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 the accompanying unaudited condensed consolidated financial statements and related notes. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs, and expected performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in “Cautionary Note Regarding Forward-Looking Statements,” the Annual Report under the heading “Item 1A. Risk Factors,” and in “Part II – Other Information, Item 1A. Risk Factors” included herein. We assume no obligation to update any of these forward-looking statements.
Overview
The Company, together with its subsidiaries, is a leading integrated energy services and technology company focused on providing innovative hydraulic fracturing services and related technologies to onshore oil and natural gas E&P companies. We offer customers hydraulic fracturing services, together with complementary services including wireline services, proppant delivery solutions, field gas processing and treating, CNG delivery, data analytics, related goods (including our sand mine operations), and technologies to facilitate lower emission completions, thereby helping our customers reduce their emissions profile. We have grown from one active hydraulic fracturing fleet in December 2011 to approximately 40 active fleets as of March 31, 2025. We provide our services primarily in the major oil and gas shale basins in North America and in the Northern Territory of Australia.
In early 2023, the Company launched Liberty Power Innovations LLC (“LPI”), an integrated alternative fuel and power solutions provider for remote applications. LPI provides CNG supply, field gas processing and treating, and well site fueling and logistics. LPI was formed to support the Company’s transition towards our next generation digiFleets℠ and dual fuel fleets, as CNG fueling services can be limited in the market, yet critical to maintaining highly efficient well site operations. Through the first quarter of 2025, LPI was primarily focused on supporting an industry transition to natural gas fueled technologies, serving as a key enabler of the next step of cost and emissions reductions in the oilfield. In January 2025, we announced LPI’s intent to expand into the distributed power business, where we expect to leverage our experience in providing electric power for our digiFrac℠ pumps into other areas inside and outside of the oilfield.
Business Developments
On March 3, 2025, we completed the acquisition of IMG Energy Solutions, a leading developer of distributed power systems, for cash consideration of approximately $19.6 million, subject to normal closing adjustments and net of cash received. The IMG Acquisition brings integrated capabilities across engineering design and development, construction management, enhanced software and monitoring systems, operations and marketing. We believe the IMG Acquisition will strengthen LPI by incorporating IMG Energy Solutions’s advanced engineering designs, software control systems, utility interconnection experience and power marketing expertise.
Business Strategy and Technical Innovation
We believe technical innovation and strong relationships with our customer and supplier bases distinguish us from our competitors and are the foundations of our business. We expect that E&P companies will continue to focus on technological innovation as completion complexity and fracture intensity of horizontal wells increases, particularly as customers are increasingly focused on reducing emissions from their completions operations. We remain proactive in developing innovative solutions to industry challenges, including developing: (i) our databases of U.S. unconventional wells to which we apply our proprietary multi-variable statistical analysis technologies to provide differential insight into fracture design optimization; (ii) our Liberty Quiet Fleet® design which significantly reduces noise levels compared to conventional hydraulic fracturing fleets; (iii) hydraulic fracturing fluid systems tailored to the specific reservoir properties in the basins in which we operate; (iv) our dual fuel dynamic gas blending (“DGB”) fleets that allow our engines to run diesel or a combination of diesel and natural gas, to optimize fuel use, reduce emissions and lower costs; (v) our digiFleets℠, comprising of digiFrac℠ and digiPrime℠ pumps and other complementary equipment, including power generation units (together “digiTechnologies℠”), our innovative, purpose-built electric and hybrid frac pumps that have approximately 25% lower CO2e emission profile than the Tier IV DGB; (vi) our wet sand handling technology which eliminates the need to dry sand, enabling the deployment of mobile mines nearer to wellsites; and (vii) the launch of LPI to support the transition to our digiFleets as well as the transition to lower costs and emissions in the oilfield. In addition, our integrated supply chain includes proppant, chemicals, equipment, natural gas fueling services, logistics and integrated software which we believe promotes wellsite efficiency and leads to more pumping hours and higher productivity throughout the year to better service our customers. In order to achieve our technological objectives, we carefully manage our liquidity and debt position to promote operational flexibility and invest in the business throughout the full commodity cycle in the regions we operate.
Recent Trends and Outlook
Global oil markets are contending with tariff impacts, geopolitical tensions, and oil supply dynamics, including the evolving OPEC+ production strategy and potential constraints on Iranian, Russian, and Venezuelan oil exports. While recent volatility in commodity prices is not immediately driving changes in North American production activity, oil producers are evaluating a range of scenarios in anticipation of oil price pressure in light of the foregoing. Gas producers could prove to be beneficiaries of potentially lower associated gas production in oily basins if oil production is curtailed. Larger, well-capitalized producers, that comprise a greater portion of present North American shale production, are better able to withstand a broader range of commodity prices.
Most producers have targeted flat to modest production growth for 2025 and today’s frac activity supports maintaining current oil production levels. Natural gas fundamentals are expected to be more favorable during the year on rising LNG export capacity demand.
During the first quarter of 2025, the posted WTI price traded at an average of $71.78 per barrel (“Bbl”), as compared to the first quarter of 2024 average of $77.50 per Bbl, and the fourth quarter of 2024 average of $70.73 per Bbl. Subsequent to March 31, 2025, the WTI price traded lower at an average of $64.18 per Bbl through April 14, 2025. In addition, the Henry Hub price traded at an average of $4.14 per one million British thermal units (“MMBtu”), as compared to the first quarter of 2024 average of $2.44 per MMBtu, and the fourth quarter of 2024 average of $2.15 per MMBtu. Subsequent to March 31, 2025, the Henry Hub traded lower at an average of $3.82 per MMBtu through April 14, 2025, still well above prior period prices. The average domestic onshore rig count for the United States and Canada was 788 rigs reported in the first quarter of 2025, down from the average in the first quarter of 2024 of 810, and up from the fourth quarter of 2024 of 765, according to a report from Baker Hughes.
Results of Operations
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024 | | | | | | | | | | | | | | | | | |
| Three months ended March 31, |
| Description | 2025 | | 2024 | | Change |
| (in thousands) |
| Revenue | $ | 977,461 | | | $ | 1,073,125 | | | $ | (95,664) | |
| Cost of services, excluding depreciation, depletion, and amortization shown separately | 761,616 | | | 782,680 | | | (21,064) | |
| General and administrative | 65,775 | | | 52,986 | | | 12,789 | |
| Transaction and other costs | 811 | | | — | | | 811 | |
| Depreciation, depletion, and amortization | 127,742 | | | 123,186 | | | 4,556 | |
| Loss (gain) on disposal of assets, net | 3,345 | | | (1,160) | | | 4,505 | |
| Operating income | 18,172 | | | 115,433 | | | (97,261) | |
| Other (income) expense, net | (9,745) | | | 7,063 | | | (16,808) | |
| Net income before income taxes | 27,917 | | | 108,370 | | | (80,453) | |
| Income tax expense | 7,806 | | | 26,478 | | | (18,672) | |
| Net income | 20,111 | | | 81,892 | | | (61,781) | |
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Revenue
Our revenue decreased $95.7 million, or 9%, to $977.5 million for the three months ended March 31, 2025 compared to $1.1 billion for the three months ended March 31, 2024. The decrease in revenue was primarily attributable to a decrease in service and materials pricing, partially offset by higher activity levels primarily from increased fleet efficiency.
Cost of Services
Cost of services (excluding depreciation, depletion, and amortization) decreased $21.1 million, or 3%, to $761.6 million for the three months ended March 31, 2025 compared to $782.7 million for the three months ended March 31, 2024. The decrease in expense was primarily related to decreases in materials costs and lower repairs and maintenance costs, partially offset by increased personnel costs related to higher activity levels discussed above.
General and Administrative
General and administrative increased 24%, to $65.8 million for the three months ended March 31, 2025 compared to $53.0 million for the three months ended March 31, 2024. The increase was primarily attributable to increased stock-based compensation expense recognized in connection with the resignation of Christopher A. Wright, the Company’s previous Chief Executive Officer and Chairman of the Board, from the Company upon his confirmation to the Secretary of Energy of the United States.
Transaction and Other Costs
Transaction and other costs were $0.8 million for the three months ended March 31, 2025, with no such costs recorded for the three months ended March 31, 2024, for costs related to the IMG Acquisition. See Note 2—Significant Accounting Policies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for further details.
Depreciation, Depletion, and Amortization
Depreciation, depletion, and amortization expense increased $4.6 million, or 4%, to $127.7 million for the three months ended March 31, 2025 compared to $123.2 million for the three months ended March 31, 2024. The increase during the three months ended March 31, 2025 was due to additional finance leases entered into during the period for heavy equipment.
Loss (Gain) on Disposal of Assets, net
The Company recorded a loss on disposal of assets of $3.3 million for the three months ended March 31, 2025 compared to a gain on disposal of assets of $1.2 million for the three months ended March 31, 2024. The loss as of March 31, 2025 was primarily the result of the Company selling equipment that is no longer in use as part of normal course fleet and equipment management. The gain as of March 31, 2024 primarily related to the scrapping of fully depreciated equipment.
Other (Income) Expense, Net
Other (income) expense, net changed by $16.8 million to $9.7 million income for the three months ended March 31, 2025 compared to $7.1 million expense for the three months ended March 31, 2024. Other (income) expense, net is comprised of gain on investments, net of $19.3 million related to investments in equity securities measured at fair value for the three months ended March 31, 2025, with no such gain or loss on investments during the three months ended March 31, 2024. Interest expense, net increased $2.0 million primarily as a result of the addition of finance lease liabilities, refer to “Liquidity and Capital Resources” below for further discussion of the Company’s finance leases. Additionally, interest income—related party decreased $0.5 million related to a note receivable agreement executed in December 2022, amended in August 2023, and fully collected in March 2024.
Income Tax Expense
The Company recognized income tax expense of $7.8 million for the three months ended March 31, 2025, an effective rate of 28%, compared to $26.5 million for the three months ended March 31, 2024, an effective rate of 24%. The decrease in income tax expense was primarily attributable to the decrease in net income before income taxes, as discussed above.
Comparison of Non-GAAP Financial Measures
We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income before interest, income taxes, and depreciation, depletion, and amortization. We define Adjusted EBITDA as EBITDA adjusted to eliminate the effects of items such as non-cash stock-based compensation, new fleet or new basin start-up costs, fleet lay-down costs, gain or loss on the disposal of assets, net, bad debt reserves, transaction and other costs, the gain or loss on remeasurement of liability under our tax receivable agreements, the gain or loss on investments, net, and other non-recurring expenses that management does not consider in assessing ongoing performance.
Our Board, management, investors, and lenders use EBITDA and Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation, depletion, and amortization) and other items that impact the comparability of financial results from period to period. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.
Note Regarding Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance and results of operations. Net income is the GAAP financial measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net income, which is the most directly comparable GAAP financial measure for the periods presented:
Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024: EBITDA and Adjusted EBITDA | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| Description | 2025 | | 2024 | | Change |
| (in thousands) |
| Net income | $ | 20,111 | | | $ | 81,892 | | | $ | (61,781) | |
| Depreciation, depletion, and amortization | 127,742 | | | 123,186 | | | 4,556 | |
| Interest expense, net | 9,543 | | | 7,063 | | | 2,480 | |
| Income tax expense | 7,806 | | | 26,478 | | | (18,672) | |
| EBITDA | $ | 165,202 | | | $ | 238,619 | | | $ | (73,417) | |
| Stock-based compensation expense | 18,080 | | | 7,327 | | | 10,753 | |
| Gain on investments, net | (19,288) | | | — | | | (19,288) | |
| Transaction and other costs | 811 | | | — | | | 811 | |
| Loss (gain) on disposal of assets, net | 3,345 | | | (1,160) | | | 4,505 | |
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| Adjusted EBITDA | $ | 168,150 | | | $ | 244,786 | | | $ | (76,636) | |
EBITDA was $165.2 million for the three months ended March 31, 2025 compared to $238.6 million for the three months ended March 31, 2024. Adjusted EBITDA was $168.2 million for the three months ended March 31, 2025 compared to $244.8 million for the three months ended March 31, 2024. The decreases in EBITDA and Adjusted EBITDA primarily resulted from lower pricing and partially offset by changes in activity levels in 2025 as described above under the captions Revenue, Cost of Services, and General and Administrative for the Three Months Ended March 31, 2025, Compared to the Three Months Ended March 31, 2024.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity consist of cash flows from operations and borrowings under our ABL Facility. We believe that we can fund operations and current organic growth plans with these sources. We monitor the availability and cost of capital resources such as equity, debt, and lease financings that could be leveraged for current or future financial obligations including those related to acquisitions, capital expenditures, working capital, and other liquidity requirements. We may incur additional indebtedness or issue equity in order to meet our capital expenditure activities and liquidity requirements, as well as to fund organic and other growth opportunities that we pursue, including via acquisition. Our primary uses of capital have been capital expenditures to support growth, both organic and through acquisitions, and funding ongoing operations, including maintenance and fleet upgrades, as well as the repurchases of, and dividends on, shares of our Class A Common Stock.
Cash and cash equivalents increased by $4.1 million to $24.1 million as of March 31, 2025 compared to $20.0 million as of December 31, 2024, while working capital excluding cash and current liabilities under debt and lease arrangements decreased $36.1 million.
As of March 31, 2025, the Company was party to one credit agreement, which provides for a revolving line of credit up to $525.0 million. The ABL Facility is subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory available to finance working capital needs. As of March 31, 2025, the borrowing base was calculated to be $363.9 million, and the Company had $210.0 million outstanding, in addition to letters of credit in the amount of $14.0 million, with $139.9 million of remaining availability.
The ABL Facility contains covenants that restrict our ability to take certain actions. As of March 31, 2025, we were in compliance with all debt covenants.
See Note 7— Debt to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for further details.
We have no material off balance sheet arrangements as of March 31, 2025, except for purchase commitments under supply agreements as disclosed above under Note 14—Commitments & Contingencies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report. As such, we are not materially exposed to any other financing, liquidity, market, or credit risk that could arise if we had engaged in such financing arrangements.
Share Repurchase Program
Under our share repurchase program, the Company is authorized to repurchase up to $750.0 million of outstanding Class A Common Stock through July 31, 2026. Shares may be repurchased from time to time for cash in open market transactions, through block trades, in privately negotiated transactions, through derivative transactions, or by other means in accordance with applicable federal securities laws. The timing and the amount of repurchases will be determined by the Company at its discretion based on an evaluation of market conditions, capital allocation alternatives and other factors. The share repurchase program does not require us to purchase any dollar amount or number of shares of our Class A Common Stock and may be modified, suspended, extended or terminated at any time without prior notice. The Company expects to fund any repurchases by using cash on hand, borrowings under the ABL Facility, and expected free cash flow to be generated through the duration of the share repurchase program. During the three months ended March 31, 2025, the Company repurchased and retired shares of Class A Common Stock for $24.0 million, under the share repurchase program.
Cash Flows
The following table summarizes our cash flows for the periods indicated: | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| Description | 2025 | | 2024 | | Change |
| (in thousands) |
Net cash provided by operating activities | $ | 192,118 | | | $ | 159,396 | | | $ | 32,722 | |
Net cash used in investing activities | (106,175) | | | (141,993) | | | 35,818 | |
Net cash used in financing activities | (81,849) | | | (30,233) | | | (51,616) | |
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Analysis of Cash Flow Changes Between the Three Months Ended March 31, 2025 and March 31, 2024
Operating Activities. Net cash provided by operating activities was $192.1 million for the three months ended March 31, 2025, compared to $159.4 million for the three months ended March 31, 2024. The $32.7 million increase in cash from operating activities is attributable to a $39.8 million increase in cash from changes in working capital for the three months ended March 31, 2025, compared to a $52.0 million decrease in cash from changes in working capital for the three months ended March 31, 2024. This increase in cash flows was partially offset by a $95.7 million decrease in revenues, net of a $36.6 million decrease in cash operating expenses, interest expense, net, and income tax expense.
Investing Activities. Net cash used in investing activities was $106.2 million for the three months ended March 31, 2025, compared to $142.0 million for the three months ended March 31, 2024. Cash used in investing activities was lower during the three months ended March 31, 2025, compared to the three months ended March 31, 2024 primarily due to proceeds of $29.9 million from the sale of common shares on the active market of Oklo and higher proceeds from the sale of assets, offset by a nominal increase in capital expenditures, including acquisitions. During the three months ended March 31, 2025, the Company acquired IMG Energy Solutions for total cash consideration of approximately $15.2 million, net of cash received, after preliminary closing adjustments. Refer to Note 2—Significant Accounting Policies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information related to the IMG Acquisition. Investments in equipment, including the new digiTechnologies™ suite and capitalized maintenance of existing equipment decreased $11.1 million, from $145.0 million for the three months ended March 31, 2024 to $133.9 million for the three months ended March 31, 2025.
Financing Activities. Net cash used in financing activities was $81.8 million for the three months ended March 31, 2025, compared to net cash used in financing activities of $30.2 million for the three months ended March 31, 2024. The $51.6 million increase in cash used in financing activities was primarily due to a $35.6 million increase in cash paid under the TRA liability, $8.4 million increase in cash paid for finance leases, $5.8 million increase in cash paid for tax withholding on RSU vestings, and $1.5 million increase in dividends paid. These increases were partially offset by a $6.5 million decrease in net borrowings and $6.2 million decrease in share repurchases during the three months ended March 31, 2025, compared to the three months ended March 31, 2024.
Cash Requirements
Our material uses of cash consist primarily of obligations under long-term debt on the ABL Facility, TRAs, finance and operating leases for property and equipment, cash used to pay for repurchases of, and dividends on, shares of our Class A Common Stock, and purchase obligations as part of normal operations. Certain amounts included in our contractual obligations as of March 31, 2025 are based on our estimates and assumptions about these obligations, including pricing, volumes, and duration. We have no material off balance sheet arrangements as of March 31, 2025, except for purchase commitments under supply agreements of $26.1 million payable within 2025. See Note 14—Commitments & Contingencies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for information regarding scheduled contractual obligations. During the three months ended March 31, 2025, the Company expanded its equipment lease facilities resulting in the addition of $27.7 million in new finance lease obligations. The terms on these new leases range from three to five years.
There have been no material changes to cash requirements since the year ended December 31, 2024.
Income Taxes
The Company is a corporation and is subject to U.S. federal, state, and local income tax. The Company is also subject to Canada and Australia federal and provincial income tax on its foreign operations.
The effective global income tax rate applicable to the Company for the three months ended March 31, 2025 was 28%, compared to 24% for the period ended March 31, 2024. The Company’s effective tax rate is greater than the statutory federal income tax rate of 21% due to state income taxes in the states the Company operates, as well as nondeductible executive compensation, partially offset by U.S. federal income tax credits. The Company recognized an income tax expense of $7.8 million and $26.5 million during the three months ended March 31, 2025 and 2024, respectively.
Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. As of March 31, 2025 and December 31, 2024, the Company’s net deferred tax liabilities were $137.7 million.
Refer to Note 11—Income Taxes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information related to income tax expense.
Tax Receivable Agreements
Refer to Note 11—Income Taxes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information related to tax receivable agreements.
Critical Accounting Estimates
The Company’s unaudited condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions (see Note 2—Significant Accounting Policies to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report and Note 2—Significant Accounting Policies and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Annual Report). A critical accounting estimate is one that requires our most difficult, subjective or complex estimates and assessments and is fundamental to our results of operations. We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
There have been no material changes in our evaluation of our critical accounting policies and estimates since our Annual Report.
