receive one share of Class A Common Stock.
The following table summarizes the RSU award activity under the Equity Plan for the nine months ended September 30, 2026:
|
Restricted Stock Units |
|
|||||||
|
Number of |
|
|
Weighted Average Grant Date Fair Value |
|
||||
Unvested as of December 31, 2025 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
Unvested as of September 30, 2026 |
|
|
|
|
|
|
|
||
There was approximately $
Performance Restricted Stock Units
The PRSU awards are granted to the Company’s executive officers. Under these awards, the number of shares vested and earned is typically determined at the end of a
41
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table summarizes the PRSU award activity under the Equity Plan for the nine months ended September 30, 2026:
|
Performance Restricted Stock Units |
|
|||||||
|
Number of |
|
|
Weighted Average Grant Date Fair Value |
|
||||
Unvested as of December 31, 2025 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
||
Unvested as of September 30, 2026 |
|
|
|
|
|
|
|
||
There was approximately $
Note 15 – Employee Benefit Plan
The Company maintains a 401(k) retirement savings plan for the employees who meet certain eligibility requirements. The Internal Revenue Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. Currently, the Company matches
The Company’s matching contributions amounted to approximately $
Note 16 – Commitments and Contingencies
Claims and Legal Proceedings
The Company is, and from time to time may be, subject to various claims and legal proceedings which arise in the ordinary course of business. The Company accrues liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
The Company also maintains insurance coverage for certain matters, including employment practices and other fiduciary liabilities. Insurance recoveries are recognized separately from the related loss contingency when recovery is deemed probable and are not offset against the related accrued liability in the accompanying condensed consolidated balance sheets.
As of September 30, 2026, the Company had accrued an estimated loss of $
Other than the matters described above, in the opinion of management, there are no pending legal matters that are likely to have a material adverse effect on the Company’s condensed consolidated financial position, results of operations or cash flows.
42
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 17 – Segment Information
Our operations are primarily based in the United States. All material revenues of the Company are derived from the United States. Substantially all long-lived assets of the Company are located in the U.S.
The Company identifies reportable operating segments based on management’s structure, the customers’ application of its products and services offered by each and the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) to assess segment performance and allocate resources among segments. The Company’s
The Company further disaggregates revenues by major product and service line within its reportable segments, as presented in Note 4 – Revenue Recognition.
Corporate headquarters and certain functional departments do not earn revenues but incur costs which do not constitute business activities. Therefore, these corporate headquarters and certain functional departments do not qualify as an operating segment and have been included within corporate and other, which is also not considered a reportable segment. Corporate and other includes (i) corporate and overhead costs, and (ii) capitalized costs related to the IPO and debt issuance and does not include any immaterial and aggregated operating segments.
43
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The tables below contain revenues and certain expenses regularly presented to the CODM in order to make decisions regarding the Company's business, including resource allocation and performance assessments for the periods presented (in thousands):
|
Three Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2026 |
|
||||||||||||||||||||||||
|
|
Production Solutions |
|
|
|
Natural Gas Technologies |
|
|
|
Total |
|
|
|
Production Solutions |
|
|
|
Natural Gas Technologies |
|
|
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues from external customers |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Elimination of intersegment revenue |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total consolidated revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cost of revenues from external customers (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Intersegment cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Elimination of intersegment cost of revenue |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total consolidated cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Gain) loss on sale of equipment |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||
Segment profit |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
||||||
Corporate expenses (2) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Other income, net |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Income before provision for income taxes |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
||||||
____________________________
(1)
(2)
44
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
|
Three Months Ended September 30, 2025 |
|
|
Nine Months Ended September 30, 2025 |
|
||||||||||||||||||||||||
|
|
Production Solutions |
|
|
|
Natural Gas Technologies |
|
|
|
Total |
|
|
|
Production Solutions |
|
|
|
Natural Gas Technologies |
|
|
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues from external customers |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Elimination of intersegment revenue |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total consolidated revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cost of revenues from external customers (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Intersegment cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Elimination of intersegment cost of revenue |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total consolidated cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Gain) loss on sale of equipment |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||
Segment profit |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
||||||
Corporate expenses (2) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Total operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income before provision for income taxes |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
||||||
____________________________
(1)
(2)
The following tables set forth certain selected financial information for our operating segments for the periods presented (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||||
|
|
2026 |
|
|
2025 |
|
||||
Segment capital expenditures: |
|
|
|
|
|
|
|
|
||
Production Solutions |
|
$ |
|
|
|
$ |
|
|
||
Natural Gas Technologies |
|
|
|
|
|
|
|
|
||
Total segment capital expenditures |
|
|
|
|
|
|
|
|
||
Corporate and other |
|
|
|
|
|
|
|
|
||
Total capital expenditures |
|
$ |
|
|
|
$ |
|
|
||
|
|
As of September 30, |
|
|||||||
|
|
2026 |
|
|
2025 |
|
||||
Segment assets: |
|
|
|
|
|
|
|
|
||
Production Solutions |
|
$ |
|
|
|
$ |
|
|
||
Natural Gas Technologies |
|
|
|
|
|
|
|
|
||
Total segment assets |
|
|
|
|
|
|
|
|
||
Eliminations |
|
|
|
( |
) |
|
|
|
( |
) |
Corporate and other |
|
|
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
|
$ |
|
|
||
45
Flowco Holdings Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 18 – Related Party
In connection with the IPO and related reorganization transactions in January 2025, the Company entered into a TRA with the Continuing Equity Owners. Certain of the Continuing Equity Owners are individuals and entities classified as related parties of the Company. Accordingly, transactions and obligations arising under the TRA with these individuals and entities are considered related party transactions. As of September 30, 2026, the Company's total outstanding liability under the TRA is $
Note 19 – Subsequent Events
On
On October 29, 2026, the Company’s Board of Directors approved an increase in the aggregate dollar amount authorized under the Repurchase Program from $
On
46
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 read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. The following discussion includes forward-looking statements that involve certain risks and uncertainties. For further information on items that could impact our future operating performance or financial condition, see Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and in our Quarterly Reports on Form 10-Q for the three months ended March 31, 2026 and June 30, 2026, and “Cautionary Statement Regarding Forward-Looking Statements” in this Quarterly Report. We assume no obligation to update any of these forward-looking statements, except as required by law. Unless otherwise indicated or the context otherwise requires, the historical financial information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects only the historical financial results of Flowco Holdings Inc. and its consolidated subsidiaries and references to the “Company,” “we,” “our,” or “us” are to Flowco Holdings Inc. and its consolidated subsidiaries.
Background and Business Overview
We are a leading provider of production optimization, artificial lift and emissions management and monetization solutions for the oil and natural gas industry. The Company’s core technologies include high pressure gas lift (“HPGL”), electric submersible pumps (“ESP”), conventional gas lift, plunger lift, and vapor recovery units (“VRUs”), all supported by proprietary digital tools that enable real-time remote monitoring and control to enhance efficiency and performance.
Consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources, our operations are conducted, managed and presented within the following two reportable segments:
The Production Solutions operations are critical to maximizing the economic lifespan and profitability of oil and gas wells, particularly as production naturally declines over time – especially in shale formations. The Company’s artificial lift and optimization technologies are essential in maintaining production rates and enabling wells to remain economically viable, making these offerings less discretionary and more integrated into ongoing operations.
In the Natural Gas Technologies segment, the Company also holds a leading position in the rapidly growing market for methane abatement, offering innovative VRUs and related technologies that capture fugitive emissions of methane and other hydrocarbons. These solutions not only provide economic value by monetizing captured gas, but also help customers achieve decarbonization goals and comply with increasingly stringent environmental regulations. Initially driven by safety and operational benefits, demand for these solutions has accelerated due to their strong return on investment and regulatory necessity. As a result, the Company’s offerings are viewed as indispensable in both economic and environmental contexts, providing our customers with durable earnings and stable through-cycle performance in their well productions.
Overall, we have strategically positioned ourselves to provide products and services that include a full range of equipment and technology solutions that enable our customers to efficiently and cost-effectively maximize the profitability and economic lifespan of the production phase of their operations. As a result of this strategic position, we are able to generate revenues throughout the long producing lives of oil and natural gas wells. Our products and services also integrate proprietary digital technologies that allow for remote monitoring and controls, and other enhanced uses of our equipment. We have an operating presence in every major onshore oil and natural gas producing region in the United States.
47
As of September 30, 2026, our Production Solutions and Natural Gas Technologies segments operated a combined fleet of over 5,500 active systems, generating consistent, recurring revenues through the long production life of wells. For a more detailed overview of our business, see Part I, Item 1, Business, and Part I, Item 2, Properties, included in our Annual Report.
Recent Developments and Trends
Lifting Solutions Acquisition
On October 2, 2026, we completed the acquisition of all of the issued and outstanding equity interests of Lifting Solutions Energy Services Inc. (“Lifting Solutions”), a vertically integrated manufacturer of artificial lift technologies headquartered in Edmonton, Alberta, Canada. The cash consideration totaled approximately CAD $159.0 million, or $111.8 million based on the exchange rate at closing, subject to customary purchase price adjustments, plus potential contingent consideration based on Lifting Solutions' financial performance during 2027. We funded the cash consideration through available capacity under our Revolving Credit Facility.
We believe this acquisition (“Lifting Solutions Acquisition”) strategically expands our artificial lift portfolio within the Production Solutions segment through the addition of continuous rod and progressing cavity pump (“PCP”) technologies, which were not previously part of our product offerings. These technologies complement our existing high pressure gas lift, conventional gas lift, plunger lift and electric submersible pump solutions, broadening our ability to address customers' artificial lift requirements across different stages of a well's producing life. In particular, the addition of rod lift and PCP technologies expands our participation in later-life well applications and provides opportunities to serve a broader addressable market.
Additionally, the acquisition represents a significant step in our strategy to expand our geographic footprint beyond the United States. Lifting Solutions has established operations and customer relationships across Canada, the Middle East and other international markets, providing a platform for continued international growth. We believe the combination of Lifting Solutions' existing international presence, manufacturing capabilities and complementary technologies with our established product portfolio and customer relationships creates opportunities for cross-selling and further market penetration across North America and international markets. For additional information on the Lifting Solutions Acquisition, see Note 19 – Subsequent Events of the notes to the condensed consolidated financial statements included in this Quarterly Report.
Valiant Acquisition
On March 2, 2026, we completed the previously announced agreement to acquire all of the issued and outstanding equity interests of Riverstone Oilfield Services and Equipment, Inc., a Delaware corporation (the “Acquired Company”), from Riverway Group, a Cayman Islands exempted company with limited liability (the “Seller”) pursuant to the Stock Purchase Agreement dated as of February 1, 2026 (the “Purchase Agreement”) by and between the Company and the Seller. The Acquired Company is the parent company of its wholly owned subsidiary, Valiant Artificial Lift Solutions, LLC (“Valiant”).
Pursuant to the Purchase Agreement, we paid aggregate consideration, including Valiant’s cash on hand, of approximately $316.0 million, consisting of (i) $283.2 million of cash, of which $113.2 million was related to Valiant’s cash on hand, subject to adjustment in accordance with the Purchase Agreement, and (ii) 1,454,849 shares of Class A common stock of the Company. We funded the cash portion of the acquisition through available capacity under our Revolving Credit Facility. Upon the consummation of this acquisition, both the Acquired Company and Valiant became our wholly owned subsidiaries.
We believe this acquisition (the “Valiant Acquisition”) strategically diversifies our complementary fleet within the Production Solutions segment and allows for significant expected synergies to our already vertically integrated business models across the long life production stages of a well. For additional information on the Valiant Acquisition,
48
see Note 3 – Business Combination and Asset Acquisition of the notes to the condensed consolidated financial statements in this Quarterly Report.
Macroeconomic Conditions and Outlook
We monitor macroeconomic conditions and industry-specific drivers and key risk factors affecting our business segments as we formulate our strategic plans and make decisions related to allocating capital and human resources. Our business segments provide products and services to support oil and natural gas production. As a result, we are substantially dependent upon global oil production levels, as well as operating expenditures and new investment activity levels in the oil and natural gas sector. Demand for our products and services is impacted by overall global demand for oil and natural gas, ongoing depletion rates of existing oil and natural gas wells, and our customers’ willingness to invest in the development of new oil and natural gas resources. Our customers determine their operating and capital budgets based on current and expected future crude oil and natural gas prices and expectation of industry cost levels, among other factors. Crude oil and natural gas prices are impacted by supply and demand, which are influenced by geopolitical, macroeconomic and local events, and have historically been subject to substantial volatility and cyclicality.
Over the mid to long-term, we expect demand for oil and natural gas exploration and production as well as new energy platforms to continue to require more advanced technology from the energy services industry. While uncertainty remains due to the factors discussed above, we believe our integrated portfolio of products and services, differentiated technologies and strong market position us to capitalize on opportunities across our end markets. Accordingly, we remain cautiously optimistic regarding our long-term growth prospects.
Tariff Environment and Mitigation Efforts
We continue to monitor developments in the global tariff environment and evaluate their potential impact on our operations, supply chain and cost structure. Although changes in tariffs and global trade policies may increase the cost of raw materials, affect product availability and contribute to inflationary pressures within our business and those of our customers, we do not currently expect the existing tariff environment to have a material impact on our business, financial condition or results of operations. Management continues to evaluate opportunities to mitigate tariff-related costs through sourcing, pricing and supply chain initiatives, while also pursuing available opportunities to recover previously paid tariffs through governmental actions, legal proceedings, administrative rulings and approved refund claims, where appropriate.
During the nine months ended September 30, 2026, we have received approximately $6.0 million of refunds related to previously paid tariffs. These refunds were allocated based on the nature of the underlying costs, including adjustments to inventory and rental fleet assets, amounts payable to customers, amounts attributable to acquisition-date assets and liabilities recognized in connection with the Valiant Acquisition, reductions to depreciation expense and amounts recognized as interest income. We continue to pursue additional eligible refunds as outstanding claims are processed, although the timing and amount of any additional recoveries remain uncertain. For additional information regarding the accounting treatment of these refunds, see Note 2 – Summary of Significant Accounting Policies of the notes to the condensed consolidated financial statements included in this Quarterly Report.
Critical Accounting Estimates
Refer to our “Critical Accounting Estimates” included in Part II, Item 7 – Management’s Discussions and Analysis included in our Annual Report for a discussion of our critical accounting estimates.
Consolidated Results of Operations
The following discussions relating to significant line items from our condensed consolidated statements of operations are based on available information and represent our analysis of significant changes or events that impact the
49
comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items.
We currently have two operating segments: (i) Production Solutions and (ii) Natural Gas Technologies. Our corporate headquarters and certain functional departments do not earn revenues but incur costs which do not constitute business activities. Therefore, these corporate headquarters and certain functional departments do not qualify as an operating segment and have been included within corporate and other, which is also not considered a reportable segment. Corporate and other includes (i) corporate and overhead costs, and (ii) capitalized costs related to IPO and debt issuance. Corporate does not include any immaterial and aggregated operating segments. The performance of our operating segments is primarily evaluated based on revenue and segment profit or loss with respect to such segments, in addition to other measures.
Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|
Change |
|
|||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rentals |
|
$ |
|
141,756 |
|
|
$ |
|
106,966 |
|
|
$ |
|
34,790 |
|
|
|
33 |
% |
Sales |
|
|
|
116,866 |
|
|
|
|
69,975 |
|
|
|
|
46,891 |
|
|
|
67 |
% |
Total revenues |
|
|
|
258,622 |
|
|
|
|
176,941 |
|
|
|
|
81,681 |
|
|
|
46 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of rentals (exclusive of |
|
|
|
36,870 |
|
|
|
|
29,295 |
|
|
|
|
7,575 |
|
|
|
26 |
% |
Cost of sales (exclusive of |
|
|
|
84,646 |
|
|
|
|
44,888 |
|
|
|
|
39,758 |
|
|
|
89 |
% |
Selling, general and administrative |
|
|
|
39,846 |
|
|
|
|
28,980 |
|
|
|
|
10,866 |
|
|
|
37 |
% |
Depreciation and amortization |
|
|
|
48,907 |
|
|
|
|
38,953 |
|
|
|
|
9,954 |
|
|
|
26 |
% |
Loss on sale of equipment |
|
|
|
422 |
|
|
|
|
232 |
|
|
|
|
190 |
|
|
|
82 |
% |
Income from operations |
|
|
|
47,931 |
|
|
|
|
34,593 |
|
|
|
|
13,338 |
|
|
|
39 |
% |
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
|
(4,856 |
) |
|
|
|
(2,757 |
) |
|
|
|
(2,099 |
) |
|
|
76 |
% |
Other income (expense), net |
|
|
|
(233 |
) |
|
|
|
229 |
|
|
|
|
(462 |
) |
|
|
(202 |
%) |
Total other expenses |
|
|
|
(5,089 |
) |
|
|
|
(2,528 |
) |
|
|
|
(2,561 |
) |
|
|
101 |
% |
Income before provision for income |
|
|
|
42,842 |
|
|
|
|
32,065 |
|
|
|
|
10,777 |
|
|
|
34 |
% |
Income tax benefit (provision) |
|
|
|
(2,129 |
) |
|
|
|
2,208 |
|
|
|
|
(4,337 |
) |
|
|
(196 |
%) |
Net income |
|
|
|
40,713 |
|
|
|
|
34,273 |
|
|
|
|
6,440 |
|
|
|
19 |
% |
Net income attributable to redeemable non-controlling interests |
|
|
|
20,588 |
|
|
|
|
21,756 |
|
|
|
|
(1,168 |
) |
|
|
(5 |
%) |
Net income attributable to |
|
$ |
|
20,125 |
|
|
$ |
|
12,517 |
|
|
$ |
|
7,608 |
|
|
|
61 |
% |
Revenue – rentals. Rental revenue was $141.8 million for the three months ended September 30, 2026, an increase of $34.8 million, or approximately 33%, compared to $107.0 million for the three months ended September 30, 2025. This increase was primarily attributable to the following:
50
Revenue – sales. Sales revenue was $116.9 million for the three months ended September 30, 2026, an increase of $46.9 million, or 67%, compared with $70.0 million for the three months ended September 30, 2025. The increase was primarily driven by higher sales of downhole components of approximately $21.1 million, including $18.6 million of incremental sales revenue generated from the Valiant Acquisition, which was completed in March 2026 and therefore was not included in the three months ended September 30, 2025. The increase also reflects higher sales of natural gas systems of approximately $24.8 million, primarily attributable to significantly higher customer order volumes during the three months ended September 30, 2026, compared to minimal sales activity during the three months ended September 30, 2025. Additionally, VRU sales increased approximately $0.9 million, primarily attributable to the timing of customer orders.
In addition to sales to our external customers, we sell our natural gas systems to our Production Solutions segment through intercompany transactions for further use in its operations. Intercompany sales of natural gas systems to the Production Solutions segment were approximately $1.6 million for the three months ended September 30, 2026, a decrease of approximately $16.5 million from approximately $18.1 million in the three months ended September 30, 2025. The decrease was primarily attributable to certain HPGL customers taking fewer new units than previously anticipated and delaying the timing of deliveries relative to their original schedules. All intercompany revenues have been eliminated in consolidation.
Cost of rentals. Rental cost was $36.9 million for the three months ended September 30, 2026, an increase of $7.6 million, or approximately 26%, compared to $29.3 million for the three months ended September 30, 2025. The increase was primarily attributable to higher costs of approximately $5.0 million associated with the surface equipment rental fleet, reflecting increased maintenance activities, higher operating costs and increased labor costs resulting from higher headcount. Additionally, vapor recovery rental costs increased approximately $1.0 million, generally consistent with the increase in vapor recovery rental revenue during the current-year period. The increase also included approximately $1.6 million of incremental costs associated with downhole component rental operations acquired in connection with the Valiant Acquisition in March 2026, which were not included in the three months ended September 30, 2025. Excluding the impact of the nonrecurring $9.1 million lease termination payment discussed above, the approximately 26% increase in cost of rentals was generally consistent with the 24% increase in rental revenue, with the slightly higher rate of cost growth primarily reflecting increased maintenance and labor expenses.
51
Cost of sales. Cost of sales was $84.6 million for the three months ended September 30, 2026, an increase of $39.8 million, or approximately 89%, compared to $44.9 million for the three months ended September 30, 2025. This increase was primarily attributable to approximately $21.7 million of higher cost associated with natural gas systems sales, reflecting significantly higher sales activity during the three months ended September 30, 2026 compared to minimal activity in the three months ended September 30, 2025. The increase also included approximately $12.9 million of incremental cost of sales associated with the Valiant Acquisition, which was completed in March 2026 and therefore was not included in the three months ended September 30, 2025. Additionally, cost of sales associated with legacy downhole component operations increased by approximately $4.4 million, while vapor recovery cost of sales increased approximately $0.8 million, generally consistent with the increases in the respective sales revenues discussed above.
Selling, general and administrative expenses. Selling, general and administrative expenses were $39.8 million for the three months ended September 30, 2026, an increase of $10.9 million, or approximately 37%, compared to $29.0 million for the three months ended September 30, 2025. The increase was primarily attributable to approximately $5.7 million of higher corporate selling, general and administrative expenses, driven by transaction-related costs incurred in connection with the anticipated Lifting Solutions acquisition (see Note 19 – Subsequent Events) and increased share-based compensation expense associated with the accelerated vesting of equity awards held by certain individuals. The increase also included approximately $4.0 million of incremental selling, general and administrative expenses associated with the Valiant Acquisition, which was completed in March 2026 and therefore was not included in the three months ended September 30, 2025. The remaining increase was primarily attributable to higher personnel and administrative expenses across the Company’s other operations.
Depreciation and amortization. Depreciation and amortization was $48.9 million for the three months ended September 30, 2026, an increase of $10.0 million, or approximately 26%, compared to $39.0 million for the three months ended September 30, 2025. The increase was primarily attributable to approximately $8.2 million of depreciation and amortization expense associated with the Valiant Acquisition, which was completed in March 2026 and therefore was not reflected in the three months ended September 30, 2025. Excluding the impact of the Valiant Acquisition, depreciation and amortization expense increased by approximately $1.8 million, primarily driven by the continued expansion of the Company's rental fleet, including additional assets placed into service and assets acquired in the Archrock acquisition, principally within the Estis and Flogistix operations.
Interest expense. Interest expense was $4.9 million for the three months ended September 30, 2026, an increase of $2.1 million, or approximately 76%, compared to $2.8 million in the three months ended September 30, 2025. This increase was primarily attributable to higher average outstanding borrowings under the Company’s Revolving Credit Facility during the three months ended September 30, 2026 compared to the three months ended September 30, 2025, largely resulting from additional borrowings incurred in March 2026 to fund the Valiant Acquisition. As a result, the Company maintained higher average debt balances throughout the three months ended September 30, 2026.
Income tax provision. Income tax provision was $2.1 million for the three months ended September 30, 2026, compared to an income tax benefit of $2.2 million for the three months ended September 30, 2025, representing an unfavorable swing of $4.3 million. This change was primarily attributable to the absence of a tax benefit recognized during the three months ended September 30, 2025, resulting from the enactment of the One Big Beautiful Bill Act (“OBBBA”) in July 2025. During the three months ended September 30, 2025, the Company revised its estimated income tax provision to reflect the reinstatement of 100% bonus depreciation for qualifying property under the OBBBA, resulting in a reversal of approximately $2.9 million of income tax expense previously recognized during the six months ended June 30, 2025. This benefit was partially offset by approximately $0.7 million of additional Texas margin tax expense during three months ended September 30, 2025.
52
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|
Change |
|
|||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rentals |
|
$ |
|
396,299 |
|
|
$ |
|
306,366 |
|
|
$ |
|
89,933 |
|
|
|
29 |
% |
Sales |
|
|
|
307,712 |
|
|
|
|
256,140 |
|
|
|
|
51,572 |
|
|
|
20 |
% |
Total revenues |
|
|
|
704,011 |
|
|
|
|
562,506 |
|
|
|
|
141,505 |
|
|
|
25 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of rentals (exclusive of |
|
|
|
104,643 |
|
|
|
|
83,748 |
|
|
|
|
20,895 |
|
|
|
25 |
% |
Cost of sales (exclusive of |
|
|
|
221,259 |
|
|
|
|
173,033 |
|
|
|
|
48,226 |
|
|
|
28 |
% |
Selling, general and administrative |
|
|
|
111,977 |
|
|
|
|
92,197 |
|
|
|
|
19,780 |
|
|
|
21 |
% |
Depreciation and amortization |
|
|
|
139,774 |
|
|
|
|
106,237 |
|
|
|
|
33,537 |
|
|
|
32 |
% |
Loss on sale of equipment |
|
|
|
916 |
|
|
|
|
255 |
|
|
|
|
661 |
|
|
|
259 |
% |
Income from operations |
|
|
|
125,442 |
|
|
|
|
107,036 |
|
|
|
|
18,406 |
|
|
|
17 |
% |
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
|
(14,801 |
) |
|
|
|
(14,567 |
) |
|
|
|
(234 |
) |
|
|
2 |
% |
Other income (expense), net |
|
|
|
(723 |
) |
|
|
|
521 |
|
|
|
|
(1,244 |
) |
|
|
(239 |
%) |
Total other expenses |
|
|
|
(15,524 |
) |
|
|
|
(14,046 |
) |
|
|
|
(1,478 |
) |
|
|
11 |
% |
Income before provision for income |
|
|
|
109,918 |
|
|
|
|
92,990 |
|
|
|
|
16,928 |
|
|
|
18 |
% |
Income tax provision |
|
|
|
(10,807 |
) |
|
|
|
(4,320 |
) |
|
|
|
(6,487 |
) |
|
|
150 |
% |
Net income |
|
|
|
99,111 |
|
|
$ |
|
88,670 |
|
|
$ |
|
10,441 |
|
|
|
12 |
% |
Net income attributable to redeemable non |
|
|
|
59,029 |
|
|
|
|
64,510 |
|
|
|
|
(5,481 |
) |
|
|
(8 |
%) |
Net income attributable to |
|
$ |
|
40,082 |
|
|
$ |
|
24,160 |
|
|
$ |
|
15,922 |
|
|
|
66 |
% |
Revenue – rentals. Rental revenue was $396.3 million for the nine months ended September 30, 2026, an increase of $89.9 million, or approximately 29%, compared to $306.4 million for the nine months ended September 30, 2025. The increase was primarily attributable to the following:
53
Revenue – sales. Sales revenue was $307.7 million for the nine months ended September 30, 2026, an increase of $51.6 million, or approximately 20%, compared to $256.1 million for the nine months ended September 30, 2025. The increase was primarily attributable to approximately $43.0 million of incremental downhole component sales generated from the Valiant Acquisition, which was completed in March 2026 and therefore was not included in the nine months ended September 30, 2025. The increase also included approximately $13.6 million of higher natural gas systems sales, primarily driven by increased sales activity during the nine months ended September 30, 2026. These increases were partially offset by a decrease of approximately $2.6 million in sales of legacy downhole component parts, primarily reflecting lower international sales associated with ongoing conflicts in the Middle East and reduced business activity in the Gulf of America. Additionally, vapor recovery unit sales decreased approximately $2.4 million, primarily attributable to the timing of customer orders for large equipment.
In addition to sales to our external customers, we sell our natural gas systems through intercompany transactions for further use in the Production Solutions segment. Approximately $26.6 million of intercompany natural gas system sales to the Production Solutions segment were recognized in the nine months ended September 30, 2026, a decrease of approximately $17.7 million in intercompany revenues from approximately $44.3 million in the nine months ended September 30, 2025. The decrease was primarily attributable to certain HPGL customers taking fewer new units than previously anticipated and delaying the timing of deliveries relative to their original schedules. All intercompany revenues have been eliminated in consolidation.
Cost of rentals. Cost of rentals was $104.6 million for the nine months ended September 30, 2026, an increase of $20.9 million, or approximately 25%, compared to $83.7 million for the nine months ended September 30, 2025. The increase was primarily attributable to approximately $16.8 million of higher costs associated with the surface equipment rental fleet, reflecting increased rental activity, higher maintenance expenditures and operating costs associated with the rental fleet, and increased labor costs resulting from higher headcount. Additionally, vapor recovery rental costs increased approximately $1.7 million, reflecting increased rental activity during the nine months ended September 30, 2026. The increase also included approximately $2.3 million of incremental costs associated with downhole component rental operations acquired in connection with the Valiant Acquisition in March 2026, which was not included in the nine months ended September 30, 2025. Excluding the impact of the nonrecurring $9.1 million lease termination payment discussed above, the approximately 25% increase in cost of rentals was generally consistent with the 26% increase in rental revenue, although surface equipment rental costs increased at a higher rate due to the additional maintenance and labor expenses.
Cost of sales. Cost of sales was $221.3 million for the nine months ended September 30, 2026, an increase of $48.2 million, or approximately 28%, compared to $173.0 million for the nine months ended September 30, 2025. This increase was primarily attributable to approximately $30.4 million of incremental cost of sales associated with the Valiant Acquisition, which was completed in March 2026 and therefore was not included in the nine months ended September 30, 2025. The increase also included approximately $14.4 million of higher costs associated with natural gas systems sales, reflecting increased sales activity during the nine months ended September 30, 2026. Additionally, cost of sales associated with legacy downhole component operations increased approximately $4.1 million. These increases were partially offset by a decrease of approximately $0.6 million in vapor recovery unit cost of sales, generally consistent with the decrease in related sales revenue discussed above.
54
Selling, general and administrative expenses. Selling, general and administrative expenses for the nine months ended September 30, 2026 were $112.0 million, an increase of $19.8 million, or approximately 21%, compared to $92.2 million for the nine months ended September 30, 2025. The increase was primarily attributable to approximately $12.2 million of higher corporate selling, general and administrative expenses, primarily driven by increased legal and professional fees incurred in connection with the Valiant Acquisition and the anticipated Lifting Solutions (see Note 19 – Subsequent Events), higher share-based compensation expense, including the accelerated vesting of equity awards held by certain individuals and increased employee-related expenses. The increase also included approximately $9.3 million of incremental selling, general and administrative expenses associated with the Valiant Acquisition, which was completed in March 2026 and therefore was not reflected in the nine months ended September 30, 2025. These increases were partially offset by a net decrease of approximately $1.8 million in selling, general and administrative expenses across the Company’s other operations, primarily reflecting the absence of certain nonrecurring legacy equity-based compensation crystallization expenses recognized during the nine months ended September 30, 2025 in connection with the Company's IPO.
Depreciation and amortization. Depreciation and amortization was $139.8 million for the nine months ended September 30, 2026 an increase of $33.5 million, or approximately 32%, from $106.2 million for the nine months ended September 30, 2025. The increase was primarily attributable to approximately $18.8 million of incremental depreciation and amortization expense associated with the Valiant Acquisition, which was completed in March 2026 and therefore was not included in the nine months ended September 30, 2025. Excluding the impact of the Valiant Acquisition, depreciation and amortization expense increased by approximately $14.8 million, primarily driven by the continued expansion of the Company's rental fleet, including additional assets placed into service and assets acquired in the Archrock acquisition, principally within the Estis and Flogistix operations.
Interest expense. Interest expense was $14.8 million in the nine months ended September 30, 2026, an increase of $0.2 million compared to $14.6 million in the nine months ended September 30, 2025. Interest expense remained relatively consistent between the periods, as higher interest expense during the second and third quarters of 2026, primarily attributable to increased average outstanding borrowings under the Company’s Revolving Credit Facility incurred in March 2026 to fund the Valiant Acquisition, was substantially offset by lower interest expense during the first quarter of 2026 compared to the nine months ended September 30, 2025.
Income tax provision. Income tax provision was $10.8 million for the nine months ended September 30, 2026, an increase of $6.5 million, or approximately 150%, compared to $4.3 million for the nine months ended September 30, 2025. The increase was primarily attributable to the Company’s increased ownership interest in Flowco LLC during the nine months ended September 30, 2026, resulting in a higher proportion of income subject to corporate-level income taxation. The increase also reflects the absence of a tax benefit recognized during the nine months ended September 30, 2025 following the enactment of the OBBBA in July 2025, which resulted in a reversal of a portion of the income tax provision previously recognized during the six months ended June 30, 2025.
Liquidity and Capital Resources
IPO and Subsequent Transactions
On January 15, 2025, we consummated our IPO and received $461.8 million net proceeds from the sale of 20,470,000 shares of our Class A common stock. The net proceeds from our IPO were used to purchase 20,470,000 newly issued LLC Interests directly from Flowco LLC at a price per unit equal to the IPO price per share of Class A common stock.
In connection with the IPO described above, Flowco LLC used the net proceeds received from us to: (i) redeem approximately $20.9 million of Flowco LLC interests from certain non-affiliate holders and (ii) with respect to the remainder, repay indebtedness under our Credit Agreement in the amount of $440.0 million.
55
Sources of Liquidity and Indebtedness
As of September 30, 2026, we had $137.8 million of cash and cash equivalents. We believe existing cash and cash equivalents and cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We have historically generated cash and funded our operations primarily from cash flows from operating activities as well as availability under our Credit Agreement. Borrowings under our Credit Agreement have a maturity date of August 20, 2029, at which all principal owed is payable upon maturity. Our interest rate is Term Secured Overnight Finance Rate (“SOFR”) for one month plus 0.1% (“Adjusted REVSOFR30”) plus a contractual applicable margin based on the Company’s calculated leverage ratio, which combined approximates 5.46% per annum at the effective date with interest due monthly. If such rate is below contractual minimums, the interest rate will be calculated based on Adjusted Term SOFR Rate, Adjusted REVSOFR30 Rate or the Adjusted Daily Simple SOFR Rate. Depending upon market conditions and other factors, we may also have the ability to issue additional equity and/or debt, as needed.
As of October 30, 2026, we had $355.7 million outstanding borrowings and $364.8 million available borrowing capacity under our Credit Agreement.
Additional Liquidity Requirements
As a holding company, we have no material assets other than our ownership of LLC Interests in Flowco LLC. As such, we have no independent means of generating revenue. The Flowco LLC Agreement provides for the payment of certain distributions to the Continuing Equity Owners and to us in amounts sufficient to cover the income taxes imposed on the Company with respect to the allocation of taxable income from Flowco LLC as well as to cover our obligations under the TRA and other administrative expenses.
Regarding the ability of Flowco LLC to make distributions to us, the terms of their financing arrangements (including the Credit Facility) contain covenants that may restrict Flowco LLC or its subsidiaries from paying such distributions, subject to certain exceptions. Further, Flowco LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Flowco LLC (with certain exceptions), as applicable, exceed the fair value of its assets.
In addition, under the TRA, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the TRA. We expect the amount of the cash payments that we will be required to make under the TRA will be significant. The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the TRA will generally reduce the amount of overall cash flow that might have otherwise been available to us.
Additionally, when we declare any cash dividends, we intend to cause Flowco LLC to make distributions to us in amounts sufficient to fund such cash dividends declared by us to our stockholders. Deterioration in the financial condition, earnings, or cash flow of Flowco LLC for any reason could limit or impair their ability to pay such distributions.
If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could materially affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent we are unable to make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due
56
under the TRA. In addition, if Flowco LLC does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.
See Part I – Item 1A. Risk Factors-Risks Related to our Organizational Structure in our Annual Report.
Dividends
Our Board of Directors may elect to declare cash dividends on our Class A common stock, subject to our compliance with applicable law, and depending on, among other things, economic conditions, our financial condition, results of operations, projections, liquidity, earnings, legal requirements, and restrictions in the agreements governing our indebtedness.
In February, May and July 2026, our Board of Directors declared and paid a cash dividend of $0.08 per share payable to holders of Class A common stock of record as of the close of business February 13, 2026, and $0.09 per share payable to holders of Class A common stock of record as of the close of business on each of May 15, 2026 and August 14, 2026 (the “Common Stock Dividend”). In conjunction with the Common Stock Dividend, Flowco LLC declared a distribution on its units of $0.08 to all unitholders of record of Flowco LLC as of the close of business on February 13, 2026 and $0.09 per unit to all unitholders of record of Flowco LLC as of the close of business on each of May 15, 2026 and August 14, 2026. On August 10, 2026, our Board of Directors approved a one-time special cash dividend of $0.14 per share payable to holders of Class A common stock as of the close of business on August 21, 2026 (the “Special Dividend”). The Special Dividend applies only to the Company’s outstanding shares of Class A common stock and represents a one-time, discretionary event. The declaration and payment of future dividends will be at the discretion of our Board of Directors and will depend on future business conditions, financial conditions, results of operations and other factors.
Common Share Repurchase Program
On June 11, 2025, our Board of Directors authorized a share repurchase program (the “Repurchase Program”) for up to $50 million of our Class A common stock. Repurchases under the Repurchase Program may be made from time to time through open market purchases, privately negotiated transactions, or other means in accordance with applicable regulations of the Securities and Exchange Commission. The timing of purchases and the number of shares repurchased under the Repurchase Program will depend on a variety of factors including price, trading volume, market conditions and corporate and regulatory requirements. The Repurchase Program does not obligate us to repurchase any particular amount of shares and may be modified, suspended, or discontinued at any time.
During the three months ended September 30, 2026, we did not repurchase any shares under the Repurchase Program. During the nine months ended September 30, 2026, we repurchased and subsequently retired 780,000 shares of our Class A common stock at an average price of $21.18 per share, excluding commissions. As of September 30, 2026, the remaining total available authorization under the Repurchase Program was approximately $18.5 million.
On October 29, 2026, our Board of Directors approved an increase in the aggregate amount authorized under the Repurchase Program from $50 million to $200 million. The increased authorization provides additional flexibility to return capital to stockholders, subject to prevailing market conditions, liquidity needs and other capital allocation priorities. See Note 19 – Subsequent Events to the condensed consolidated financial statements for additional information.
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Cash Flow Analysis
The following table summarizes our cash flows for the periods presented (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||||
|
|
2026 |
|
|
2025 |
|
||||
Net cash provided by operating activities |
|
$ |
|
277,041 |
|
|
$ |
|
207,194 |
|
Net cash used in investing activities |
|
$ |
|
(264,577 |
) |
|
$ |
|
(175,644 |
) |
Net cash provided by (used in) financing activities |
|
$ |
|
120,829 |
|
|
$ |
|
(28,930 |
) |
Operating Cash Flows – Net cash provided by operating activities was $277.0 million in the nine months ended September 30, 2026 compared to $207.2 million in the nine months ended September 30, 2025, an increase of approximately $69.8 million. The increase was primarily attributable to higher cash receipts from customers driven by increased revenues and operating activity, as well as the timing of payments to vendors, suppliers and other third parties.
Investing Cash Flows – Net cash used in investing activities was $264.6 million and $175.6 million for the nine months ended September 30, 2026 and 2025, respectively. The approximately $89.0 million increase in net cash used was primarily attributable to the cash paid for the Valiant acquisition during the nine months ended September 30, 2026.
Financing Cash Flows – Net Cash provided by financing activities was $120.8 million for nine months ended September 30, 2026, compared to net cash used in financing activities of $28.9 million in the nine months ended September 30, 2025, representing a favorable change of $149.7 million. The change was primarily attributable to a $609.0 million increase in net cash flows from long-term debt, reflecting higher borrowings and lower debt repayments during the nine months ended September 30, 2026. The higher borrowings were primarily driven by additional amounts drawn under our Revolving Credit Facility in March 2026 to fund the Valiant Acquisition, while the lower debt repayments reflected the significant repayment of outstanding indebtedness during the nine months ended September 30, 2025, using proceeds from our IPO. The change also reflected the absence of approximately $20.9 million of cash to purchase LLC Interests from the Continuing Equity Owners following our IPO in January 2025. These favorable changes were partially offset by the absence of $461.8 million IPO proceeds received during the nine months ended September 30, 2025, an $11.9 million increase in dividends paid to Class A common stockholders, $5.5 million increase in distributions to members of Flowco LLC, and $1.5 million of additional cash used for repurchases of the Company’s Class A common stock.
Critical Accounting Policies and Estimates
In preparing our financial statements in conformity with U.S. GAAP, we must make decisions that impact the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, we apply judgments based on our understanding and analysis of the relevant circumstances, historical experience, and business valuations. Actual amounts could differ from those estimated at the time the Consolidated Financial Statements are prepared.
Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to our accompanying financial statements included elsewhere in this Quarterly Report on Form 10-Q. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition, or
58
results of operations. There have been no material changes to the Company’s critical accounting estimates since our Annual Report, except as described below.
Fair Value Estimates in Business Combination Accounting
Business combination accounting requires that assets acquired and liabilities assumed be recorded at their estimated fair value in connection with the initial recognition of the transaction. Estimating fair value of assets acquired and liabilities assumed in connection with business combination accounting requires management to make estimates, assumptions and judgments, and in some cases management may also utilize third-party specialists to assist and advise on those estimates.
In order to estimate the fair value of assets acquired and liabilities assumed, we utilized widely accepted valuation techniques, including discounted cash flow and cost methods. The discounted cash flow method utilizes assumptions that include, but are not limited to, estimated future cash flows, discount rates applied to estimated future cash flows, estimated rates of return and estimated customer attrition rates. Cost methods estimate the fair value of assets based on the estimated construction, and in some cases, replacement cost of the assets, and requires the use of various inputs and assumptions. While we believe that we have made reasonable assumptions to estimate the fair value, these assumptions are inherently uncertain. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions, and their interdependence, that can materially affect our estimates.
The purchase price allocation recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies, and our consolidated financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if as an emerging growth company we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our systems of internal controls over financial reporting pursuant to Section 404, (ii) provide all the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Act, (iii) comply with the requirement of the PCAOB regarding the communication of critical audit matters in the auditor’s report on the financial statements, and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply until we no longer meet the requirements of being an emerging growth company. We will remain an emerging growth company until the earliest of: (i) the last day of the fiscal year in which it has total annual gross revenues of $1.235 billion or more; (ii) the last day of the fiscal year following the fifth anniversary of the IPO; (iii) the date on which the Company has issued more than $1 billion in non-convertible debt during the previous three-year period; or (iv) the date on which the Company is deemed to be a “large accelerated filer,” which means the market value of the Company’s Class A common stock
59
that is held by non-affiliates exceeds $700.0 million as of the last business day of the most recently completed second fiscal quarter (following twelve months from the IPO).
Recent Accounting Pronouncements
For a discussion of new accounting pronouncements recently adopted and not yet adopted, refer to Note 2 – Summary of Significant Accounting Policies to our accompanying condensed consolidated financial statements in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in interest rates and inflation. These market risks arise in the normal course of business. During the nine months ended September 30, 2026, there have been no material changes to the information included under Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of September 30, 2026.
Based on the evaluation of our disclosure controls and procedures, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of September 30, 2026 due to the material weaknesses in our internal control over financial reporting described below.
Notwithstanding the material weaknesses discussed below, we believe our condensed consolidated financial statements fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented, in accordance with GAAP.
Previously Reported Material Weaknesses
As disclosed in Item 9A – Controls and Procedures of our Annual Report, we previously identified material weaknesses in our internal control over financial reporting, which continue to exist as of September 30, 2026. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
We identified the following material weaknesses in our internal control over financial reporting:
This material weakness contributed to the following additional material weaknesses:
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The material weaknesses resulted in a revision to a disclosure in the consolidated financial statements as of and for the year ended December 31, 2023, and immaterial adjustments to the consolidated financial statements as of and for the years ended December 31, 2023 and 2022, and as of and for the nine-month period ended September 30, 2024. The material weaknesses also resulted in adjustments recorded prior to the issuance of the consolidated financial statements as of and for the year ended December 31, 2024 and an adjustment to a disclosure recorded prior to the issuance of the condensed consolidated financial statements as of and for the nine-month period ended September 30, 2024. The material weaknesses also resulted in a revision to the previously issued consolidated financial statements for the interim periods prior to September 30, 2025, the annual period ended December 31, 2024 and the previously filed prospectus for the nine months ended September 30, 2024. The material weaknesses also resulted in a revision to the previously issued unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, the three and nine months ended September 30, 2025, and the three months ended March 31, 2026, and to the previously issued audited consolidated financial statements for the year ended December 31, 2025. See Note 2 – Summary of Significant Accounting Policies within this Quarterly Report for more information. In addition, in connection with the preparation of the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026, the material weaknesses resulted in a reclassification adjustment between additional paid-in capital and retained earnings.
These material weaknesses could result in misstatements of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.
Remediation Plans
We have taken, and will continue to take, steps to address the material weaknesses, including:
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We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to the material weaknesses are remediated. We have made progress towards remediation and will continue to implement our remediation plan for the material weaknesses in internal control over financial reporting described above. We will not consider the material weaknesses remediated until the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the period covered in this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we are subject to mediation, arbitration, litigation, or claims arising in the ordinary course of business. The results of any current or future claims or proceedings cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and litigation costs, diversion of management resources, reputational harm, and other factors. We do not believe that any existing claims or proceedings will have a material effect on our business, consolidated financial condition or results of operations.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed under Part I, Item 1A. Risk Factors in our Annual Report and Part II, Item 1A. Risk Factors in our Quarterly Reports on Form 10-Q for the three months ended March 31, 2026 and June 30, 2026. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this Quarterly Report. Except as set forth in our Quarterly Reports on Form 10-Q for the three months ended March 31, 2026 and June 30, 2026, there have been no material changes in the risks affecting the Company since the filing of our Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Trading Arrangements
Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Insider Trading Policy permits our directors and executive officers to enter into trading plans designed to comply with Rule 10b5-1. Other than the plan discussed below, during the three months ended September 30, 2026, none of our executive officers or directors
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Aggregate Number of Securities to be Sold |
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Appointment of Executive Vice President
Effective August 11, 2026, the Company appointed Gareth Ford as Executive Vice President, Production Solutions. Mr. Ford joined the Company in March 2026 in connection with the Company’s acquisition of Valiant, where he previously served as Chief Executive Officer. In his new role, Mr. Ford will oversee the Company’s Production Solutions segment and report directly to the Company’s President and Chief Executive Officer.
Share Repurchase Program
On October 29, 2026, the Company’s Board of Directors approved an increase in the aggregate amount authorized under the Company's existing share repurchase program from $50 million to $200 million for repurchases of the Company's Class A common stock, par value $0.0001 per share. Repurchases under the program may be made from time to time through open-market transactions, privately negotiated transactions or other permitted means, subject to applicable legal and regulatory requirements. The timing and amount of any repurchases will depend on various factors, including the Company's stock price, trading volume, market conditions, liquidity and capital requirements, and other corporate considerations. The program does not obligate the Company to repurchase any particular amount of shares and may be modified, suspended or discontinued at any time.
Item 6. Exhibits.
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Incorporated by Reference |
||
Exhibit Number |
Exhibit Description |
Form |
Exhibit |
Filing Date |
2.1 |
Contribution Agreement, dated as of June 20, 2024, by and among Flowco MergeCo LLC, GEC Estis Holdings LLC, Flowco Production Solutions, L.L.C. and Flogistix Holdings, LLC |
S-1 |
2.1 |
01-13-2025 |
2.1+ |
Stock Purchase Agreement dated February 1, 2026, by and between Flowco Holdings Inc. and Riverway Group |
8-K |
2.1 |
02-02-2026 |
3.1 |
Amended and Restated Certificate of Incorporation of Flowco Holdings Inc. |
S-8 |
4.1 |
01-17-2025 |
3.2 |
Amended and Restated Bylaws of Flowco Holdings Inc. |
S-8 |
4.2 |
01-17-2025 |
4.1 |
Registration Rights and Lock-Up Agreement, dated March 2, 2026, by and between Flowco Holdings Inc. and Riverway Group |
8-K |
4.1 |
03-03-2026 |
10.1 |
Flowco Holdings Inc. 2026 Employee Stock Purchase Plan |
8-K |
10.1 |
05-08-2026 |
10.2* |
Executive Employment Agreement by and between Gareth C. Ford and Flowco MasterCo LLC, dated as of August 11, 2026. |
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31.1* |
Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer |
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31.2* |
Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer |
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32.1** |
Section 1350 Certification of Principal Executive Officer |
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32.2** |
Section 1350 Certification of Principal Financial Officer |
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101 INS* |
Inline XBRL Instance Document |
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101.SCH* |
Inline XBRL Taxonomy Extension Schema Document |
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104* |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* Filed herewith
64
** Furnished herewith. The certifications attached as Exhibits 32.1 and 32.2 to this Quarterly Report are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in such filing.
# Indicates management contract or compensatory plan
+ Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). Flowco agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request.
65
SIGNATURES
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.
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Flowco Holdings Inc. |
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Date: November 4, 2026 |
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By: |
/s/ Jonathan W. Byers |
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Jonathan W. Byers |
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Chief Financial Officer (Principal Financial Officer) |
66