UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2024

OR

Commission File Number 001-42477

Flowco Holdings Inc.

(Exact name of Registrant as specified in its Charter)

Registrant’s telephone number, including area code: (713) 997-4877

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☐ NO ☒

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☐ NO ☐

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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The Registrant was not a public company as of the last business day of its most recently completed second fiscal quarter and, therefore, cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date.

As of March 19, 2025, the number of shares of Registrant’s Class A common stock outstanding was 25,721,620, and the number of shares of the Registrant's Class B common stock outstanding was 64,823,042.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table of Contents

Definitions

The following is a listing of certain abbreviations, acronyms, and other industry terminology that may be used throughout this Annual Report on Form 10-K (“Annual Report”):

Cautionary Statement Regarding Forward-Looking Statements

This Annual 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 results to differ materially from those in the forward-looking statements are described under Part 1, Item 1A, Risk Factors.

About this Annual Report

This Annual Report includes certain historical consolidated financial and other data for Flowco MergeCo LLC. (“Flowco LLC”), including its predecessor and subsidiaries. Flowco Holdings Inc. (“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 Flowco Holdings did not have any previous operations prior to the IPO, Flowco LLC is viewed as the accounting predecessor of Flowco Holdings.

On June 20, 2024, Flowco LLC consummated the 2024 Business Combination through the acquisition of 100% of membership interests of each Estis Intermediate, Flowco Productions and Flogistix Intermediate (“Merging Entities”). A description of the 2024 Business Combination was included in the final prospectus, filed with the SEC on January 15, 2025, pursuant to Rule 424(b)(4) relating to our Registration Statement (the “Final Prospectus”) and is also described more fully in “Part 1. Item 1. Business – Recent Developments – 2024 Business Combination” and elsewhere in this Annual Report. As a result of the 2024 Business Combination, Estis was determined to be the accounting acquirer and predecessor to Flowco LLC, and consequently, to Flowco Holdings.

This determination was based primarily on Estis’ (i) relatively larger size among the Merging Entities; (ii) majority in economics; and (iii) majority in board seats nominated as well as more significant representation on the executive management team subsequent to the 2024 Business Combination.

The historical financial information of Flowco Holdings is not included in this Annual Report as it is a newly incorporated entity, had no business transactions or activities prior to the IPO date and had no assets or liabilities during the periods presented in this Annual Report. As such, only the audited balance sheet of Flowco Holdings as of December 31, 2024, and November 30, 2024 are presented herein.

The historical financial information of Flowco LLC prior to the 2024 Business Combination was not presented as Flowco LLC was determined to lack commercial substance for not having engaged in any prior business activities. Therefore, all historical financial information of Flowco LLC prior to June 20, 2024, reflects the historical financial information of Estis as the accounting predecessor. All historical financial information subsequent to June 20, 2024, reflects the combined historical information of the Merging Entities. As such, the audited financial statements of Flowco LLC as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022 are presented herein.

Certain monetary amounts, percentages, and other figures included in this Annual Report have been subject to rounding adjustments. Percentage amounts included in this Annual 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 Annual Report may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Annual Report. Certain other amounts that appear in this Annual Report may not sum due to rounding.

The Transactions

Flowco Holdings is a holding company and the sole managing member of Flowco LLC, and its principal asset will consist of LLC Interests acquired directly from 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:

Post-IPO Organizational Structure

Described below are the details of our organizational structure following the IPO:

As the sole managing member of Flowco LLC, we operate and control all of the business and affairs of Flowco LLC and, through Flowco LLC and its direct and indirect subsidiaries, conduct our business. Following the IPO, we will have a minority economic interest in Flowco LLC but will control the management of Flowco LLC as its sole managing member. As a result, we will consolidate Flowco LLC and record a significant noncontrolling interest in a consolidated entity in our consolidated financial statements for the economic interest in Flowco LLC held by the Continuing Equity Owners.

Up-C Structure and Tax Receivable Agreements

Our corporate structure following the IPO 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 Agreements 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 United States (U.S.) federal income tax purposes. Investors in and after the IPO, by contrast, hold their equity ownership in our Company, a Delaware Corporation that is 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 III, Item 13. Certain Relationships and Related Transactions, and Director Independence – Tax Receivable Agreement and Part I, Item 1A. Risk Factors – Risk Factors Related to our Organizational Structure.

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.

As described below under Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence-Tax Receivable Agreement, 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.

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. See “Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence – IPO and Reorganization Transactions.” 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 cancelled for no consideration on a one-for-one basis with the number of LLC Interests redeemed or exchanged.

PART I

Item 1. Business

Overview

We are incorporated under the laws of the state of Delaware, and our common stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol “FLOC.” Our operations are located in the United States (US). Our corporate headquarters are located at 1300 Post Oak Blvd., Suite 450, Houston, Texas 77056.

We are a leading provider of production optimization, artificial lift and methane abatement solutions for the oil and natural gas industry. Our products and services 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. Our principal products and services are organized into two business segments: (i) Production Solutions; and (ii) Natural Gas Technologies. Our core technologies include high pressure gas lift (“HPGL”), conventional gas lift, plunger lift and vapor recovery unit (“VRU”) solutions, all of which are overlaid by our proprietary digital technologies and solutions that enable real-time remote monitoring and control to maximize efficiencies for our products and services. These products and services, including proprietary technologies such as HPGL, which was pioneered by Estis, hold, in their respective categories, leading positions in growing markets, and are used extensively by the largest oil and natural gas producers primarily in the U.S.

We generate revenues throughout the long production lives of oil and natural gas wells. As of December 31, 2024, we had a fleet of over 4,300 active systems enabling consistent revenue generation. We also sell other products and services that help our customers optimize the value of their assets. We believe that the demand for our products and services is more stable than the demand for drilling and completion related services, and this demand has resulted in a more durable, recurring cash flows for our products and services compared to many other oilfield services. The production phase of a new oil or natural gas well begins when it is brought online. From this point forward, the rate of production is determined by the geological characteristics of the reservoir from which the well is producing, the design and construction of the wellbore from the reservoir to the surface, and the elapsed time since the well is brought online. This rate of production typically falls over time as the natural reservoir pressure declines and becomes insufficient to bring oil and natural gas to the surface. This decline is particularly steep for shale wells found in onshore North American oil and natural gas basins.

Artificial lift and production optimization technologies are essential to counteracting this decline, increasing production rates, and maximizing hydrocarbon recovery, all of which improve the economics of a producing well. Artificial lift enables the economic production of oil and natural gas from shale wells that would be otherwise uneconomic. As a result, operating expenses associated with production optimization are less discretionary in nature, placing our solutions on a critical path for producers to generate positive returns and maximize the value of their wells.

Furthermore, the production phase is the most stable and least capital-intensive phase of the well lifecycle, driving consistent revenue, durable earnings and stable through-cycle performance for our business. Our products are chosen due to their reliability and ability to aid our customers in achieving maximum output and cash flow from their producing wells. Our products and services also integrate proprietary digital technologies that allow for remote monitoring and other enhanced uses of our equipment.

Our VRUs and other methane abatement solutions capture fugitive emissions of methane and other hydrocarbons that are heavier than methane—such as ethane, propane, and butane, which is a natural by-product of oil production. As oil flows to the surface and is processed at the wellsite, methane is released as associated gas. Since methane is a very small molecule, much of it escapes as fugitive emissions. In addition, many sources of potential methane emissions exist throughout the natural gas value chain. By capturing these fugitive emissions, our VRUs and other methane abatement solutions allow for monetization of the resulting incremental natural gas volumes and enable our customers to meet their decarbonization goals and comply with regulatory requirements. These innovative and proprietary methane abatement solutions extend across each of our core technologies and can be used on their own as well as in conjunction with our other products and services. Demand for these solutions was initially driven by safety benefits, but accelerated as producers became more aware of the value of monetizing captured vapors, leading to high return on investment outcomes for our customers. Due to recent and emerging regulatory requirements aimed at reducing fugitive methane emissions across oil and natural gas operations from numerous federal and state-level entities, operating expenses associated with our methane abatement solutions have become increasingly required and therefore non-discretionary in nature. We hold a leading position in the rapidly growing VRU market, which is driven by both economic and environmental benefits, and we have helped drive adoption of our methane abatement solutions with our customers.

Our Asset Footprints

We have an operating presence in every major onshore oil and natural gas producing region in the U.S. and have cultivated deep and longstanding customer relationships with leading oil and natural gas producers in each region, including supermajors and large independent producers. We are headquartered in Houston, Texas with major service facilities in Midland, Texas; Carlsbad, New Mexico; and Williston, North Dakota. We operate manufacturing and repair facilities in El Reno, Oklahoma; Houston, Fort Worth, Kilgore and Pampa, Texas; and Lafayette, Louisiana. Our service centers are geographically positioned near our customers’ operations, enabling us to rapidly deploy our solutions and provide responsive, high-quality service nationwide.

Business Segments

Our business currently operates under two segments: (i) Production Solutions; and (ii) Natural Gas Technologies.

Production Solutions

We design and deliver products and services that enable our customers to optimize oil and natural gas production rates and volumes to maximize cash flow over the decades-long lives of their wells. We provide systems applicable to wells from initial production through their natural decline to late-life production, as well as digital technologies that enable the optimization of our systems’ performance and uptime. We also provide methane abatement solutions that enable our customers to capture and monetize fugitive methane emissions, improving the profitability of their wells and their compliance with recent and forthcoming emissions-related regulatory requirements. On a given well, our customers often use three of our production solutions offerings concurrently, utilizing our digital technologies and methane abatement solutions in conjunction with HPGL, conventional gas lift or plunger lift. Furthermore, in many instances, our customers utilize all of our production solutions over the life of a well, as our HPGL transitions to conventional gas lift in mid-stage production, which transitions to plunger lift in later-stage production. In some instances, customers install conventional gas lift components such as side-pocket mandrels at the same time as HPGL, even though the former may not be used for more than a year. We believe our integrated scope of services throughout the life of the well promotes retention and long-term partnerships with our customers. Our production solutions include:

Natural Gas Technologies

We design and manufacture products and provide services that allow our customers to optimize cash flow related to natural gas production and monetize or utilize fugitive emissions related to producing oil and natural gas wells and other emissions-prone operations. We also provide ancillary and complementary products and services, as well as develop and sell related digital solutions in connection with these technologies. Our natural gas technologies include:

Our Competitive Strengths and Competitions

Our objective is to create value for our stockholders by serving as the leading provider of production optimization, artificial lift and methane abatement solutions that help our customers maximize production and profit at the wellhead through a comprehensive offering of proprietary products and services. We believe that the following strengths differentiate us from our peers and position us well to execute on our strategy:

Our Sustainable Leadership and Business Strategies

We intend to achieve our primary business objectives by successfully executing them on the following strategies:

Patents, Trademarks and Other Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret laws as well as confidentiality procedures and contractual provisions to protect our proprietary software and our brands. We have registered patents with respect to certain of our products, which, once issued, provide 20 years of protection as counted from the patent’s filing date. We have also registered or applied to register certain of our trademarks in the United States and several other countries. Once registered in the U.S., our trademarks can be renewed regularly (generally, every 10 years) as long as they continue to be commercially utilized in the U.S. We also license intellectual property from third parties, including software that is incorporated in or bundled with our proprietary software applications. We generally control access to and use of our proprietary software and other confidential information through the use of internal and external controls, including entering into non-disclosure and confidentiality agreements with both our employees and third parties.

Seasonality

Our results of operations have not historically been materially affected by seasonality, and we do not currently have reason to believe that seasonal fluctuations will have a material impact in the foreseeable future.

Legal Proceedings

We are, from time to time, party to various claims and legal proceedings arising out of our ordinary course of business, but we do not believe that any of these claims or proceedings will have a material effect on our business, consolidated financial condition or results of operations.

Insurance

We believe that our insurance coverage is customary for our industry and adequate for our business operations. As such, we review our safety equipment and procedures, and carry insurance to protect ourselves against most, but not all, risks in our business operations. To address the hazards inherent in our business, we maintain insurance coverage that includes physical damage coverage, third-party general liability insurance, employer’s liability, environmental and pollution, cybersecurity, and other coverage. These coverages are subject to deductibles, and coverage for environmental- and pollution-related losses is subject to significant limitations. Certain types of losses are also generally not insured by us because they are either uninsurable or not economically insurable, such as losses caused as a result of inability to deliver on time or at the right quality, or losses occasioned by willful misconduct, criminal acts, fines and penalties and various perils associated with war and terrorism. Accordingly, our insurance policies may not be sufficient to adequately insulate us from a claim that exceeds policy limits or against every circumstance or hazard to which we could be subject.

An uninsured loss, a loss that exceeds the limits of our insurance policies or a succession of such losses could have a material adverse effect on our business, operations and financial condition.

In addition to the property damage, personal injury and other losses from these accidents, the frequency and severity of these incidents may affect our operating costs and insurability and our relationships with customers, employees, regulatory agencies and other parties. Any significant increase in the frequency or severity of these incidents, or the general level of compensation awards or regulatory enforcement sanctions, could adversely affect the cost of, or our ability to obtain, workers’ compensation and other forms of insurance, and could have other material adverse effects on our financial condition, our results of operations or our ability to operate. For additional details, see “Risk Factors - Risk Factors Related to Our Business and Industry,” which is incorporated by reference in this Item 1 section of the Annual Report.

Regulatory, Environmental and Safety Matters

We are subject to stringent federal, state, and local governmental laws and regulations pertaining to protection of the environment and occupational safety and health. Compliance with environmental legal requirements in the U.S. at the federal, state or local levels may require acquiring permits to conduct regulated activities, incurring costs to limit or prevent emissions, discharges and any unauthorized releases, and complying with stringent practices to handle, recycle and dispose of certain wastes. Permits and approvals can be denied or delayed, which may cause us to lose potential and current customers, interrupt our operations, and limit our growth and revenue. Moreover, failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, imposition of remedial obligations, and the issuance of injunctions delaying or prohibiting operations. These laws and regulations include, among others:

The trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the environment and thus any changes in environmental laws and regulations or re-interpretation of enforcement policies that result in more stringent and costly waste handling, storage transport, disposal, or remediation requirements could have a material adverse effect on our financial position and results of operations.

We may be unable to pass on such increased compliance costs to our customers. While any changes, or additions to, or more stringent enforcement of existing environmental laws and regulations could have a material adverse effect on us, we believe that we are in substantial compliance with all of these environmental laws and regulations. While compliance with existing environmental laws and regulations has not had a material adverse effect on our operations, we can provide no assurance that this will continue in the future. We and our customers are subject to extensive environmental and health and safety laws and regulations that may increase our costs, limit the demand for our products and services or restrict our operations.

Air emissions

The CAA and comparable state laws regulate emissions of air pollutants from various industrial sources and impose certain monitoring and reporting requirements. Such emissions are regulated by air emissions permits, which are applied for and obtained through various state or federal regulatory agencies. Any such determinations could have the effect of making projects more costly than our customers expected and could require the installation of more costly emissions controls, which may lead some of our customers not to pursue certain projects.

Increased obligations of operators to reduce air emissions of nitrogen oxides and other pollutants from internal combustion engines in transmission service have been imposed by governmental authorities. For example, the U.S. Environmental Protection Agency (“EPA”) has published regulations under the CAA to control emissions of hazardous air pollutants from existing stationary reciprocal internal combustion engines, also known as Quad Z regulations. The NYSE rule requires us to undertake certain expenditures and activities, including emissions control equipment on certain compressor engines and generators. We also are subject to air regulation at the state level. For example, the Texas Commission on Environmental Quality (“TCEQ”) has adopted revisions to certain air permit programs that significantly increase the air permitting requirements for new and certain existing oil and natural gas production and gathering sites for 15 counties in the Barnett Shale production area. The TCEQ has stated it will consider expanding application of the air permit program statewide. Although at this point, we cannot predict the cost to comply with such requirements if the geographic scope is expanded, any additional regulation of air emissions from the oil and natural gas sector could result in increased expenditures for pollution control equipment, which could impact our customers’ operations and negatively impact our business. There can be no assurance that future requirements compelling the installation of more sophisticated emissions control equipment would not have a material adverse impact on our business, financial condition, results of operations, and cash available for distribution.

Climate change

State, national and foreign governments and agencies continue to evaluate, and in some instances adopt, climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases. Changes in environmental requirements related to GHG emissions, climate change, hydraulic fracturing and alternative energy sources may negatively impact demand for our services. Other energy legislation and initiatives could include a carbon tax or cap-and-trade program. At the state level, many states, including the states in which we or our customers conduct operations, have adopted legal requirements that have imposed new or more stringent permitting, disclosure, or well construction requirements on oil and natural gas activities. In addition, almost half of the states have begun to address GHG emissions, primarily through the planned development of emissions inventories or regional GHG cap-and-trade programs. Depending on the particular program, we could be required to control GHG emissions or to purchase and surrender allowances for GHG emissions resulting from our operations.

Since our business depends on the level of activity in the oil and natural gas industry, existing or future laws, regulations, treaties, or international agreements related to GHG emissions and climate change, it may reduce demand for oil and natural gas and could have a negative impact on our business. In addition, our business, compliance obligations and financial and operational results could be impacted by initiatives to address GHG emissions and climate change and incentives to conserve energy or use alternative energy sources. For example, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) appropriates significant federal funding for the development of renewable energy, clean hydrogen, clean fuels, electric vehicles and supporting infrastructure and carbon capture and sequestration, amongst other provisions. In addition, the Inflation Reduction Act imposes the first ever federal fee on the emission of greenhouse gases (“GHG”) through a methane emissions charge. In January 2024, the EPA issued a proposed rule to impose and collect the methane emissions charge authorized under the Inflation Reduction Act. At the international level, Former President Biden issued an executive order on January 20, 2021, recommitting the United States to the “Paris Agreement,” a United Nations-sponsored agreement for nations to limit their GHG emissions through individually determined reduction goals every five years after 2020. In April 2021, Former President Biden announced a new, more rigorous nationally determined emission level of 50-52% reduction from 2005 levels in economy-wide net GHG emissions by 2030. In November 2021, the international community gathered at the COP26 in Glasgow, during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and further action on non-carbon dioxide GHGs. More recently, at the COP28 hosted by the United Arab Emirates in December 2023, parties signed onto an agreement to transition “away from fossil fuels in energy systems in a just, orderly, and equitable manner” and increase renewable energy capacity so as to achieve net zero by 2050, although no timeline for doing so was set. The impact of these orders, pledges, and agreements, and any legislation or regulation promulgated to fulfil the United States’ commitments under the Paris Agreement, COP26, COP28, or other international conventions cannot be predicted at this time, and it is unclear what additional initiatives may be adopted or implemented. These developments could further accelerate the transition of the U.S. economy away from the use of fossil fuels towards lower- or zero-carbon emissions alternatives, which could reduce demand for our products and services and negatively impact our business.

Many of our products and services are designed to facilitate our customers’ needs to decrease emissions and integrate alternative energy sources into their operations, and we also attempt to do the same to pursue economically beneficial opportunities to reduce our environmental footprint. To that end, we are reducing the use of pneumatic devices and improving cylinder packing materials to reduce our emissions of nitrogen oxide, carbon monoxide, carbon dioxide, and VOCs.

Water discharge

The CWA and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, such as dredge and fill material, into waters of the U.S. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. The CWA also requires the development and implementation of spill prevention, control, and countermeasures, including the construction and maintenance of containment berms and similar structures, if required, to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture, or leak at such facilities. In addition, the CWA and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. Federal and state regulatory agencies can impose administrative, civil, and criminal penalties as well as other enforcement mechanisms for non-compliance with discharge permits or other requirements of the CWA and analogous state laws and regulations.

Our artificial lift and production enhancement products and our related services do not generate process wastewaters that are discharged to waters of the U.S. In any event, our customers assume responsibility under the majority of our standard service contracts for obtaining any permits, including permits that may be required under the CWA, whether for discharges or developing property by filling wetlands. On January 18, 2023, the EPA and the U.S. Army Corps of Engineers issued a final rule revising the standard for what constitutes jurisdictional waters and wetlands subject to the protections and requirements of the CWA (“2023 WOTUS Rule”). On May 25, 2023, the U.S. Supreme Court invalidated parts of the 2023 WOTUS Rule in its decision in Sackett vs. EPA. In response to Sackett, the EPA issued a final rule conforming its definition of WOTUS to the Sackett decision and narrowing federal jurisdiction under the CWA. That rule became effective on September 8, 2023. Changes to the jurisdictional reach of the CWA could cause our customers to face increased costs and delays due to additional permitting and regulatory requirements, and possible challenges to permitting decisions.

Safe Drinking Water Act

A significant portion of our customers’ oil and natural gas production is developed from unconventional sources that require hydraulic fracturing as part of the completion process.

Legislation to amend the SDWA to repeal the exemption for hydraulic fracturing from the definition of “underground injection” and require federal permitting and regulatory control of hydraulic fracturing, as well as legislative proposals to require disclosure of the chemical constituents of the fluids used in the fracturing process, have been proposed from time to time and the U.S. Congress continues to consider legislation to amend the SDWA. Several states have also proposed or adopted legislative or regulatory restrictions on hydraulic fracturing, including prohibitions on the practice. We cannot predict the future of such legislation and what additional, if any, provisions would be included. If additional levels of regulation, restrictions, and permits were required through the adoption of new laws and regulations at the federal or state level, or if the agencies that issue the permits develop new interpretations of those requirements, it could lead to delays, increased operating costs, and process prohibitions that could reduce demand for our services and products, which could materially adversely affect our revenue and results of operations.

Site remediation

CERCLA and comparable state laws may impose strict, joint, and several liability without regard to fault or the legality of the original conduct on certain classes of persons that contributed to the release of a hazardous substance into the environment. These persons include the current and former owners and operators of the site where the hazardous substance release occurred and any company that transported, disposed of, or arranged for the transport or disposal of the hazardous substance released at the site. Under CERCLA, such persons may be liable for the costs of remediating the hazardous substances that have been released into the environment, for damages to natural resources, and for the costs of certain health studies. In addition, where contamination may be present, neighboring landowners and other third parties sometimes file claims for personal injury, property damage, and recovery of response costs. While we generate materials in the course of our operations that may be regulated as hazardous substances, we have not received notification that we may be potentially responsible for cleanup costs under CERCLA at any site.

Our revenue-generating compression units typically are installed on properties owned or leased by third-party customers and operated by us pursuant to terms set forth in services contracts executed by those customers. Under most of our services contracts, our customers must contractually indemnify us for certain damages we may suffer as a result of the release into the environment of hazardous and toxic substances. We are not currently responsible for any remedial activities at any properties we use; however, there always is the possibility that our future use of those properties may result in spills or releases of petroleum hydrocarbons, wastes, or other regulated substances into the environment that may cause us to become subject to remediation costs and liabilities under CERCLA, the Resource Conservation and Recovery Act or other environmental laws. We cannot provide any assurance that the costs and liabilities associated with the future imposition of such remedial obligations upon us would not have a material adverse effect on our operations or financial position.

Resource Conservation and Recovery Act

RCRA and comparable state statutes regulate the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and non-hazardous wastes. Pursuant to rules issued by the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids produced waters and most of the other wastes associated with the exploration, development and production of crude oil or natural gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain oil and natural gas drilling and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. The possible removal of RCRA’s exemption for exploration and production wastes has the potential to significantly increase waste disposal costs to manage, which in turn may result in increased operating costs and could adversely impact our customers and, in turn, reduce demand for our products and services and negatively impact our business results and financial position.

Endangered Species Act

The federal ESA and comparable state laws were established to protect endangered and threatened species. Similar protections are offered to migratory birds under the Migratory Bird Treaty Act. Pursuant to the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities adversely affecting that species’ habitat. Our customers may conduct operations on oil and natural gas leases in areas where certain species that are listed as threatened or endangered are known to exist. The listing of new species under the ESA in the areas where our customers operate could potentially adversely impact their operations, limit their exploration and production activities, and, in turn, reduce demand for our products and services. For example, in November 2022, the U.S. Fish and Wildlife Service (the “FWS”) listed two Distinct Population Segments (“DPS”) of the Lesser Prairie Chicken under the ESA. The Southern DPS, the habitat of which includes portions of the southwestern Texas panhandle, was listed as endangered. Additionally, in May 2024, the FWS listed the Dune Sagebrush Lizard as endangered, the population of which is concentrated in the Permian Basin. The FWS may also designate critical habitat and suitable habitat areas that it believes are necessary for the survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in further material restrictions to federal land use and may materially delay or prohibit land access for oil and natural gas development. This could reduce demand for our products and services and negatively impact our business results and financial position.

Safety and health

OSHA and comparable state laws strictly govern the protection of the health and safety of our employees. The OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of CERCLA, and similar state statutes require that we organize and, as necessary, disclose information about hazardous materials used or produced in our operations to various federal, state, and local agencies, as well as to employees.

Emerging Growth Company

We are an emerging growth company (“EGC”) as defined in Section 2(a)(19) of the Exchange Act, modified by the Jumpstart Our Business Startup Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of all these exemptions.

Human Capital Resources

Our People – Our employees are a critical asset and are key to our innovative culture and overall success. We are focused on building upon our high-performance culture by attracting, engaging, developing, retaining and rewarding top talent. We strive to enhance the economic and social well-being of our employees and are committed to providing a welcoming and inclusive environment. We are not a party to any collective bargaining agreement. We consider our relations with our employees to be good. Our human capital resources objective include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and prospective employees. Our ability to attract, retain, and motivate our employees, is a direct result of competitive salaries and wages that include annual bonuses, retirement plans such as 401(k), healthcare and insurance benefits, health savings accounts partially funded by us, company-sponsored long and short-term disability, accident and critical illness, paid time off, family leave, paid maternity and paternity leave, and other employee assistance programs.

As of December 31, 2024, we had approximately 1,283 full-time employees located throughout the United States. None of our employees are represented by a labor union or are party to a collective bargaining agreement, and we have had no labor-related work stoppages.

Employee Safety – The safety of our employees is critical to our operations and continued success. We consider our employees to be our greatest asset. We believe the success of our business is a direct result of the well-being of our employees, and as a company, we are committed to promoting the highest standards of safety and environmental processes to ensure we are compliant with internal, customer driven and jurisdictional standards. We provide our employees with the tools and instruction they need in order to operate in a safe manner. Under our Stop Work Authority program, every employee, regardless of role, responsibility or tenure, has the authority to stop an activity when they feel unsafe conditions then exist or may arise absent intervention. All safety incidents are investigated and reviewed by supervisors.

Finally, we track our Total Recordable Incident Rate (TRIR) as an indicator of workplace safety.

Training and Development – Our success relies on the skills, experience and dedication of our employees. We provide both in-person and online training to our employees. In general, more technical, service-oriented training is conducted in a hands-on, in-person setting, while general business training is provided online. Training is provided when new employees join our Company, as well as on a monthly basis throughout the year. In certain instances, we also have employees participate in training provided by certain of our vendors.

Health and Welfare Benefits – We provide benefits to our employees and their dependents that we believe are competitive with other companies within our industry and in the geographies where we operate. We regularly benchmark our benefits and work with consultants. In general, we make modifications to our benefits annually during open enrollment. As part of this process, we conduct in-person and online sessions in order to enable employees to make the best use of the benefits we provide.

Recent Developments

2024 Business Combination

On June 24, 2024, Flowco LLC entered into a contribution agreement with (i) the Estis Member, (ii) the FPS Member and (iii) the Flogistix Member, pursuant to which, Flowco LLC acquired 100% of the membership interests of each of Estis Intermediate, Flowco Productions and Flogistix Intermediate in exchange for Series A Units of Flowco LLC proportionate to the value of the contributed membership interests (the “2024 Business Combination”). In connection with the 2024 Business Combination, the FPS Member also contributed substantially all of its assets to Flowco Productions immediately prior to the consummation of the 2024 Business Combination and the contribution of the membership interests of Flowco Productions to Flowco LLC. The 2024 Business Combination was consummated effective as of June 20, 2024. As a result of the 2024 Business Combination, our Original Equity Owners acquired the following ownership interest in Flowco LLC:

The Estis Member and FPS Member are affiliates of GEC Advisors LLC (“GEC”) and its controlling member, Jonathan B. Fairbanks. The Flogistix Member is an affiliate of White Deer.

IPO-Related Transactions

In connection with the Transactions, and immediately prior to the IPO, GEC and White Deer effected transactions that resulted in the distribution of LLC Interests held directly by the Original Equity Owners to their direct or indirect members, including the Continuing Equity Owners and the Blocker Shareholders that remained affiliates of GEC and White Deer immediately following the Transactions and IPO. In connection with such distribution of LLC Interests, Flowco LLC repurchased and redeemed LLC Interests assigned to certain non-affiliate holders for an aggregate amount of approximately $20.9 million.

2024 Credit Agreement

On August 20, 2024, Flowco MasterCo, Flowco Productions, Estis Intermediate, and Flogistix Intermediate, as borrowers, and other loan parties (collectively, “Loan Parties”) entered into a first lien credit agreement, which provides for a $700.0 million aggregate principal amount senior secured revolving credit facility (as amended to date, the “Credit Agreement”). The Credit Agreement was entered into as a continuation and an upsize of a credit facility previously established by Estis Intermediate and certain of its subsidiaries as loan parties thereto. The Credit Agreement was further amended on November 27, 2024, pursuant to which the aggregate revolving commitment was increased to $725.0 million.

Website Access to Reports and Other Information

We file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and other documents electronically with the SEC under the Exchange Act.

Our website address is www.flowco-inc.com. We make available, free of charge, through the “Investor Relations” section of our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. The information contained on our website does not constitute part of this Annual Report. We will provide electronic or paper copies of our filings free of charge upon request. Address request to investor.relations@flowco-inc.com.

Item 1A. Risk Factors

Investing in our Class A common stock involves a high degree of risk. Our investors should consider the following risks that could affect us and our business. The following disclosures should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report. These disclosures are intended to discuss certain material risks of the Company’s business as they appear to management at this time. There may be other additional risks, uncertainties and matters not presently known to us or that we believe to be immaterial that could nevertheless have a material adverse effect on our business, financial condition and results of operations.

Risk Factor Summary

Risks Factors Related to Our Business and Industry

Risk Factors Related to Financial Condition and Markets

Risk Factors Related to Legal and Regulatory Environments

Risk Factors Related to Our Organizational Structure

Risk Factors Related to the Ownership of Our Class A Common Stock

Risks Factors Related to Our Business and Industry

Trends in crude oil and natural gas prices may affect production-related activities and production-related operating expenditures by our customers, and therefore the demand for, and profitability of, our products and services.

The oil and natural gas industry is cyclical in nature and experiences periodic downturns of varying length and severity. Demand for our products and services is sensitive to the level of operating and capital spending by global oil and natural gas companies, and in particular production-related operating expenditures. The level of production-related operating expenditures is directly affected by trends in crude oil and natural gas prices, which are influenced by numerous factors affecting the supply and demand for oil and natural gas, including:

We expect continued volatility in both crude oil and natural gas prices (including the possibilities that such prices could remain at current levels or decline further for an extended period of time), as well as in the level of production-related operating expenditures as a result of the level of interest rates and costs of capital, decisions of OPEC and other oil exporting nations regarding production, and the other factors listed above. Our ability to modify and adopt our operating activities in response to lower oilfield service activity levels during periodic industry downturns or in the transition to a lower carbon economy is important to our business, results of operations and prospects. However, a significant further decline in the industry could continue to impact demand for our products and services and could have a material adverse effect on our business, results of operations, financial condition and cash flows, and could result in asset impairments, including an impairment of the carrying value of our goodwill, along with other accounting charges.

Decreased expenditures by our customers can adversely impact our customers’ demand for our products and services and our revenue.

Our business is directly affected by changes in spending by our customers, and reductions in their spending or changes in the allocation of their expenditures could reduce demand for our products and services and have a material adverse effect on our revenue. Some of the factors impacting our customers’ operating and capital spending may include:

Our operations could be adversely affected by global market and economic conditions in ways we may not be able to predict or control.

Concerns over global economic conditions, inflation, energy costs, geopolitical issues, supply chain disruptions, the availability and cost of credit, and the continuing conflicts between Russia and Ukraine and in the Middle East have contributed to increased economic uncertainty. An expansion or escalation of the Russian-Ukraine or Middle East conflicts or an economic slowdown or recession in the United States or in any other country that significantly affects the supply of or demand for oil or natural gas could negatively impact our operations and therefore adversely affect our results. Global economic conditions have a significant impact on oil and natural gas prices and any stagnation or deterioration in global economic conditions could result in less demand for our services and could cause our customers to reduce their planned spending on drilling and production activity. Adverse global economic conditions may cause our customers, vendors and/or suppliers to lose access to the financing necessary to sustain or increase their current level of operations, fulfill their commitments and/or fund future operations and obligations. Furthermore, challenging economic conditions may result in certain of our customers experiencing bankruptcy or otherwise becoming unable to pay vendors, including us. In the past, global economic conditions, and expectations for future global economic conditions, have sometimes experienced significant deterioration in a relatively short period of time and there can be no assurance that global economic conditions or expectations for future global economic conditions will recover in the near term or not quickly deteriorate again due to one or more factors. These conditions could have a material adverse effect on our business, financial condition and results of operations.

We could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of raw materials or if we are unable to obtain raw materials.

We purchase raw materials, sub-assemblies and components for use in manufacturing operations, which exposes us to volatility in prices for certain commodities. Significant price increases for these commodities could adversely affect our operating profits. Like others in our industry, we have faced, and continue to face, inflation in raw materials cost. While we will generally attempt to mitigate the impact of increased raw material prices by endeavoring to make strategic purchasing decisions, broadening our supplier base and passing along increased costs to customers, there may be a time delay between the increased raw material prices and the ability to increase the prices of our products. Additionally, we may be unable to increase the prices of products due to the terms of existing contracts, a competitor’s pricing pressure or other factors. The inability to obtain necessary raw materials on acceptable terms could affect our ability to meet customer commitments and satisfy demand for certain products. Certain of our product lines depend on a limited number of third-party suppliers and vendors. The ability of these third parties to deliver raw materials may be affected by events beyond our control. In addition, public health threats, severe influenza and other highly communicable viruses or diseases could limit access to vendors and their facilities, or the ability to transport raw materials from our vendors, which would adversely affect our ability to obtain necessary raw materials for certain of our products or increase the costs of such materials.

A significant price increase in or the unavailability of raw materials may result in a loss of customers and adversely impact our business, results of operations, financial condition and cash flows, and could result in asset impairments, including an impairment of the carrying value of our goodwill.

Continuing inflation and cost increases may impact our sales margins and profitability.

Cost inflation including significant increases in raw material and component costs, labor rates, and global transportation and logistics costs have and could continue to impact profitability. In addition, our customers are also affected by inflation and the rising costs of goods and services used in their businesses, which could negatively impact their ability to purchase our products, which could adversely impact our revenue and profitability. There is no guarantee that we can increase selling prices, replace lost revenue, or reduce costs to fully mitigate the effect of inflation on our costs and business, which may adversely impact our sales margins and profitability.

We might be unable to successfully compete with other companies in our industry.

The business in which we operate is highly competitive. The principal competitive factors are customer service, product technology, product quality and performance, breadth of product offering, price, payment terms, allocation of risk, geographic footprint, technical expertise and innovation. In some of our product and service offerings, we compete with the oil and natural gas industry’s largest oilfield service providers. These large national and multinational companies may have longer operating histories, greater brand recognition, and a stronger presence in geographies than us. They may also have more robust organizational and technical capabilities. In addition, we compete with many smaller companies capable of effectively competing on a regional or local basis. Our competitors may be able to respond more quickly to new or emerging technologies and services and for changes in customer requirements. Many contracts are awarded on a bid basis, which further increases competition based on price. As a result of the competitive environment in which we operate, if we are unable to successfully compete in our industry, we may lose competitive share, be unable to maintain or increase prices for our products and services, or be unable to develop new business opportunities, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

If we are unable to develop new products and technologies, our competitive position may be impaired, which could materially and adversely affect our sales and market share.

The businesses in which we operate are characterized by changing technologies and the introduction of new products and services. As a result, our success is dependent upon our ability to develop or acquire new products and services on a cost-effective basis, to introduce them into the marketplace in a timely manner, and to protect and maintain critical intellectual property assets related to these developments. Difficulties or delays in research, development or production of new products and technologies, or failure to gain customer acceptance of new products and technologies, may significantly reduce future revenue and materially and adversely affect our competitive position.

While we intend to continue to commit financial resources and effort to the development of new products and services, our ability to do so may be impacted by the prolonged industry downturn and/or we may not be able to successfully differentiate our products and services from those of our competitors. Our customers may not consider our proposed products and services to be of value to them or may not view them as superior to our competitors’ products and services. In addition, our competitors or customers may develop new technologies which are similar to, or improvements on, our existing technologies.

Further, we may not be able to adapt to evolving customer needs and technologies, including the transition to a lower-carbon economy and energy system by our customers, develop new products, and achieve and maintain technological advantages in developing products and services in support of the evolving industry. If we do not successfully compete through the development and introduction of new products and technologies, our business, results of operations, financial condition and cash flows could be materially adversely affected.

Our products are used in operations that are subject to potential hazards inherent in the oil and natural gas industry and, as a result, we are exposed to potential liabilities that may affect our financial condition and reputation.

Our products are used in potentially hazardous production applications in the oil and natural gas industry where an accident or a failure of a product can potentially have catastrophic consequences. Risks inherent in these applications, such as equipment malfunctions and defects, failures, equipment misuse and explosions can cause personal injury, loss of life, suspension of operations, damage to formations, damage to facilities, business interruption and damage to or destruction of property, surface and drinking water resources, equipment and the environment. While we currently maintain insurance protection against some of these risks and seek to obtain indemnity agreements from our customers requiring them to hold us harmless from some of these risks, our current insurance and contractual indemnity protection may not be sufficient or effective enough to protect us under all circumstances or against all risks. The occurrence of a significant event not fully insured or indemnified against, or the failure of a customer to meet its indemnification obligations to us could adversely affect our business, results of operations, financial condition and cash flows.

Consolidation in our industry may impact our results of operations.

Business consolidations within the oil and natural gas industry in recent years have resulted in some of our largest customers combining and using their size and purchasing power to seek economies of scale and pricing concessions. Continuing consolidation within the industry may result in reduced operating and capital spending by some of our customers or the acquisition of one or more of our primary customers, which may lead to decreased demand for our products and services. There is no assurance that we will be able to maintain our level of sales to a customer that has consolidated or replace that revenue with increased business activity with other customers. As a result, the acquisition of one or more of our primary customers may have a significant adverse impact on our business, results of operations, financial condition and cash flows.

We are unable to predict what effect consolidations in the industry may have on prices, operating or capital spending by our customers, our selling strategies, our competitive position, our ability to retain customers or our ability to negotiate favorable agreements with our customers.

The credit risks of our customer base could result in losses.

The majority of our customers are oil and natural gas companies that have faced or may in the future face liquidity constraints during adverse commodity price environments. These customers are also affected by prolonged changes in economic and industry conditions such as geopolitical unrest and instability, volatility in oil and natural gas prices as a result of associated changes in demand for such commodities, and continuing inflationary pressures, including increased interest rates and cost of credit. If a significant number of our customers experience prolonged business declines, disruptions, or bankruptcies, we may incur increased exposure to credit risk and losses from bad debts.

The loss of one or more significant customers could have an adverse impact on our financial results.

We have long-standing customer relationships with many of the largest operators in oil and natural gas drilling and production. Our customers include international and national oil and natural gas companies, large integrated operators as well as independent conventional and unconventional oil and natural gas companies, major oilfield equipment and service providers, and pipeline companies. Our customer base is generally diverse, but in certain international jurisdictions, our business may be concentrated in and depend on one or a few customers. We do have significant customer concentration in our top ten customers; therefore, the loss of a major customer could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Changes in our customer and product mix could cause our profit margin to fluctuate.

From time to time, we may experience changes in our customer mix or in our product mix. Our customer relationships depend, in part, on our ability to provide customers the products they need when they need them and our ability to provide an appropriate level of service to gain and retain customers. If our customers’ experience is negative or our customers require lower-margin products from us and fewer higher-margin products, our results of operations and financial condition may suffer.

We are subject to information technology, cybersecurity and privacy risks.

We depend on various information technologies and other products and services to store and process business information and otherwise support our business activities. We also manufacture and sell hardware and software to provide monitoring, controls and optimization of customer critical assets in oil and natural gas production and distribution. In addition, certain of our customer offerings include digital components, such as remote monitoring of certain customer operations.

We also provide services to maintain these systems. Additionally, our operations rely upon partners, suppliers and other third-party providers of information technology and other products and services. If any of these information technologies, products or services are damaged, cease to properly function, are breached due to employee error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity attacks, such as those involving unauthorized access, malicious software and/or other intrusions, we and our partners, suppliers or other third parties could experience: (i) production downtimes, (ii) operational delays, (iii) the compromising of confidential, proprietary or otherwise protected information, including personal and customer data, (iv) destruction, corruption, or theft of data, (v) security breaches, (vi) other manipulation, disruption, misappropriation or improper use of our systems or networks, (vii) hydrocarbon pollution from loss of containment, (viii) financial losses from remedial actions, (ix) loss of business or potential liability, (x) adverse media coverage, and (xi) legal claims or legal proceedings, including regulatory investigations and actions, and/or damage to our reputation. Increased risks of such attacks and disruptions also exist as a result of geopolitical conflicts, such as the continuing conflict between Russia and Ukraine and the Middle East. While we have not experienced a material breach of our information technologies and we attempt to mitigate these risks by employing a number of measures, including employee training, technical security controls and maintenance of backup and protective systems, the Company’s and our customers’, partners’, vendors’ and other third- parties’ systems, networks, products and services remain potentially vulnerable to known or unknown cybersecurity attacks and other threats, any of which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to cover us against claims related to cybersecurity breaches or attacks, failures or other data security-related incidents, and we cannot be certain that cyber insurance will continue to be available to us on economically reasonable terms, or at all, or that an insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could materially and adversely affect our results of operations, cash flows, and financial condition.

Our failure to successfully integrate the businesses of Estis, FPS and Flogistix from the 2024 Business Combination may adversely affect the value of our Class A common stock.

We completed the 2024 Business Combination on June 20, 2024, and we are continuing to integrate combined operations. Estis, FPS and Flogistix, including their respective subsidiaries, were operated independently prior to the completion of the business combination. The success of the 2024 Business Combination will depend, in part, on our ability to realize anticipated benefits from combining the separate businesses of Estis, FPS and Flogistix. If we are unable to achieve our objectives successfully, the anticipated benefits of the business combination may not be realized fully or at all, or may take longer to realize than expected.

We have also incurred, and will continue to incur, fees and expenses related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. In addition, the actual integration may result in additional and unforeseen expenses, which could reduce the anticipated benefits of the business combination. Ongoing integration efforts for the three companies will divert management attention and resources. The integration process could also result in difficulties, including (i) the disruption of each prior company’s ongoing businesses, (ii) the loss of key employees, (iii) inconsistencies in each company’s standards, controls, procedures and policies; and (iv) identifying material weaknesses or significant deficiencies in the internal controls over financial reporting of the other businesses. The occurrence or any unforeseen extended scope of these matters could adversely affect the combined company’s ability to maintain relationships with customers and employees or to achieve anticipated benefits of the business combination. These integration matters could have an adverse effect on our combined business and future results of operations. We will continue to assess the magnitude of both these expenses and achievement of any net benefits.

We identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and Class A common stock price.

While we are designing and implementing measures to remediate the existing material weaknesses, we cannot predict the success of such measures or the outcome of the assessment of these measures at this time. We can give no assurance that these measures will remediate any of the deficiencies in our internal control over financial reporting, or additional material weaknesses in our internal control over financial reporting will not be identified in the future. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, personnel, IT systems and applications, or other factors. Any failure to design or maintain effective internal control over financial reporting or any difficulties encountered in our implementation or improvement could increase compliance costs, negatively impact share trading prices, or otherwise harm our operating results or cause us to fail to meet our reporting obligations. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. If we are unable to remediate the material weaknesses, our ability to record, process, summarize and report information within the time periods specified in the rules and forms of the SEC could be adversely affected, which, in turn, may adversely affect our reputation and business and the market price of our Class A common stock. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities and harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business.

As a public company, we are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on the effectiveness of our internal control over financial reporting. However, we are exempt from furnishing management report on the effectiveness of our internal control over financial reporting for the period covered in this Annual Report due to a transition period established by rules of the SEC for newly public companies. Additionally, our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company,” as defined in the JOBS Act. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, in which case our independent registered public accounting firm could not issue an unqualified opinion related to the effectiveness of our internal control over financial reporting. If we are unable to conclude that we have effective internal control over financial reporting and our independent registered public accounting firm is unable to issue an unqualified opinion related to the effectiveness of our internal control over financial reporting, investors could lose confidence in our reported financial information, which could have a material adverse effect on the trading price of our Class A common stock.

We are subject to risks relating to existing international operations and expansion into new geographical markets.

While sales outside of the U.S. have historically represented an immaterial percentage of our consolidated revenue, we continue to focus on expanding sales globally as part of our overall growth strategy and expect sales from outside the United States to represent a growing portion of our revenue. Our international operations and global expansion strategy are subject to general risks related to such operations, including:

If we are unable to successfully manage the risks associated with expanding our global business or adequately manage operational risks of our existing international operations, these risks could have a material adverse effect on our growth strategy into new geographical markets, our reputation, our business, results of operations, financial condition and cash flows.

Adverse health events, such as a pandemic, could adversely affect our business, liquidity, and financial results.

From time to time, various diseases have spread across the globe such as COVID-19, SARS and the avian flu. If a disease spread sufficiently to cause an epidemic or a pandemic, the ability to operate our business or the businesses of our suppliers, contractors or customers could be reduced due to illness of employees, local restrictions to combat the disease and demand for our products and services or those of our customers could decrease. Our supply chain could be disrupted if access to vendor facilities is limited or they experience labor shortages, or our ability to obtain components from our vendors could be limited, adversely affecting the price or availability of products, which could result in a loss of revenue and profitability. Demand for our products could decrease if our customers curtail their activities, due to lower demand for their products, budget constraints or other capital discipline measures, which may adversely affect our revenue and cash flows.

Our failure to attract, retain and develop personnel could have an adverse effect on our results of operations, financial condition and cash flows.

The delivery of our services and products requires personnel with specialized skills and experience, and our growth, profitability and effectiveness in conducting our operations and executing our strategic plans depend in part on our ability to attract, retain and develop qualified personnel, and align them with appropriate opportunities for key management positions. We may experience employee turnover or labor shortages if our business requirements and/or expectations about when and how often employees work either on-site or remotely are inconsistent with the expectations of our employees or if employees pursue employment in fields with less volatility than in the energy industry. Additionally, during periods of increased investment in the oil and natural gas industry, competition for qualified personnel may increase and the availability of qualified personnel may be further constrained. Although we believe we generally offer competitive compensation packages, our costs of operations and selling, general and administrative expenses could increase in the future if required to attract and retain qualified personnel and there is no assurance that the prices of our products and services could be increased to offset any such increases. If we are unsuccessful in our efforts to attract and retain sufficient qualified personnel on terms acceptable to us, or do so at rates necessary to maintain our liquidity and competitive position, our business, results of operations, financial condition, cash flows, and market share could be adversely affected.

The inability to protect or obtain patent and other intellectual property rights could adversely affect our revenue, operating profits and cash flows.

We own patents, trademarks, licenses and other intellectual property related to our products and services, and we continuously invest in research and development that may result in innovations and intellectual property rights. We employ various measures to develop, maintain and protect our innovations and intellectual property rights. These measures may not be effective in capturing intellectual property rights, and they may not prevent our intellectual property from being challenged, invalidated, circumvented, infringed, misappropriated or otherwise violated, particularly in countries where intellectual property rights are not highly developed or protected. We also may not be successful in fully protecting innovations and intellectual property we develop or acquire. In addition, if licenses to certain intellectual property are no longer available, we may not be able to continue providing services or products relating to that license, which could adversely affect our financial condition, results of operations and cash flows. Unauthorized use of our intellectual property rights and any potential litigation we may initiate or have initiated against us in respect of our intellectual property rights could adversely impact our competitive position and have a negative impact on our business, results of operations, financial condition and cash flows.

Natural disasters and unusual weather conditions could have an adverse impact on our business.

Our business could be materially and adversely affected by natural disasters or severe weather conditions, including the effects of climate change. Hurricanes, tropical storms, tornadoes, flash floods, blizzards, extreme cold weather and other natural disasters or severe weather conditions, which may increase in frequency or intensity as a result of climate change, could result in evacuation of personnel, curtailment of services, damage to equipment and facilities, interruption in transportation of products and materials and loss of productivity. For example, certain of our manufactured products and components are manufactured at a single facility, and disruptions in operations or damage to any such facilities could reduce our ability to manufacture our products and satisfy customer demand. If our customers are unable to operate or are required to reduce operations due to natural disasters or severe weather conditions, our business could be adversely affected as a result of curtailed deliveries of our products and services. Our headquarters and certain manufacturing facilities are located in the U.S. Gulf Coast, and this region is also home to many of our customers and suppliers. Hurricanes or other severe weather events impacting the Gulf Coast could materially and adversely affect our operations, our ability to obtain raw materials at reasonable cost, or at all, and our customers in the region.

Our growth and results of operations may be adversely affected if we are unable to complete future third-party acquisitions on acceptable terms and integrate such acquisitions.

We expect to make future acquisitions that broaden our existing technological, geographic and business offerings, thereby complementing our businesses. However, there can be no assurance that we will be able to find suitable opportunities to purchase or acquire such capabilities on acceptable terms.

If we are unsuccessful in our acquisition efforts, our revenue growth could be adversely affected. In addition, we face the risk that a completed acquisition may underperform relative to expectations. We may not achieve the synergies originally anticipated, may become exposed to unexpected liabilities, or may not be able to sufficiently integrate completed acquisitions into our then-current business and growth model. There can be significant challenges inherent in the process of integrating acquired businesses, including the ability to ensure the effectiveness of internal control over financial reporting, integrating information technology, accounting, finance and other systems, as well as retention of key officers and personnel. The successful or cost-effective integration of acquired businesses cannot be assured. These factors could potentially have an adverse impact on our business, results of operations, financial condition and cash flows.

Risk Factors Related to Financial Condition and Markets

Investor sentiment towards climate change, fossil fuels and other ESG matters could adversely affect our access to and cost of capital and stock price.

Increasing attention to climate change, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary ESG initiatives and disclosures, and consumer demand for alternative forms of energy may result in increased costs, including, but not limited to, increased costs related to compliance, stakeholder engagement, contracting and insurance, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on the price of our common units and access to capital markets. For instance, there have been efforts within the investment community (including investment advisors, investment fund managers, sovereign wealth funds, public pension funds, universities and individual investors) to promote the divestment of, or limit investment in, the stock of companies in the oil and natural gas industry. There has also been pressure on lenders and other financial services companies to limit or curtail financing of companies in the oil and natural gas industry. If these efforts continue or expand, our stock price and our ability to raise capital may be negatively impacted.

Members of the investment community are also increasing their focus on ESG practices and disclosures, including practices and disclosures related to climate change and sustainability, diversity equity and inclusion initiatives, and heightened governance standards, among companies more generally. In addition, organizations that voluntarily provide information to investors on corporate governance and related matters have developed rating processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with fossil fuel energy-related assets could lead to increased negative investor sentiment toward us, our customers and our industry and to the diversion of investments to other industries, which could have a negative impact on our access to and costs of capital.

As a result, we may continue to face increasing pressure regarding our ESG disclosures and practices. Over the past few years, there has also been an acceleration in investor demand for ESG investing opportunities, and many large institutional investors have committed to increasing the percentage of their portfolios that are allocated towards ESG investments. With respect to any of these investors, our ESG disclosures and efforts may not satisfy the investor requirements or their requirements may not be made known to us. If we are unable to meet the ESG standards or investment criteria set by these investors and funds, we may lose investors or investors may allocate a portion of their capital away from us, our cost of capital may increase, and our stock price may be negatively impacted.

Our Credit Agreement imposes restrictions that limit our operating flexibility, and such facility may not be available if financial covenants are violated or if an event of default occurs.

Our Credit Agreement contains a number of covenants restricting, among other things, our ability to incur liens and indebtedness, sell assets, repurchase our equity shares and make certain types of investments. We are also subject to certain financial covenants, including but not limited to compliance with certain leverage and interest coverage ratios as defined in the Credit Agreement. A breach of any covenant or our inability to comply with the required financial ratios could result in a default under our Credit Agreement, and we can provide no assurance that we will be able to obtain the necessary waivers or amendments from our lenders to remedy a default. In the event of any default not cured or waived, the lenders are not obligated to provide funding or issue letters of credit and could declare any outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable, thus requiring us to apply available cash to repay any borrowings then outstanding. If we are unable to repay borrowings with respect to our Credit Agreement when due, our lenders could proceed against the guarantees of our material domestic subsidiaries. If any indebtedness under our Credit Agreement is accelerated, we can provide no assurance that our assets would be sufficient to repay such indebtedness in full.

Our exposure to exchange rate fluctuations on cross-border transactions and the translation of local currency results into U.S. dollars could negatively impact our results of operations.

While only small portion of our current business is transacted and/or denominated in foreign currencies, and fluctuations in currency exchange rates or the inability to exchange or repatriate foreign currencies could have an impact on our results of operations, financial condition and cash flows, which are presented in U.S. dollars. Cross-border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects. We conduct business in countries that have restricted or limited trading markets for their local currencies and restrict or limit cash repatriation. We may accumulate cash in those geographies, but we may be limited in our ability to convert our profits into U.S. dollars, repatriate the profits from those countries or reinvest those earnings to fund operations in other countries. Significant changes in currency exchange rates could negatively affect our results of operations.

Additionally, a future strengthening of the U.S. dollar potentially exposes us to competitive threats from lower cost producers in other countries and could result in unfavorable translation effects as the results of foreign locations are translated into U.S. dollars for reporting purposes.

Our indebtedness could adversely affect our financial condition and operating flexibility.

Our ability to make payments on, and to refinance, our indebtedness, as well as any future indebtedness that we may incur, will depend upon the level of cash flows generated by our operations, our ability to sell assets, availability under our revolving Credit Agreement and our ability to access the capital markets and/or other sources of financing. Our ability to generate cash is subject to general economic, industry, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are not able to repay or refinance our indebtedness as it becomes due, we may be forced to sell assets or take other disadvantageous actions, such as reducing financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes or dedicating an unsustainable level of cash flow from operations to the payment of principal and interest on the indebtedness. In addition, our ability to withstand competitive pressures and to react to changes in the oil and natural gas industry could be impaired.

Disruptions in the capital and credit markets, low commodity prices, our debt level and other factors may restrict our ability to raise capital on favorable terms, or at all.

Disruptions in the capital and credit markets, in particular with respect to companies in the energy sector, could limit our ability to access these markets or may significantly increase our cost to borrow. Continued low commodity prices, the rapid increases in interest rates by the U.S. Federal Reserve to counteract inflation, as well as other factors, have caused some lenders to increase interest rates, enact tighter lending standards which we may not satisfy as a result of our debt level or otherwise, refuse to refinance existing debt at maturity on favorable terms, or at all, and in certain instances have reduced or ceased to provide funding to borrowers. If we are unable to access the capital and credit markets on favorable terms or at all, it could adversely affect our business, financial condition, results of operations and cash flows.

Risk Factors Related to Legal and Regulatory Environments

Federal, state and local legislative and regulatory initiatives relating to oil and natural gas development and the potential for related litigation could result in increased costs and additional operating restrictions or delays for our customers, which could reduce demand for our products.

Environmental laws, regulations and policies could limit our customers’ exploration and production activities. Although we do not directly engage in drilling or hydraulic fracturing activities, we provide products and services to operators in the oil and natural gas industry who are actively involved in the drilling and hydraulic fracturing activities. There has been significant growth in opposition to oil and natural gas development both in the United States and globally. This opposition is focused on attempting to limit or stop hydrocarbon development in certain areas. Examples of such opposition include: (i) efforts to reduce access to public and private lands; (ii) delaying or canceling permits for drilling or pipeline construction or export facilities; (iii) limiting or banning industry techniques such as hydraulic fracturing, and/or adding restrictions on the use of water and associated disposal; (iv) delaying or denying air-quality permits; and (v) advocating for increased regulations, punitive taxation, or citizen ballot initiatives or moratoriums on industry activity.

In addition, various state and local governments have implemented, or are considering the implementation of, increased regulatory oversight of oil and natural gas development through additional permitting requirements, operational restrictions, including on the time, place and manner of drilling activities, disclosure requirements and temporary or permanent bans on hydraulic fracturing, exports of liquified natural gas or other facets of crude oil and natural gas exploration and development in certain areas such as environmentally sensitive watersheds. Increased regulation and opposition to oil and natural gas activities could increase the potential for litigation concerning these activities and could include companies who provide products and services used in hydrocarbon development, such as us.

From time to time, legislation has been introduced, but not enacted, in Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the fracturing process. Additionally, some states have adopted, and other states are considering adopting, regulations that could impose new or more stringent permitting, disclosure or well construction requirements on hydraulic fracturing operations. The adoption of new laws, regulations or policies at the federal, state or local levels imposing reporting obligations, or otherwise limiting or delaying hydrocarbon development, could make it more difficult for our customers to complete oil and natural gas wells, increase our customers’ costs of compliance and doing business, and otherwise adversely affect the oil and natural gas activities they pursue. Such developments, which could increase costs for our customers, could negatively impact demand for our products and services. In addition, heightened political, regulatory and public scrutiny, including lawsuits, could expose us or our customers to increased legal and regulatory proceedings, which could be time-consuming, costly or result in substantial legal liability or significant reputational harm.

We could be directly affected by adverse litigation or indirectly affected if the cost of compliance or the risks of liability limit the ability or willingness of our customers to operate. Such costs and scrutiny could directly or indirectly, through reduced demand for our products and services, have a material adverse effect on our business, results of operations, financial condition and cash flows.

We and our customers are subject to extensive environmental and health and safety laws and regulations that may increase our costs, limit the demand for our products and services or restrict our operations.

Our operations and the operations of our customers are subject to numerous and complex federal, state, local and foreign laws, regulations and policies relating to the protection of human health, safety and the environment. These laws, regulations and policies may adversely affect us by limiting or curtailing our customers’ exploration, drilling and production and export activities, impacting the products and services we design, market and sell and the facilities where we manufacture our products. For example, our operations and the operations of our customers are subject to numerous and complex laws, regulations and policies that, among other things: may regulate the management and disposal of hazardous and non-hazardous wastes; may require acquisition of environmental permits related to our operations; may restrict the types, quantities and concentrations of various materials that can be released into the environment; may limit or prohibit operational activities in certain ecologically sensitive and other protected areas; may regulate specific health and safety criteria addressing worker protection; may require compliance with operational and equipment standards; may impose testing, reporting and record-keeping requirements; and may require remedial measures to mitigate pollution from former and ongoing operations. Sanctions for noncompliance with such laws, regulations and polices may include revocation of permits, corrective action orders, administrative or civil penalties, criminal prosecution and the imposition of injunctions to prohibit certain activities or force future compliance.

Some environmental laws, regulations and policies provide for joint and several strict liability for remediation of spills and releases of hazardous substances. In addition, we or our customers may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances, as well as damage to natural resources. These laws and regulations may expose us or our customers to liability for the conduct of or conditions caused by others, or for our acts or for the acts of our customers that were in compliance with all applicable laws and regulations at the time such acts were performed. Any of these laws and regulations could result in claims, fines or expenditures that could be material to our business, results of operations, financial condition and cash flows.

Environmental laws, regulations and policies, and the interpretation and enforcement thereof, frequently change, and have tended to become more stringent over time. New laws, regulations treaties, or international agreements related to GHG and climate change, including incentives to conserve energy or use alternative energy sources, and temporary or permanent bans on certain activities or licenses or permits for certain activities may have a material adverse effect on our customers by limiting or curtailing their exploration, drilling, and production and export activities, which may adversely affect our operations by limiting demand for our products and services. Additionally, the implementation of new laws, regulations and policies may have a material adverse effect on our operating results by requiring us to modify our operations or products or shut down some or all of our facilities.

Various laws, regulations and policies exist or are under development that seek to regulate the emission of GHG, including establishing GHG “cap and trade” programs, increased efficiency standards, participation in international climate agreements, issuance of executive orders by the U.S. presidential administration and incentives or mandates for pollution reduction, use of renewable energy sources, or use of alternative fuels with lower carbon content. Any regulation of GHG emissions could result in increased compliance costs or additional operating restrictions for us and/or our customers and limit or curtail exploration, drilling and production and export activities of our customers, which could directly or indirectly, through reduced demand for our products and services, adversely affect our business, results of operations, financial condition and cash flows.

In addition, oil and natural gas operations may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect wildlife. Seasonal restrictions may limit our customers’ ability to operate in protected areas and can intensify competition for drilling rigs, oilfield equipment, services, supplies and qualified personnel, which may lead to periodic shortages when drilling is allowed. These constraints and the resulting shortages or high costs could delay our customers’ operations or materially increase their operating and capital costs, which could in turn reduce demand for our products and services.

Our reputation, ability to do business and results of operations may be impaired by violations of U.S. and international laws and regulations regarding, anti-bribery, trade control, trade sanctions, anti-corruption and similar laws.

Our operations require us to comply with a number of U.S. and international laws and regulations, including those relating to anti-corruption, anti-bribery, fair competition, export and import compliance, money laundering and data privacy. In particular, our international operations are subject to the regulations imposed by the Foreign Corrupt Practices Act as well as anti-bribery and anti-corruption laws of various jurisdictions in which we operate. While we strive to maintain high ethical standards and robust internal controls, we cannot provide assurance that our internal controls, training and compliance systems will always protect us from acts committed by our employees, agents or business partners that would violate such U.S. or international laws or regulations.

Any such violations of law or improper actions could subject us to civil or criminal investigations in the United States or other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related stockholder lawsuits, could lead to increased costs of compliance and could damage our reputation, business, results of operations, financial condition and cash flows.

Tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows.

Our material input costs are adversely affected by tariffs imposed by the U.S. government on products imported into the United States and by trade restrictions imposed on business dealings with particular entities and/or individuals. Further trade restrictions, retaliatory trade measures and additional tariffs could result in higher input costs for our products, disrupt our supply chain and logistics, cause adverse financial impacts due to volatility in foreign exchange rates and interest rates, inflationary pressures on raw materials and energy, and heighten cybersecurity threats and other restrictions. We may not be able to fully mitigate the impact of these increased costs or pass price increases on to our customers. We cannot predict future developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows.

Changes in domestic and foreign governmental laws, regulations and policies, risks associated with emerging markets, changes in statutory tax rates and laws, and unanticipated outcomes with respect to tax audits could adversely affect our business, profitability and reputation.

Our domestic and international sales and operations are subject to risks associated with changes in laws, regulations and policies (including environmental and employment regulations, export/import laws, local content and local ownership requirements, tax policies such as export subsidy programs and research and experimentation credits, carbon emission regulations and other similar programs). Failure to comply with any of the foregoing laws, regulations and policies could result in civil and criminal, monetary and non-monetary penalties, as well as damage to our reputation. In addition, we cannot provide assurance that costs of complying with new and evolving regulatory reporting requirements and current or future laws, including environmental protection, employment, data security, data privacy and health and safety laws, will not exceed our estimates. In addition, we have made investments in certain countries, and we may in the future invest in other countries, which may carry high levels of currency, political, compliance, or economic risk. While these risks or the impact of these risks are difficult to predict, any one or more of them could adversely affect our business, results of operations and reputation.

We are subject to taxation in a number of jurisdictions. Accordingly, our effective tax rate is impacted by changes in the mix among earnings in countries with differing statutory tax rates. A material change in the statutory tax rate or interpretation of local law in a jurisdiction in which we have significant operations could adversely impact our effective tax rate and impact our financial results.

Our tax returns are subject to audit and taxing authorities could challenge our operating structure, taxable presence, application of treaty benefits or transfer pricing policies. If changes in statutory tax rates or laws or audits result in assessments different from amounts estimated, then our business, results of operations, financial condition and cash flows may be adversely affected. In addition, changes in tax laws could have an adverse effect on our customers, resulting in lower demand for our products and services.

War, terrorism or civil unrest could harm our business.

Due to the unsettled political conditions in many natural gas and oil-producing countries, our operations, revenue and profits are subject to adverse consequences of war, terrorism, civil unrest, strikes, currency controls, and governmental actions. These risks cause us to increase spending on security worldwide, cause us to cease operating in certain countries and disrupt financial and commercial markets, including the supply of and pricing for oil and natural gas. In addition, any possible reprisals as a consequence of military or other action, such as acts of terrorism in the United States or elsewhere, could have a material adverse effect on our business, results of operations and financial condition.

Risk Factors Related to Our Organizational Structure

Our principal asset is our interest in Flowco LLC and, as a result, we depend on distributions from Flowco LLC to pay our taxes and expenses, including payments under the Tax Receivable Agreement. Flowco LLC’s ability to make such distributions may be subject to various limitations and restrictions.

Subsequent to the IPO, we became a holding company and our principal asset is our ownership of LLC Interests in Flowco LLC. As such, we have no independent means of generating revenue or cash flow, and our ability to pay our taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the financial results and cash flows of Flowco LLC and its subsidiaries and distributions we receive from Flowco LLC. There can be no assurance that Flowco LLC and its subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions, including negative covenants in our debt instruments, will permit such distributions. Although Flowco LLC is not currently subject to any debt instruments or other agreements that would restrict its ability to make distributions to us, the terms of our Credit Agreement and other outstanding indebtedness restrict the ability of our subsidiaries to pay dividends to Flowco LLC.

Flowco LLC will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, any taxable income of Flowco LLC will be allocated to holders of LLC Interests, including us. Accordingly, we will incur income taxes on our allocable share of any net taxable income of Flowco LLC. Under the terms of the Flowco LLC Agreement, Flowco LLC will be obligated, subject to various limitations and restrictions, including with respect to our debt agreements, to make tax distributions to holders of LLC Interests, including us. In addition to tax expenses, we will also incur expenses related to our operations, including payments under the Tax Receivable Agreement, which we expect could be significant. See “Part III, Item 13. Certain Relationship and Related Transactions, and Director Independence.” We intend, as its managing member, to cause Flowco LLC to make cash distributions to the holders of LLC Interests in an amount sufficient to (i) fund all or part of their tax obligations in respect of taxable income allocated to them and (ii) cover our operating expenses, including payments under the Tax Receivable Agreement. However, Flowco LLC’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which Flowco LLC is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering Flowco LLC insolvent. If we do not have sufficient funds to pay tax or other liabilities, or to fund our operations (including, if applicable, as a result of an acceleration of our obligations under the Tax Receivable Agreement), we may have to borrow funds, which could materially and adversely affect our liquidity and financial condition, and subject us to various restrictions imposed by any lenders of such funds. To the extent we are unable to make timely payments under the Tax Receivable Agreement 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 Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement. See “Part III, Item 13. Certain Relationship and Related Transactions, and Director Independence.” 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 “Risk Factors — Risk Factors Related to the Offering and Ownership of our Class A Common Stock” and “Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividends.”

Under the Flowco LLC Agreement, we intend to cause Flowco LLC, from time to time, to make distributions in cash to its members (including us) in amounts that may cover the taxes imposed on their allocable share of taxable income of Flowco LLC. As a result of (i) potential differences in the amount of net taxable income allocable to us and to Flowco LLC’s other stockholders, (ii) the lower tax rate applicable to corporations as opposed to individuals, and (iii) certain tax benefits that we anticipate from (a) future purchases or redemptions of LLC interests from the Continuing Equity Owners, (b) payments under the Tax Receivable Agreement and (c) any acquisition of interests in Flowco LLC from other stockholders in connection with the consummation of the Transactions, these tax distributions may be in amounts that exceed our tax liabilities.

Our board of directors (“Board of Directors”) will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, the payment of obligations under the Tax Receivable Agreement and the payment of other expenses. We will have no obligation to distribute such cash (or other available cash) to our stockholders. To the extent we do not distribute such excess cash as dividends on our Class A common stock we may take other actions with respect to such excess cash, for example, holding such excess cash, contributing such cash to Flowco LLC in exchange for additional LLC Interests or lending it (or a portion thereof) to Flowco LLC, some of which may result in shares of our Class A common stock increasing in value relative to the value of LLC Interests. The holders of LLC Interests may benefit from any value attributable to such cash balances if they acquire shares of Class A common stock in exchange for their LLC Interests, notwithstanding that such holders may have participated previously as holders of LLC Interests in distributions that resulted in such excess cash balances.

The Tax Receivable Agreement with the Continuing Equity Owners requires us to make cash payments to them in respect of certain tax benefits to which we may become entitled, and we expect that such payments will be substantial.

In connection with the consummation of the IPO, we entered into a Tax Receivable Agreement with Flowco LLC and each of the TRA Participants. Under the Tax Receivable Agreement, we are required to make cash payments to the TRA Participants 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) Flowco Holdings’ allocable share of existing tax basis acquired in connection with the Transactions and increases to such allocable share of existing tax basis; (ii) Flowco Holdings’ utilization of certain tax attributes of the Blocker Companies (including the Blocker Companies’ allocable share of existing tax basis); (iii) the increases in our share of the tax basis of assets of Flowco LLC resulting from (a) the purchase of LLC Interests directly from Flowco LLC in connection with the IPO, (b) any future redemptions or exchanges of LLC Interests from the Continuing Equity Owners as described under “Part III, item 13. Certain Relationship and Related Transactions, and Director Independence,” and (c) certain distributions (or deemed distributions) by Flowco LLC; and (iv) certain other tax benefits arising from payments under the Tax Receivable Agreement. We will be required to make such payments to the TRA Participants even if all of the Continuing Equity Owners were to exchange or redeem their remaining LLC Interests.

The payment obligation is an obligation of Flowco Holdings and not of Flowco LLC. We expect that the amount of the cash payments we will be required to make under the Tax Receivable Agreement will be substantial. Any payments made by us to the TRA Participants under the Tax Receivable Agreement will not be available for reinvestment in our business and will generally reduce the amount of overall cash flow that might have otherwise been available to us.

To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us, provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement. The payments under the Tax Receivable Agreement are not conditioned upon continued ownership of us by the exchanging Continuing Equity Owners. Furthermore, if we experience a Change of Control (as defined under the Tax Receivable Agreement), which includes certain mergers, asset sales, and other forms of business combinations, we would be obligated to make an immediate payment, and such payment may be significantly in advance of, and may materially exceed, the actual realization, if any, of the future tax benefits to which the payment relates. This payment obligation could (i) make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the Tax Receivable Agreement and (ii) result in holders of our Class A common stock receiving substantially less consideration in connection with a change of control transaction than they would receive in the absence of such obligation. Accordingly, the Continuing Equity Holders’ interests may conflict with those of the holders of our Class A common stock. The existing tax basis acquired in connection with the Transactions, the actual increase in tax basis, and the actual utilization of any resulting tax benefits, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors: including the timing of redemptions by the Continuing Equity Owners; the price of shares of our Class A common stock at the time of the redemption; the extent to which such redemptions are taxable; the amount of gain recognized by such Continuing Equity Owners; the amount and timing of the taxable income allocated to us or otherwise generated by us in the future; the portion of our payments under the Tax Receivable Agreement constituting imputed interest; and the federal and state tax rates then applicable.

Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Owners that will not benefit holders of our Class A common stock to the same extent that it will benefit the Continuing Equity Owners.

Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Owners that will not benefit the holders of our Class A common stock to the same extent that it will benefit the Continuing Equity Owners. We entered into the Tax Receivable Agreement with Flowco LLC and each of the TRA Participants in connection with the completion of the IPO and the Transactions, which provides for the payment by us to the TRA Participants of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize, as a result of: (i) Flowco’s allocable share of existing tax basis acquired in connection with the Transactions and increases to such allocable share of existing tax basis; (ii) Flowco Holdings’s utilization of certain tax attributes of the Blocker Companies (including the Blocker Companies’ allocable share of existing tax basis); (iii) the increases in our share of the tax basis of assets of Flowco LLC resulting from (a) the purchase of LLC Interests directly from Flowco LLC in connection with the IPO, (b) any future redemptions or exchanges of LLC Interests from the Continuing Equity Owners as described under “Certain Relationships and Related Party Transactions - Flowco LLC Agreement - Flowco LLC Agreement in Effect Upon Consummation of the Transactions - Common Unit Redemption Right” and (c) certain distributions (or deemed distributions) by Flowco LLC; and (iv) certain other tax benefits arising from payments under the Tax Receivable Agreement.

See “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.” Although we will retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the future trading market for the Class A common stock.

Additionally, we are a holding company and have no material assets other than our ownership of LLC Interests. As a consequence, our ability to declare and pay dividends to the holders of our Class A common stock is subject to the ability of Flowco LLC to provide distributions to us. If Flowco LLC makes such distributions, the Continuing Equity Owners that hold LLC Interests will be entitled to receive equivalent distributions from Flowco LLC on a pro rata basis. However, because we must pay taxes, amounts ultimately distributed as dividends to holders of our Class A common stock are expected to be less on a per share basis than the amounts distributed by Flowco LLC to such Continuing Equity Owners on a per unit basis. This and other aspects of our organizational structure may adversely impact the future trading market for our Class A common stock.

In certain cases, payments under the Tax Receivable Agreement to the TRA Participants may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.

The Tax Receivable Agreement provides that if (i) we materially breach any of our material obligations under the Tax Receivable Agreement, (ii) certain mergers, asset sales, other forms of business combinations or other changes of control were to occur after the consummation of the IPO or (iii) we elect an early termination of the Tax Receivable Agreement, then our obligations, or our successor’s obligations, under the Tax Receivable Agreement to make payments would be based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.

As a result of the foregoing, we would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, based on certain assumptions, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. We could also be required to make cash payments to the TRA Participants that are greater than the specified percentage of any actual benefits we ultimately realize in respect of the tax benefits that are subject to the Tax Receivable Agreement. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control.

There can be no assurance that we will be able to fund or finance our obligations under the Tax Receivable Agreement. We may need to incur debt to finance payments under the Tax Receivable Agreement to the extent our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement as a result of timing discrepancies or otherwise.

We are not reimbursed for any payments made to the TRA Participants under the Tax Receivable Agreement in the event that any tax benefits are disallowed.

Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, and the U.S. Internal Revenue Service (the “IRS”) or another tax authority, may challenge all or part of the tax basis increases or other tax benefits we claim, as well as other related tax positions we take, and a court could sustain such challenge. If the outcome of any such challenge would reasonably be expected to materially affect a recipient’s payments under the Tax Receivable Agreement, then we are not permitted to settle or fail to contest such challenge without the consent (not to be unreasonably withheld or delayed) of certain TRA Participants. The interests of the TRA Participants in any such challenge may differ from or conflict with our interests and your interests, and the TRA Participants may exercise their consent rights relating to any such challenge in a manner adverse to our interests and your interests. We are not reimbursed for any cash payments previously made to the TRA Participants under the Tax Receivable Agreement in the event that any tax benefits initially claimed by us and for which payment has been made to a TRA Participants are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by us to a TRA Participant will be netted against any future cash payments we might otherwise be required to make to such TRA Participants, under the terms of the Tax Receivable Agreement. However, we might not determine that we have effectively made an excess cash payment to a TRA Participants for a number of years following the initial time of such payment and, if any of our tax reporting positions are challenged by a taxing authority, we are not permitted to reduce any future cash payments under the Tax Receivable Agreement until any such challenge is finally settled or determined. Moreover, the excess cash payments we made previously under the Tax Receivable Agreement could be greater than the amount of future cash payments against which we would otherwise be permitted to net such excess. The applicable U.S. federal income tax rules for determining applicable tax benefits we may claim are complex and factual in nature, and there can be no assurance that the IRS or a court will not disagree with our tax reporting positions. As a result, payments could be made under the Tax Receivable Agreement significantly in excess of any actual cash tax savings that we realize in respect of the tax attributes with respect to a TRA Participant that are the subject of the Tax Receivable Agreement.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition.

We are subject to taxes by the U.S. federal, state, local and foreign tax authorities. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

In addition, we may be subject to audits of our income, sales and other taxes by U.S. federal, state, and local and foreign taxing authorities. Outcomes from these audits could have an adverse effect on our operating results and financial condition.

If Flowco LLC were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and Flowco LLC might be subject to potentially significant tax inefficiencies.

We intend to operate such that Flowco LLC does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is a partnership the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. Under certain circumstances, redemptions of LLC Interests pursuant to the redemption right, or other transfers of LLC Interests, could cause Flowco LLC to be treated as a publicly traded partnership. Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership, and we intend to operate such that redemptions or other transfers of LLC Interests qualify for one or more such safe harbors.

If Flowco LLC were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result for us and for Flowco LLC, including as a result of the inability to file a consolidated U.S. federal income tax return with Flowco LLC.

If we were deemed to be an investment company under the Investment Company Act of 1940, as amended, or the 1940 Act, including as a result of our ownership of Flowco LLC, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in either of those sections of the 1940 Act.

We and Flowco LLC intend to conduct our operations so that we are not considered an investment company. As the sole managing member of Flowco LLC, we control and operate Flowco LLC. On that basis, we believe that our interest in Flowco LLC is not an “investment security” as that term is used in the 1940 Act. However, if we were to cease participation in the management of Flowco LLC, or if Flowco LLC itself becomes an investment company, our interest in Flowco LLC could be deemed an “investment security” for purposes of the 1940 Act. If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties and that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company. If we were required to register as an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business.

Risk Factors Related to the Ownership of Our Class A Common Stock

GEC and White Deer collectively control us, and each of them individually has significant influence over us, including pursuant to the Stockholders Agreement and control over decisions that require the approval of stockholders.

GEC and White Deer control, in the aggregate, approximately 57.9% of the voting power represented by all our outstanding classes of stock, and individually control approximately 41.9% and 16.0%, respectively, of the voting power represented by all our outstanding classes of stock. GEC, White Deer and certain of their affiliates have entered into a Stockholders Agreement relating to, among other things, the election of our directors. As a result, such Continuing Equity Owners will continue to exercise significant influence over all matters requiring stockholder approval, including the election and removal of directors and the size of our Board of Directors, and will continue to have significant control over our business, affairs and policies. The directors such Continuing Equity Owners elect have the authority to incur additional debt, issue or repurchase stock, declare dividends and make other decisions that could be detrimental to stockholders.

We expect that for some period of time, members of our Board of Directors will continue to be appointed by and/or affiliated with GEC and White Deer, who will have the right pursuant to our Stockholders Agreement to nominate the majority of our directors. Such Continuing Equity Owners can take actions that have the effect of delaying or preventing a change of control of us or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other stockholders oppose them. The concentration of voting power with such Continuing Equity Owners may have an adverse effect on the price of our Class A common stock. Such Continuing Equity Owners may have interests that are different from yours and may vote in a way with which you disagree and that may be adverse to your interests.

In addition to rights relating to the nomination of directors and our Board of Directors, the Stockholders Agreement includes certain consent rights with respect to actions by the company and our subsidiaries as long as GEC Affiliates or White Deer Affiliates, respectively, beneficially own, directly or indirectly, at least 10% of the Deemed Outstanding Class A Shares. The interests of GEC and White Deer may be different than the interests of other stockholders, and such consent rights could limit our ability to engage in certain transactions in a way that is adverse to your interests. For more information, see “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

Further, our amended and restated certificate of incorporation, which became effective upon the consummation of the Transactions, provides that the doctrine of “corporate opportunity” does not apply with respect to any director or stockholder who is not employed by us or any of our subsidiaries. GEC, White Deer and their respective affiliates have investments in other oilfield services companies that may compete with us, and GEC, White Deer and their respective affiliates may invest in such other companies in the future. By renouncing our interest and expectancy in any business opportunity that may be from time to time presented to any member of a GEC or White Deer affiliated entity or any of our directors or officers who is also an employee, partner, member, manager, officer or director of any GEC or White Deer affiliated entity, our business or prospects could be adversely affected if attractive business opportunities are procured by such parties for their own benefit rather than for ours. See “Risk Factors – Risk Factors Related to the IPO and Ownership of Our Class A Common Stock – Our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” will not apply with respect to any director or stockholder who is not employed by us or our subsidiaries.”

We cannot predict the effect our dual class structure may have on the market price of our Class A common stock.

We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A common stock, in adverse publicity, or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices. In July 2017, FTSE Russell announced that it plans to require new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multiple-class share structures to certain of its indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Also in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under such announced policies, the dual class structure of our stock would make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to track those indices would not invest in our Class A common stock. These policies are relatively new, and it is unclear what effect, if any, they will have on the valuations of publicly-traded companies excluded from such indices, but it is possible they may depress valuations, compared to similar companies that are included. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.

We are a “controlled company” within the meaning of the NYSE rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You may not have the same protections afforded to stockholders of companies that are subject to such corporate governance requirements.

GEC, White Deer and certain of their affiliates collectively, are parties to the Stockholders’ Agreement relating to the election of directors, as a group currently have more than 50% of the voting power for the election of directors, and, as a result, we are considered a “controlled company” for the purposes of the NYSE rules. As such, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements, including the requirements to have a majority of independent directors on our Board of Directors, an entirely independent nominating and corporate governance committee, an entirely independent compensation committee or to perform annual performance evaluations of the nominating and corporate governance and compensation committees.

The corporate governance requirements and, specifically, the independence standards are intended to ensure directors who are considered independent are free of any conflicting interest that could influence their actions as directors. Following the IPO, we utilized certain exemptions afforded to a “controlled company.” As a result, we are not subject to certain corporate governance requirements, including that a majority of our Board of Directors consists of “independent directors,” as defined under the NYSE rules. In addition, we are not required to have a nominating and corporate governance committee or compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, or to conduct annual performance evaluations of the nominating and corporate governance and compensation committees.

Accordingly, we may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE rules. Our status as a controlled company could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

Certain provisions of Delaware law and anti-takeover provisions in our organizational documents could delay or prevent a change of control.

Certain provisions of Delaware law and our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-takeover effect and may delay, defer, or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders. These provisions provide for, among other things:

These antitakeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.

In addition, we have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), but our amended and restated certificate of incorporation provides that engaging in any of a broad range of business combinations with any “interested” stockholder (any stockholder with 15% or more of our voting stock) for a period of three years following the date on which the stockholder became an “interested” stockholder is prohibited, subject to certain exceptions, including an exclusion for GEC, White Deer and their affiliates. See “Description of Capital Stock” section included in the Final Prospectus.

The JOBS Act will allow us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC. We cannot be certain if this reduced disclosure will make our Class A common stock less attractive to investors.

The JOBS Act is intended to reduce the regulatory burden on “emerging growth companies.” As defined in the JOBS Act, a public company whose initial public offering of common equity securities occurs after December 8, 2011, and whose annual net revenues are less than $1.235 billion will, in general, qualify as an “emerging growth company” until the earliest of:

Under this definition, we are an “emerging growth company” upon completion of the IPO and could remain an “emerging growth company” until as late as the fifth anniversary of the completion of the IPO. For so long as we are an “emerging growth company,” we are, among other things:

In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period and, as a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies.

We cannot predict if investors will find our Class A common stock less attractive as a result of our decision to take advantage of some or all of the reduced disclosure requirements above. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.

Our ability to pay regular cash dividends on our Class A common stock may be limited.

Our ability to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, general and economic conditions, our results of operations and financial condition, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, and such other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends is, and may be, limited by covenants of existing and any future outstanding indebtedness we or our subsidiaries incur, including under our Credit Agreement. Therefore, any return on investment in our Class A common stock is solely dependent upon the appreciation of the price of our Class A common stock on the open market, which may not occur. See “Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividends” for more detail.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters and the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our amended and restated certificate of incorporation provides (A) (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended or restated) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Notwithstanding the foregoing, the exclusive forum provision shall not apply to claims seeking to enforce any liability or duty created by the Exchange Act. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.

Our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” will not apply with respect to any director or stockholder who is not employed by us or our subsidiaries.

The doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity.

The doctrine of corporate opportunity is intended to preclude officers or directors or other fiduciaries from personally benefiting from opportunities that belong to the corporation. Our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” will not apply with respect to any director or stockholder who is not employed by us or our subsidiaries. Any director or stockholder who is not employed by us or our subsidiaries has, therefore, no duty to communicate or present corporate opportunities to us, and will have the right to either hold any corporate opportunity for their (and their affiliates’) own account and benefit or to recommend, assign or otherwise transfer such corporate opportunity to persons other than us, including to any director or stockholder who is not employed by us or our subsidiaries.

As a result, certain of our stockholders, directors and their respective affiliates are not prohibited from operating or investing in competing businesses. We, therefore, may find ourselves in competition with certain of our stockholders, directors or their respective affiliates, and we may not have knowledge of, or be able to pursue, transactions that could potentially be beneficial to us. Accordingly, we may lose a corporate opportunity or suffer competitive harm, which could negatively impact our business, operating results and financial condition.

If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, or if there is any fluctuation in our future credit rating, our stock price and trading volume could decline.

The trading market for our Class A common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. If one or more of the analysts who do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our stock could decline. If one or more of these analysts stops covering us or fails to publish reports on us regularly, we could lose visibility in the market, which, in turn, could cause our stock price or trading volume to decline.

Additionally, any fluctuation in the credit rating of us or our subsidiaries may impact our ability to access debt markets in the future or increase our cost of future debt, which could have a material adverse effect on our operations and financial condition, which in return may adversely affect the trading price of shares of our Class A common stock.

As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and NYSE regarding our internal control over financial reporting. If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or report them in a timely manner.

We are a public reporting company subject to the rules and regulations established from time to time by the SEC and the NYSE. These rules and regulations require, among other things, that we establish and periodically evaluate procedures with respect to our internal control over financial reporting.

Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel.

In addition, as a public company we are required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting by the time our second annual report is filed with the SEC and thereafter, which will require us to document and make significant changes to our internal control over financial reporting. Likewise, our independent registered public accounting firm will be required to provide an attestation report on the effectiveness of our internal control over financial reporting at such time as we cease to be an “emerging growth company,” as defined in the JOBS Act, and we become an accelerated or large accelerated filer. As described above, we could potentially qualify as an “emerging growth company” until as late as the fifth anniversary of the completion of the IPO.

We expect to incur costs related to implementing an internal audit and compliance function in the upcoming years to further improve our internal control environment. If we identify future deficiencies in our internal control over financial reporting or if we are unable to comply with the demands that will be placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC. We also could become subject to sanctions or investigations by the SEC or other regulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets and our stock price may be adversely affected.

We incur and, continue to incur, significant costs as a result of operating as a public company.

Prior to the IPO, we operated as a private company. After the IPO, we became subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the NYSE and other applicable securities laws and regulations. The expenses incurred by public companies for reporting and corporate governance purposes have generally been trending upward. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more difficult, time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. We also expect that being a public company and being subject to new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our Audit Committee or other board committees, or as our executive officers.

Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Class A common stock, fines, sanctions and other regulatory action and potentially civil litigation. These factors may, therefore, strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our Class A common stock to decline.

The sale of shares of our Class A common stock in the public market, or the perception that such sales could occur, including sales by the cornerstone investors, could harm the prevailing market price of shares of our Class A common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon consummation of the Transactions, we had a total of 25,721,620 outstanding shares of Class A common stock, of which the 20,470,000 shares of Class A common stock sold in the IPO are freely tradable without restriction or further registration under the Securities Act, other than shares held by our affiliates. In addition, the 5,251,620 shares of Class A common stock issued to the Blocker Shareholders in the Transactions are eligible for resale pursuant to Rule 144 without restriction or further registration under the Securities Act, other than affiliate restrictions under Rule 144. Any shares of Class A common stock held by our affiliates are eligible for resale pursuant to Rule 144 under the Securities Act, subject to the volume, manner of sale, holding period and other limitations of Rule 144.

Our directors and executive officers, and substantially all of our stockholders have entered into lock-up agreements with the underwriters prior to the IPO pursuant to which each of these persons or entities, subject to certain exceptions, for a period of 180 days after the IPO, may not, without the prior written consent of, (i) offer, sell, contract to sell, pledge, grant any option to purchase, lend or otherwise dispose of any shares of our Class A common stock, or any options or warrants to purchase any shares of our Class A common stock, or any securities convertible into or exchangeable for or that represent the right to receive shares of our Class A common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant); (ii) engage in any hedging or other transaction or arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) which is designed to, or which reasonably could be expected to lead to, or result in, a sale, loan, pledge or other disposition of shares of our Class A common stock or such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Class A common stock or such other securities, in cash or otherwise; or (iii) make any demand for or exercise any right with respect to the registration of any shares of our Class A common stock or any security convertible into or exercisable or exchangeable for our common stock.

See “Underwriting (Conflicts of Interest)” in our Final Prospectus.

In addition, we have reserved shares of Class A common stock equal to approximately 6.6% of the total number of outstanding LLC Interests following the IPO for issuance under the Equity Plan (as defined below in this Annual Report). Any Class A common stock that we issue under the Equity Plan or other equity incentive plans that we may adopt in the future would dilute the percentage ownership held by the investors who purchase Class A common stock in the IPO.

As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our shares of Class A common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of Class A common stock or other securities.

In the future, we may also issue securities in connection with investments, acquisitions or capital raising activities. In particular, the number of shares of our Class A common stock issued in connection with an investment or acquisition, or to raise additional equity capital, could constitute a material portion of our then-outstanding shares of our Class A common stock. Any such issuance of additional securities in the future may result in additional dilution to you, or may adversely impact the price of our Class A common stock.

Item 1B. Unresolved Staff Comments Our cybersecurity program is designed to protect our information assets and operations from both internal and external cyber threats, while simultaneously ensuring business resilience.

None.

Item 1C. Cybersecurity

We rely on information systems and related technologies for critical internal functions, including secure data storage, processing, and transmission, as well as for interactions with key business partners such as customers and vendors.

Risk Management and Strategy

We maintain a comprehensive cybersecurity risk management program (the “Cybersecurity Program”) aligned with the National Institute of Standards and Technology (NIST) cybersecurity framework. Strategic investments in this area have prioritized:

We employ industry-leading security tools and conduct regular security risk assessments and tool reviews with independent third parties to evaluate program effectiveness and inform our security roadmap. The Cybersecurity Program also includes continuous monitoring of industry news and updates to maintain awareness of the evolving cybersecurity landscape, including potential incidents or issues involving third-party service providers.

Key elements of our Cybersecurity Program include:

We are further enhancing our Cybersecurity Program by implementing an industry-leading third-party security vendor risk management platform. This platform will automate vendor risk assessments and house our Standard Information and Governance (SIG) security questionnaire to streamline vendor procurement and response processes.

To augment our internal capabilities, we utilize an outsourced cybersecurity operations center (SOC) for continuous monitoring, investigation coordination, and remediation support.

As of the date of this Annual Report, we are not aware of any cybersecurity threats, including those resulting from prior cybersecurity incidents from our predecessor’s operations, that have had, or are reasonably likely to have, a material adverse effect on our business strategy, results of operations, or financial condition. We acknowledge the inherent and ongoing risks posed by cybersecurity threats, which, if realized and significant, could materially affect our operations, business strategy, results of operations, or financial condition.

Governance

Cybersecurity is a critical component of our overall risk management framework and a key area of focus for our Board of Directors and management. Cybersecurity responsibility is shared across the organization, from facility technicians and operators to the members of our Board of Directors. Our Director of Information Technology (IT) has direct responsibility for assessing, monitoring, and managing cybersecurity risks, as well as developing and executing our cybersecurity strategy. The Board of Directors and Audit Committee provide oversight of the Cybersecurity Program.

The IT Department, led by our Director of IT, meets regularly to evaluate ongoing security threats and incidents, and continually refines policy and procedures surrounding cybersecurity risk. Identified cybersecurity threats and incidents are monitored and assessed for materiality by the Director of IT and the IT Department. This assessment includes whether our Board of Directors should be informed of a threat or incident. Cybersecurity risks are communicated and discussed with our Board of Directors at least annually.

Our Director of IT has over 25 years of experience in IT and has a proven track record of creating, implementing, and managing successful infrastructure security, business continuity, access management, and change management policies and programs.

Item 2. Properties

We primarily lease technical customer support offices and manufacturing facilities, research and technology centers, and administrative facilities in various locations in the U.S.

As of December 31, 2024, our headquarters in Houston, Texas consisted of 6,750 square feet of leased space located at 1300 Post Oak Blvd., Suite 450, Houston, Texas 77056, and 13,685 square feet of leased space located at 6529 & 6533 N. Classen Blvd., Oklahoma City, Oklahoma, 73116.

The remainder of our property consists primarily of service equipment, vapor recovery, manufacturing and field support assets. For further information regarding our properties related to our business, see Item 1- Business - “Our Asset Footprints.”

Item 3. Legal Proceedings

From time to time, we may be involved in various claims and litigations arising in the ordinary course of our 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 our business, consolidated financial condition and results of operations. 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 4. Mine Safety Disclosures Item 5.

None.

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

On January 16, 2025, our Class A common stock began trading on the New York Stock Exchange under the ticker symbol “FLOC”. Prior to that time, there was no public market for our Class A common stock. There is no established public trading market for our Class B common stock.

Shareholders Information

As of March 19, 2025, we had six registered holders of our Class A common stock and 58 registered holders of our Class B common stock.

Recent Sales of Unregistered Securities

None.

Securities Authorized for Issuance under Equity Compensation Plans

Our 2025 Equity and Incentive Plan (the “Equity Plan”) governs equity awards to our employees, directors, consultants and other eligible participants. The Equity Plan reserves a total of 6,000,000 shares of common stock. 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 2% of the number of shares common stock issued and outstanding on the last day of each fiscal year and an amount determined by our Board of Directors. Incentive awards generally may be issued to officers, key employees, consultants, and directors and include the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units. For more information concerning common stock issuances with respect to the Equity Plan, refer to “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Securities for Issuance under Equity Compensation Plans.”

Dividends

We currently intend to pay a dividend from available funds and future earnings on our Class A common stock. The declaration, amount and payment of any future dividends on shares of our Class A common stock will be at the sole discretion of our Board of Directors and we may reduce or discontinue entirely the payment of such dividends at any time. Our Board of Directors may take into account general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our Board of Directors may deem relevant.

Use of Proceeds from the IPO

The net proceeds from our IPO were approximately $461.8 million and 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 less the underwriting discount.

In turn, Flowco LLC used the net proceeds from its sale to us of newly issued LLC Interests as follows: (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. Flowco LLC may also use a portion of the net proceeds to acquire or invest in businesses, products, services, or technologies; however, there are no agreements or commitments for any material acquisitions or investments at the time of when this Annual Report was issued. Further, there has been no material change in the expected use of the net proceeds from our IPO as described under the heading “Use of Proceeds” in our Final Prospectus.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 6. [Reserved]

Item 7. 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 consolidated financial statements and related notes and other information included elsewhere in this Annual Report. In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in Part I. Item 1A. Risk Factors and the section titled “Forward-Looking Statements” included elsewhere in this Annual. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. We use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “will,” “would,” and similar expressions to identify forward-looking statements.

Background and Business Overview

We are a leading provider of production optimization, artificial lift and methane abatement solutions for the oil and natural gas industry.

Consistent with the manner in which our chief operating decision maker evaluates performance and allocate resources, our operations are conducted, managed and presented within the following two reportable segments:

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. For a more detailed overview of our business, see Part 1. Item 1. Business and Part 1. Item 2. Properties in this Annual Report.

As the closing of our initial public offering (“IPO”) and the resulting concurrent reorganization occurred on January 17, 2025, the accompanying consolidated statements presented herein consisted of the accounts of our predecessor, as discussed below in Recent Developments.

Trends and Outlook

Macroeconomic Conditions and Commodity Prices

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.

Following a volatile oil market in 2023, marked by geopolitical turmoil and concerns over production levels of major producing countries, oil prices stabilized in the first half of 2024 as supply risks from ongoing global conflicts eased, inflationary pressures moderated and OPEC+ extended voluntary production cuts.

In early 2024, crude oil prices strengthened due to fears that the conflict in the Middle East could spread throughout the region, potentially disrupting critical shipping routes and global oil supply. However, as global oil production remained stable, supply uncertainty dissipated, causing oil prices to decline from April highs. In early June, OPEC+ agreed to extend production cuts of 3.7 million barrels per day until the end of 2025 and prolonged production cuts of 2.2 million barrels per day until the end of September 2024, with a plan to gradually phase out this cut from October 2024 to September 2025. These extensions provided support for oil prices through June. In early August, fears of a U.S. recession put downward pressure on oil prices. As these fears eased and geopolitical tensions in the Middle East rose, oil prices rebounded from six-month lows.

Longer term, the U.S. Energy Information Administration (“EIA”) forecasts U.S. crude oil production will continue to grow over the next five years, driven in part by increases in well efficiency, even with the deployment of fewer active drilling rigs, and assuming no new adverse laws or regulations. This growth in U.S. oil production follows approximately 15 years of U.S. unconventional shale development, a period in which spot oil prices fluctuated between approximately $120 per barrel to below $0 per barrel and U.S. onshore active rig count declined from approximately 1,800 rigs to below 600 rigs.

During this same period, U.S. oil production grew from 5 million barrels per day to 13 million barrels per day, and the U.S. is currently the largest global producer of oil.

While we anticipate continued variability in oil and natural gas prices, we believe commodity prices will remain constructive to incentivize oil producer operational spending, particularly within our key markets. We expect ongoing investment in the U.S. onshore market, driven by population growth, increased per capita energy consumption, energy security concerns, growing importance of U.S. oil and natural gas production, production optimization for decline management, the short-cycle nature of unconventional shale wells and continued investment in exploration and appraisal activity.

In recent years, U.S. producers focused on capital discipline have been able to realize operational efficiencies and to increase total U.S. production despite onshore rig count remaining below previous peak levels. Producers are increasingly focused on optimizing production to limit production decline rates and to maximize production in a capital efficient manner. Our services and products provide solutions to meet these industry needs and demands, by maximizing production, minimizing downtime and limiting decline rates at all stages of a well’s lifecycle.

Global Outlook and Geopolitical Environments

The ongoing heightened tension in the global geopolitical environments, especially the prolonged conflicts in Ukraine and in the Middle East and the continued tension between U.S. and China, continues to create uncertainty not only in the oil and natural gas markets, but also in the financial market and global supply chain. In early 2025, the Trump administration has introduced new and significant trade policies and has imposed or threatened to impose tariffs on imported products with numerous U.S. global trade partners. These aggressive and unpredictable trade policies could create volatility in U.S. stock markets and further disruptions in global supply chain dynamics. We do not know the ultimate severity or duration of these conflicts, but we continue to closely monitor shifts in global trade policies and evaluate their potential impacts on our business, financial condition and results of operations.

Our Industry Growth

The natural gas compression and artificial lift industry continued to experience robust growth, driven by rising global energy demand, technological innovations and evolving regulatory requirements. Advancements in compression technology, automation and data analytics continued to reshape operational efficiency and reliability across the industry. We believe that our longstanding and expansive customer relationships across every major onshore U.S. producing region combined with vertically integrated operations allow us to be strategically positioned to capitalize on these transformative trends and deliver sustainable long-term value.

As our business is closely aligned with wells production and is typically less directly affected by commodity price, we are not exposed to the volatility often faced in the narrow-focused and shorter-cycle oil field service businesses.

We deliver natural gas compression services in connection with domestic natural gas production that primarily occurs in natural gas basins, such as the Appalachian and Barnett, and in crude oil basins where associated natural gas is produced alongside crude oil production, such as San Juan, Anadarko and Permian basins, and Eagle Ford Shale.

Our products are chosen due to their reliability and ability to aid our customers in achieving maximum output and cash flow from their producing 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 U.S., with majority of our consolidated revenue generated in Permian Basin.

Recent Developments

IPO

We consummated our IPO on January 15, 2025, in which we issued and sold 20,470,000 shares of our Class A common stock at a price of $24.00 per share, resulting in gross proceeds to us approximately $491.3 million and net proceeds to us of approximately $461.8 million, after deducting the underwriting discount of approximately $29.5 million.

2024 Business Combination and Subsequent Transactions

On June 24, 2024, Flowco MergeCo LLC (“Flowco LLC”) entered into a contribution agreement with (i) the Estis Member, (ii) the FPS Member and (iii) the Flogistix Member, pursuant to which, Flowco LLC acquired 100% of the membership interests of each of Estis Intermediate, Flowco Productions and Flogistix Intermediate in exchange for Series A Units of Flowco LLC proportionate to the value of the contributed membership interests (the “2024 Business Combination”). In connection with the 2024 Business Combination, the FPS Member also contributed substantially all of its assets to Flowco Productions immediately prior to the consummation of the 2024 Business Combination and the contribution of the membership interests of Flowco Productions to Flowco LLC. The 2024 Business Combination was consummated effective as of June 20, 2024. As a result of the 2024 Business Combination, our Original Equity Owners acquired the following ownership interest in Flowco LLC:

In August 2024, Flowco LLC contributed all of the equity interest in each of Estis Intermediate, Flowco Productions and Flogistix (collectively, the “Merging Entities”) to another wholly owned subsidiary, Flowco MasterCo LLC, which is the current direct owner of Estis Intermediate, Flowco Productions and Flogistix Intermediate. The purpose of Flowco LLC is to carry on the business activities of each of the contributed entities, including production optimization and related oilfield services business lines.

Flowco Holdings Inc. (“Flowco Holdings”) was incorporated in Delaware on July 25, 2024 in connection with the IPO and only engaged, through the last date presented in this Annual Report, in activities in contemplation of the IPO. After giving effect to the IPO, we became a holding company, and our sole material assets consist of its ownership interests in Flowco LLC.

As a result of the 2024 Business Combination, Estis was deemed to be the accounting acquirer and Flowco Productions and Flogistix as the acquirees. Additionally, Estis was deemed to be the accounting predecessor for financial reporting purposes and as such, all historical results of operations discussed in this Annual Report, other than the Flowco Holdings December 31, 2024 Balance Sheet, for all periods prior to June 20, 2024, reflect only Estis’ legacy operations, and for the period subsequent to June 20, 2024, are reflective of the combined operations of the Merging Entities (the Merging Entities are also referred to herein as the “Predecessor”).

The 2024 Business Combination was accounted for as a business combination using the acquisition method of accounting under ASC 805, Business Combinations (“ASC 805”).

Factors Affecting the Comparability of Our Financial Condition and Results of Operations

Our historical financial condition and results of operations for the periods presented may not be comparable, both from period over period and going forward, for the following reasons:

Predecessor Consolidated Results of Operations

The historical consolidated financial information included in the following tables and discussions present the historical financial information of our Predecessor. Additionally, the discussions relating to significant line items from our consolidated statements of operations are based on available information and represent our analysis of significant changes or events that impact the 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. The results of operations data in the following tables for the periods presented have been derived from the audited financial statements included elsewhere in this Annual Report. The discussions related to historical financial information for the year ended December 31, 2023 compared to the year ended December 31, 2022, have been reported previously in the Final Prospectus, under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations, and is also included in this Annual Report.

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 and 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.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

The following table sets forth certain selected financial results for the periods indicated (in thousands). Prior to June 20, 2024, all operating results reflect only Estis as predecessor to the Merging Entities:

Revenue – Rentals. Rental revenue was $276.7 million for the year ended December 31, 2024, an increase of $107.9 million, or 64%, from $168.8 million for the year ended December 31, 2023. $84.4 million of increase in rental revenue relates to the Natural Gas Technologies segment from companies acquired in the 2024 Business Combination. Rental fleet from the Natural Gas Technologies segment had an average of 2,838 active systems and an average monthly price of $4,696 for the year ended December 31, 2024. The remaining $23.5 million increase in rental revenue relates to the Production Solutions segment, which was driven by an increase of 33 average active systems per month from 1,401 during 2023 to 1,434 average active systems per month during 2024, and a $1,132 increase in average monthly price from $10,043 per unit during 2023 to $11,195 per unit during 2024. Thus, of the increase in rental revenue related to the Production Solutions segment, 2.4% is attributable to an increase in average active systems, and 11.3% is due to an increase in average monthly price.

Revenue – Sales. Sales revenue was $258.6 million for the year ended December 31, 2024, an increase of $184.1 million, or 274%, from $74.5 million for the year ended December 31, 2023. This increase in revenue was partially due to $135.5 million of revenue related to Flowco Productions within the Production Solutions segment and $41.4 million of revenue related to Flogistix within the Natural Gas Technologies segment as part of the 2024 Business Combination. The remainder of the increase was primarily due to an increase of $7.2 million of sales of natural gas systems to third parties. We sell our natural gas systems through intercompany transactions for further use in the Production Solutions segment as well as sales to our customers. During 2023, intercompany sales comprised a significant portion of total natural gas system sales as we continued to increase the volume of active systems within Production Solutions segment. Due to the change in focus of sales to third parties rather than our Production Solutions segment, third party sales volume of natural gas systems increased 10% year-over-year while pricing remained flat. All intercompany revenues have been eliminated in consolidation.

Cost of Rentals. Rental cost was $74.5 million for the year ended December 31 2024, an increase of $32.3 million, or 77%, from $42.2 million for the year ended December 31, 2023. This increase was primarily attributable to $28.6 million of costs related to Flogistix as part of the 2024 Business Combination within the Natural Gas Technologies segment.

Cost of Sales. Sales cost was $189.9 million for the year ended December 31, 2024, an increase of $127.3 million, or 203%, from $62.6 million for the year ended December 31, 2023. The increase was primarily attributable to $94.9 million of costs related to Flowco Productions within the Production Solutions segment and $30.2 million of costs related to Flogistix within the Natural Gas Technologies segment as part of the 2024 Business Combination.

Selling, general and administrative expenses. Selling, general and administrative expenses for the year ended December 31, 2024, were $62.5 million, an increase of $47.2 million from $15.2 million for the year ended December 31, 2023. This increase was primarily attributable to $21.2 million of costs related to Flowco Productions within the Production Solutions segment, $15.7 million of expenses related to Flogistix within the Natural Gas Technologies segment, and Corporate expenses of $6.0 million as a part of the 2024 Business Combination. The remaining increase of $3.9 million is due to increases in personnel expense and sales and marketing expense at Estis, including the addition of management and employees in connection with our IPO and anticipated public company reporting requirements.

Depreciation and amortization. Depreciation and amortization was $90.9 million for the year ended December 31, 2024, an increase of $47.0 million, from $43.8 million for the year ended December 31, 2023. The increase in depreciation expense was primarily due to $13.2 million related to Flowco Productions within the Production Solutions segment and $27.6 million related to Flogistix within the Natural Gas Technologies segment as part of the 2024 Business Combination. The remainder of the increase in depreciation expense was due to purchases of machinery and equipment in the prior period, which primarily relates to the Production Solutions segment as depreciation and amortization within the Natural Gas Technologies remained consistent year-over-year.

Loss on sale of equipment. Loss on sale of equipment was $0.8 million for the year December 31, 2024, compared to $1.2 million for the year ended December 31, 2023, a decrease of $0.4 million, which is all related to the Production Solutions segment. The decrease is due to a fewer number of unit disposals in 2024 compared to 2023.

Interest expense. Interest expense was $32.3 million for the year ended December 31, 2024 compared to interest expense of $19.0 million for the year ended December 31, 2023. This increase in interest expense of $13.4 million is due to interest expense related to Flowco Productions and Flogistix as part of the 2024 Business Combination, in addition to the associated interest on increased borrowings under the Credit Agreement for distributions to members.

Loss on debt extinguishments. Loss on debt extinguishments was $0.2 million for the year ended December 31, 2024, compared to $0.0 million for the year ended December 31, 2023, an increase of $0.2 million, which is related to the Credit Agreement entered into on August 20, 2024, which currently provides for a $725.0 million five-year senior secured revolving credit facility.

Other expense. Other expense was $2.8 million for the year ended December 31, 2024, compared to $0.9 million for the year ended December 31, 2023, an increase of $1.8 million. The increase is due to $0.3 million related to Flowco Productions and Flogistix as part of the 2024 Business Combination as well as $2.7 million of transaction costs incurred in connection with the 2024 Business Combination and $0.9 million of professional service fees not determined to be direct and incremental to the registration statement and not part of the core operating costs of the business. These costs were partially offset by $0.5 million of other expenses incurred during the year ended December 31, 2023 that did not recur during the year ended December 31, 2024.

Provision for income taxes. Provision for income taxes was $1.2 million for the year ended December 31, 2024, a $0.8 million increase from the year ended December 31, 2023. Provision for income taxes for the years ended December 31, 2024 and 2023, are entirely associated with Texas margin tax, as an LLC. This increase is due to Flowco Productions and Flogistix, as part of the 2024 Business Combination, being included in our financial results for approximately half of 2024.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

The following table presents summary consolidated operating results of our predecessor Estis for the periods indicated:

Revenue—Rentals. Rental revenue was $168.8 million for 2023, an increase of $48.6 million, or 40%, from $120.2 million for 2022. All rental revenue is included within the Production Solutions segment. This increase in rental revenue was driven by an increase of 191 average active systems per month from 1,210 during 2022 to 1,401 average active systems per month during 2023; and $2,117 increase in average monthly price from $8,279 per unit during 2022 to $10,043 per unit during 2023. Thus, of the increase in rental revenue, 43% is attributable to an increase in average active systems, and 57% is due to an increase in average monthly price.

Revenue—Sales. Sales revenue was $74.5 million for 2023, an increase of $46.1 million, or 163%, from $28.4 million for 2022. All sales revenue is included within the Natural Gas Technologies segment. This increase in revenue was primarily due to a $45.5 million increase in sales of natural gas systems to third parties We sell our natural gas systems through intercompany transactions for further use in the Production Solutions segment as well as sales to our customers. During 2022, Natural Gas Technologies segment had $99.9 million intercompany natural gas system sales to the Production Solutions segment as we continued to increase the volume of active systems. Due to the change in focus of sales to third parties rather than our Production Solutions segment, third party sales volume of natural gas systems increased 111% year-over-year while pricing remained flat.

All intercompany revenues have been eliminated in consolidation.

Cost of Rentals. Rental cost of $42.2 million in 2023 increased $9.0 million, or 27%, from $33.2 million in 2022. All rental costs are within the Production Solutions segment. This increase was primarily attributable to an increase of $3.8 million for equipment maintenance and repair expense, $2.5 million of additional personnel expense, and $1.2 million of shop repair and maintenance expense due to the increased fleet count, as well as inflationary costs.

Cost of Sales. Sales cost of $62.6 million in 2023 increased $40.3 million, or 181%, from $22.3 million in 2022. All sales costs are within the Natural Gas Technologies segment. This increase was primarily attributable to increased sale volumes and mix of products sold.

Depreciation and amortization. Depreciation and amortization was $43.8 million for 2023 an increase of $7.6 million, from $36.2 million in 2022. The increase in depreciation expense was primarily due to depreciation on purchases of machinery and equipment of $43.3 million during 2023, as well as a full year of depreciation on $107.0 million of purchases of property, plant and equipment in 2022. The entirety of the change relates to the Production Solutions segment as depreciation and amortization within the Natural Gas Technologies segment remained consistent year-over-year.

Selling, general and administrative expenses. Selling, general and administrative expenses for 2023 were $15.2 million, an increase of $1.0 million from $14.2 million for 2022. This increase was primarily attributable to increases in personnel expense and sales and marketing expense. The entirety of the change relates to the Production Solutions segment as the selling, general and administrative expenses within the Natural Gas Technologies segment remained consistent year-over-year.

Loss on sale of equipment. Loss on sale of equipment, net was $1.2 million in 2023 compared to $0.1 million in 2022, an increase of $1.1 million, due to a higher number of unit disposals in the Production Solutions segment in the first and fourth quarters of 2023 compared to 2022, which had minimal disposals during the year.

Interest expense. Interest expense was $19.0 million in 2023 compared to interest expense of $9.3 million in 2022. This increase in interest expense of $9.7 million was related to the timing of additional borrowings of $188.4 million, partially offset by the timing of payments of $173.5 million on the revolving credit facility of Estis and its subsidiaries (the “Prior Estis Credit Facility”), as well as increased borrowing costs.

Other expense. Other expense was $0.9 million in 2023 compared to $0.4 million in 2022, an increase of $0.5 million. The increase was primarily due to an increase in other non-operating expenses.

Provision for income taxes. Provision for income taxes was $0.4 million for the year ended December 31, 2023, a $0.1 million or approximately 34% increase from the year ended December 31, 2022. The increase is associated with increased operating activities that resulted in increased Texas margin tax expenses.

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.

On August 24, 2024, we entered into a credit agreement, as amended to date, by and among Flowco MasterCo (the “Parent Borrower”), Flowco Productions, Estis Intermediate and Flogistix Intermediate, as borrowers, certain other direct and indirect subsidiaries of the Parent Borrower party thereto as guarantors, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent (as amended to date, the “Credit Agreement”). The Credit Agreement was entered into in connection with a continuation and upsize of the legacy credit facility established by a legacy credit agreement with Estis and certain of its subsidiaries as loan parties hereto.

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.

Sources of Liquidity and Indebtedness

As of December 31, 2024, we had $2.5 million of cash and cash equivalents. We expect that our primary sources of liquidity and capital resources will be cash flows generated by operating activities and borrowings under our Credit Agreement, which has a maturity date of August 20, 2029, that 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 6.4% 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.

Historically, our predecessors’ primary sources of liquidity were cash flows from operations, borrowings under Estis’ legacy credit agreement and equity provided by the Original Equity Owners. Our predecessors’ primary use of capital has been for working capital purposes, to make cash distributions to the Original Equity Owners and repay indebtedness. Prior to the repayment of a portion of the Credit Agreement in conjunction with the IPO, the outstanding borrowings under the Credit Agreement was $635.9 million with $87.6 million of available borrowing capacity on December 31, 2024.

As of March 14, 2025, we had $195.7 million outstanding borrowings and $527.7 million available borrowing capacity under our Credit Agreement.

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. We currently intend to pay a dividend from available funds and future earnings on our Class A common stock. If and to the extent our Board of Directors declares cash dividends to our stockholders, we expect the dividend to be paid from cash flows from our operations. The timing, amount and financing of dividends, if any, will be subject to the discretion of our Board of Directors from time to time. As of December 31, 2024, we have yet to declare a cash dividend on our Class A common stock. Distributions to members or partners made by our predecessor entities, including distributions to members funded during 2024 in part by borrowings under our Credit Agreement, should not be viewed as indicative that we expect to pay with respect to our Class A common stock.

Cash Flow Analysis

The following table presents our summary cash flows for the periods presented. Prior to June 20, 2024, all cash flow activity reflects only our predecessor Estis.

Operating activities. Net cash provided by operating activities was $179.4 million in 2024 compared to $81.9 million in 2023, an increase of approximately $97.5 million. Operating cash flows increased primarily due to higher net income of $17.9 million and depreciation and amortization of $46.2 million. In addition, cash outflows associated with working capital increased $10.3 million, largely due to increases in accounts payable and accrued expenses, partially offset by increases in inventory and accounts receivable.

Net cash provided by operating activities was $81.9 million in 2023 compared to $66.6 million in 2022. This increase was primarily due to higher net income of $25.4 million and depreciation and amortization of $7.6 million, partially offset by increased cash outflows associated with our working capital of $20.7 million, an increase inventory of $15.9 million and an increase in accounts receivable of $3.1 million.

Investing activities. Net cash used in investing activities was $94.4 million and $42.7 million for the years ended December 31, 2024 and 2023, respectively.

The approximately $52.7 million increase was primarily due to an increase of $46.8 million in purchases of property, plant and equipment and $7 million cash paid for acquisition slightly decreased by $3.1 million net cash acquired from the 2024 Business Combination.

Net cash used in investing activities was $42.7 million in 2023 compared to $106.9 million in 2022. The change was primarily due to a decrease of $63.4 million in purchases of property, plant and equipment from 2022 when a significant strategic investment was implemented to expand the rental fleet size.

Financing activities. Net cash used in financing activities was $80.3 million in 2024 compared to net cash used of $39.2 million in 2023. The $26.9 million increase in net cash used in financing activities was primarily related to $125.2 million of payments on long-term debt and increased distributions to members by $178.0 million, partially offset by an increase in proceeds from long-term debt of $274.1 million.

Financing activities resulted in $39.2 million of net cash used in 2023 compared to $40.4 million of net cash provided in 2022. This favorable change in cash flows from financing activities was primarily related to the absences of $65.7 million of payments on the Prior Estis Credit Facility and $15.5 million distributions to Estis' sole member in 2022, slightly offset by the decrease in year-over-year debt issuance costs of approximately $1.2 million.

Critical Accounting 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 liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these financial statements include but are not limited to the following: determination of fair value in business combinations, inventory valuation, impairment of goodwill, intangible assets and long-lived assets, share-based compensation, and useful lives of property, plant and equipment and intangible assets. Management believes these estimates and assumptions provide a reasonable basis for the fair presentation of the consolidated financial statements. Actual results could differ from those estimates.

Determination of fair value in business combinations

Accounting for the acquisition of a business requires allocation of the purchase price to the various assets acquired and liabilities assumed at their respective fair values. The determination of fair value requires the use of significant estimates and assumptions, and in making these determinations, management uses all available information. For tangible and identifiable intangible assets acquired in a business combination, the determination of fair value utilizes several valuation methodologies including discounted cash flows which has assumptions with respect to the timing and amount of future revenue and expenses associated with an asset. The assumptions made in performing these valuations include, but are not limited to, discount rate, future revenues and operating costs, projections of capital costs, royalty rate, and other assumptions believed to be consistent with those used by principal market participants.

Depending on the magnitude of the acquisition and the specialized nature of these calculations, we often engage third-party specialists to assist management in evaluating our assumptions as well as appropriately measuring the fair value of assets acquired and liabilities assumed.

Inventory valuation

Inventory is composed of components, parts and materials used in the fabrication, repair and maintenance of natural gas systems. Inventory is recorded at the lower of cost or net realizable value. We evaluate the components of inventory on a regular basis for excess and obsolescence. We record the decline in the carrying value of estimated excess or obsolete inventory as a reduction of inventory and as an expense included in cost of goods and services in the period in which it is identified. Our estimate of excess and obsolete inventory is susceptible to change from period to period and requires management to make judgments about the future demand of inventory. There were no changes in this estimate year-over-year and the estimate has a low degree of estimation uncertainty as the historical write-offs are generally consistent without material fluctuations. Typically, our write-offs approximate $1 million each year due to factors that include historical usage, estimated product demand, technological developments and current market conditions. We believe our inventory valuation reserve is adequate to properly value excess and obsolete inventory as of December 31, 2024 and 2023. However, any significant changes to the factors mentioned above could lead our estimate to change.

Goodwill and long-lived assets

We evaluate goodwill for impairment annually on December 31, unless events or changes in circumstances indicate an impairment may have occurred before that time. We estimate the fair value based on a number of factors, including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and Company specific events. Estimating projected cash flows requires us to make certain assumptions as it relates to future operating performance.

Application of the goodwill impairment test requires management’s judgments, including a qualitative assessment to determine whether there are any impairment indicators, and determining the fair value of the reporting unit. A number of significant assumptions and estimates are involved in the application of the income approach to forecast future cash flows, including revenue and operating income growth rates, discount rates and other factors. While we believe that our estimates of current value are reasonable, if actual results differ from the estimates and judgments used including such items as future cash flows and the volatility inherent in markets which we serve, impairment charges against the carrying value of those assets could be required in the future.

No events or circumstances occurred that indicated the fair value of any of our reporting units may be below its carrying amount as of December 31, 2024. As such, no impairment expense was recorded for the year ended December 31, 2024.

Impairment of Long-Lived Assets

Long-lived assets, including property, plant, and equipment, and other finite-lived identifiable intangible assets, are reviewed 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. No impairment was recorded for the years ended December 31, 2024, 2023 and 2022.

Share-based compensation

The Estis Member, as the parent member of Estis prior to the 2024 Business Combination, issued profits interests to certain employees of Estis. FPS Member and Flogistix Member also issued profits interest to certain employees of Flowco Productions and Flogistix. All of the entities account for these awards in accordance with ASC 718, Compensation – Stock Compensation. While the awards are issued by the Estis Member, FPS Member, and Flogistix Member, the costs have been recognized by Estis, Flowco Productions, and Flogistix, respectively.

We estimate grant date fair value using the Black-Scholes option-pricing model. The use of a valuation model requires management to make certain assumptions with respect to selected model inputs, such as enterprise value, volatility, risk-free rate, and term. Estis last issued profit interest awards in 2021 which had a grant date fair value of $11.71 per unit. In comparison, the Company first issued profit interest awards in 2019, which had a grant date fair value of $2.00 per unit, or a $9.71 increase in the value per unit. The enterprise value increased by $237 million and the volatility increased by 7.19% between the first and last issuances, which were the primary drivers in the change in value. Flogistix last issued profit interest awards in 2022 and Flowco Productions last issued profit interest awards in 2023. There were no other issuances during the historical financial statement periods presented.

The risk-free rate and term are key inputs with a low degree of estimation uncertainty. The key estimates that have a higher degree of estimation uncertainty were the enterprise value and volatility. Enterprise value and volatility are subject to uncertainty given the forward-looking inputs such as future cash flows and expected volatility based on public company peers. The estimate and key assumptions have not changed during the current year as no new units were issued.

The volatility in particular is highly sensitive due to the Company’s current stage in its life cycle relative to its public company peers.

Total share-based compensation expenses for the year ended December 31, 2024, 2023 and 2022 were $1.0 million, $0.1 million and $0.5 million, respectively. Because the Company has not issued new material units during these years, we do not expect material changes to this estimate.

The expected term represents the period that the share-based awards are expected to be outstanding. We determine the expected term using the simplified method as provided by the Securities and Exchange Commission. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the profit units. Since the Members' Equity is not publicly or privately traded, expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the options is based on the U.S. Treasury yield curve at the date of the grant. Forfeitures are recognized as they occur.

Useful lives of property, plant and equipment and intangible assets

Our industry is capital intensive, as property and equipment represented 44.2% of our total assets as of December 31, 2024 and depreciation and amortization represented 21.7% of our total operating costs and expenses in the year ended December 31, 2024. As of December 31, 2023, property and equipment represented 75% of our total assets and depreciation and amortization represented 56% of our total operating costs and expenses prior to the 2024 Business Combination. Our property, plant and equipment and intangible assets with finite useful lives are carried at cost less accumulated depreciation and amortization. For acquired intangible assets, we amortize the cost over their estimated useful lives using either a straight- line or an accelerated method that most accurately reflects the estimated pattern in which the economic benefit of the respective asset is consumed. No provision for salvage value is considered in determining depreciation of our property, plant and equipment. We calculate depreciation and amortization on our assets based on the estimated useful lives that we believe are reasonable. The estimated useful lives are subject to key assumptions such as maintenance and utilization. These estimates may change due to a number of factors such as changes in operating conditions or advances in technology. The estimate has a low degree of estimation uncertainty as there were no changes in the useful lives utilized by management in the periods presented. Maintenance and repairs are charged to expense when incurred. Improvements which extend the life or improve the existing asset are capitalized.

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 may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

We will continue to be an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, or (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the previous three years.

We are not currently required to comply with the SEC rules that implement Section 404 of the SOX Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K. Additionally, our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company”, as defined in the JOBS Act.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements recently adopted and not yet adopted, see the notes to the audited consolidated financial statements included elsewhere in this Annual Report.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are exposed to interest rate risk due to a variable interest rate component associated with outstanding borrowings under our Credit Agreement. Higher interest rates could adversely affect our financial condition and net income. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.

As of December 31, 2024, we had $635.9 million borrowings outstanding under the Credit Agreement at a weighted-average interest rate of 6.4%.

Inflation

While inflationary cost increases can affect our income from operations’ margin, we believe that inflation generally has not had, and is not expected to have, a material adverse effect on our results of operations. In 2022, the United States experienced the highest inflation in decades primarily due to supply-chain issues, a shortage of labor and a higher demand for goods and services. The most noticeable adverse impact to our business was increased costs associated with materials, personnel expenses, consumables and vehicle-related costs. Most of our costs moderated in 2023 except for wages. We believe it is unlikely that salaries and wages will decrease to the levels experienced in prior years.

Item 8. Financial Statements and Supplementary Data

The following Consolidated Financial Statements are filed as part of this Annual Report:

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of Flowco Holdings Inc.

Opinion on the Financial Statement – Balance Sheets

We have audited the accompanying balance sheets of Flowco Holdings Inc. (the “Company”) as of December 31, 2024 and November 30, 2024, including the related notes (collectively referred to as the “financial statement”). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2024 and November 30, 2024 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statement based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of this financial statement in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud

Our audits included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

March 19, 2025

We have served as the Company's auditor since 2024.

Flowco Holdings Inc.

Balance Sheets

Note 1 – Organization

Flowco Holdings Inc. (“Flowco Holdings”) was incorporated as a Delaware corporation on July 25, 2024 (“Date of Incorporation”). The Corporation’s fiscal year end is December 31. The Corporation was formed for the purpose of completing an initial public offering (“IPO”) of its Class A common stock and related transactions in order to continue the business of Flowco MergeCo LLC (“Flowco LLC”) as a publicly traded entity. The Corporation is a holding company and, as of January 17, 2025, the sole managing member of Flowco LLC, and its principal asset will consist of equity interests in Flowco LLC.

As the sole managing member of Flowco LLC following the IPO, Flowco Holdings operates and controls all of the business and affairs of Flowco LLC. Subsequent to the IPO, Flowco Holdings will fully consolidate Flowco LLC’s financial results and report a noncontrolling interest related to the equity interests held by the pre-IPO common unitholders (“Continuing Equity Owners”) and certain affiliated entities to Flowco LLC’s principal stockholders (“Blocker Shareholders”) in the consolidated financial statements. For more discussion, see Note 4 – Subsequent Events.

Note 2 – Summary of Significant Accounting Policies

Basis of Accounting

The Balance Sheets have been prepared in accordance with accounting principles generally accepted in the United States of America. Separate statements of operations, comprehensive operations, changes in stockholders’ equity and cash flows have not been presented in the financial statements because there have been no activities in this entity and because the single transaction is fully disclosed below.

These financial statements have been prepared assuming Flowco Holdings will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

Note 3 - Stockholders’ Equity

Under the certificate of incorporation in effect as of the Date of Incorporation, Flowco Holdings is authorized to issue 1,000 shares of Class A common stock, par value $0.01 per share. As of July 29, 2024, all 1,000 shares of Class A common stock were issued for future consideration of $10, which was not received as of the Date of Incorporation. The purchase of the Class A common stock was not funded, and therefore there is a $10 contra-equity receivable on the Flowco Holdings’ balance sheet as of December 31, 2024 and November 30, 2024.

Note 4 – Subsequent Events

IPO and Reorganization

On January 15, 2025, Flowco Holdings consummated the IPO of 20,470,000 shares of Class A Common Stock (including shares issued pursuant to the exercise in full of the underwriters’ option to purchase additional shares) for net proceeds totaling approximately $461.8 million, and the IPO closing occurred on January 17, 2025.

In connection with the IPO, Flowco Holdings 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 common units (“LLC Interests”); and (ii) issue a non-economic member interest and appoint Flowco Holdings as the sole managing member of Flowco LLC upon its acquisition of the LLC interests.

Simultaneously with the IPO, Flowco Holdings amended and restated its certificate of incorporation to, among other things, provide: (i) for Class A common stock, with each share of its Class A common stock entitling its holder to one vote per share on all matters presented to our stockholders generally; and (ii) for Class B common stock, with each share of our Class B common stock entitling its holder to one vote per share on all matters presented to our stockholders generally, any shares of our Class B common stock may only be held by the Continuing Equity Owners and their respective permitted transferees. As a result, Flowco Holdings became a holding company and the sole manager of Flowco LLC, with no material assets other than 100% of the voting membership interest in Flowco LLC.

Simultaneously with the IPO, Flowco Holdings acquired the LLC Interests held by certain of the existing indirect owners of Flowco LLC in exchange for 5,251,620 shares of its Class A common stock. After giving effect to the use of proceeds in the IPO, Flowco Holdings issued 64,823,042 shares of Class B common stock to the Continuing Equity Owners, which is equal to the number of LLC Interests held by such Continuing Equity Owners, for nominal consideration. Following the IPO, it was determined that certain allocations of Class A common stock, and of a corresponding number of Class B common stock and LLC Interests, in connection with certain reorganization transactions were made in error. Flowco LLC and the applicable members of Flowco LLC entered into an Omnibus Agreement to correct such errors through (i) a rescission of 1,057,629 LLC Interests and corresponding number of shares of Class B common stock previously issued to a White Deer Affiliate and (ii) the issuance of 1,057,629 LLC Interests to Flowco Holdings, and the issuance of 1,057,629 shares of Class A common stock to White Deer Affiliates. Such corrections did not result in any change in the aggregate number of LLC Interests issued and outstanding, or the combined number of shares of Class A common stock and Class B common stock issued and outstanding. The foregoing outstanding shares and LLC Interests give effect to the corrections set forth in the Omnibus Agreement.

Subsequent to the IPO, Flowco Holdings used the net proceeds from the IPO to purchase 20,470,000 newly issued LLC Interests for approximately $461.8 million directly from Flowco LLC at a price per unit equal to the IPO price per share of Class A common stock less the underwriting discount.

Tax Receivable Agreement

In connection with the IPO, Flowco Holdings entered into a Tax Receivable Agreement (the “TRA”) with the Continuing Equity Owners and Blocker Shareholders (collectively, the “TRA Participants”) that provides for the payment 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) related to certain tax basis adjustments and payments made under the TRA.

Registration Rights Agreement

In connection with the IPO, Flowco Holdings entered into a Registration Rights Agreement (the “RRA”) with the Continuing Equity Owners and Blocker Shareholders (collectively, the “RRA Participants”). The RRA provides that Flowco Holdings agrees to use its reasonable best effort to file, at any time after 180 days following the IPO and the expiration of any related lock-up period, a registration statement registering the sale of its Class A common stock issuable to or held by the RRA Participants and to use its reasonable best efforts to ensure the registration statement is approved in a timely manner. The RRA also requires Flowco Holdings to maintain an effective registration statement or to ensure it takes the necessary procedures to reactivate the registration statement in the event of an expiration. Certain of the RRA Participants are entitled to initiate underwritten offerings, subject to certain customary limitations. The RRA also provides for customary “piggyback” registration rights for all parties to the agreement.

2025 Equity and Incentive Plan

In January 2025, Flowco Holdings’ stockholder approved the 2025 Equity and Incentive Plan (the “Equity Plan”), which became effective in connection with the IPO. The Equity Plan is administered by the Compensation Committee. Flowco Holdings’ Board of Directors has the authority to amend and modify the Equity Plan, subject to any stockholder approval. Flowco Holdings granted 665,205 RSUs to certain of the Flowco Holdings' executives and employees and non-employees directors in conjunction with the Equity Plan with an aggregate grant date fair value of $19.8 million. The RSU awards to executives and employees cliff vest in full on the third anniversary of the grant date of the award, subject to employee’s continued employment. The RSU awards 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. The vesting of all RSU awards will accelerate and vest in full upon a change in control (as defined in the Equity Plan).

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Unit holders of Flowco MergeCo LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Flowco MergeCo LLC and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, of members’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

March 19, 2025

We have served as the Company's auditor since 2019.

Flowco MergeCo LLC

Consolidated Balance Sheets

Flowco MergeCo LLC

Consolidated Statements of Operations

Flowco MergeCo LLC

Consolidated Statements of Members' Equity

Flowco MergeCo LLC

Consolidated Statements of Cash Flows