Flowco Holdings Inc. (FLOC) FY 2024 MD&A

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:

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Production Solutions: segment is comprised of our artificial lift operations, digital solutions and methane abatement technologies; and

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Natural Gas Technologies: segment is comprised of our vapor recovery and natural gas systems operations.

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.

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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

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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

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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:

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GEC Estis Holdings, LLC (i.e., the Estis Member) – 51%;

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Flowco Production Solutions, LLC. (i.e., the FPS Member) – 26%; and

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Flogistix Holdings, LLC (i.e., the Flogistix Member) – 23%.

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

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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:

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Selling, general and administrative expenses. We expect to incur additional selling, general and administrative expenses as a result of becoming a publicly traded company. These costs include expenses associated with our annual and quarterly reporting, tax preparation expenses, Sarbanes-Oxley (“SOX”) compliance expenses, audit fees, legal fees, directors and officers insurance, investor relations expenses, Tax Receivable Agreement administration expenses and registrar and transfer agent fees. These increases in selling, general and administrative expenses are not reflected in our historical financial statements, other than a portion of these costs incurred in 2024 in contemplation and preparation of the IPO.

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Corporate Reorganization. For periods prior to June 20, 2024, the historical consolidated financial statements presented herein are based on the operations of our accounting predecessor, Estis. For a period subsequent to June 20, 2024, the consolidated financial statements presented are based on the combined operations of the Merging Entities. As a result, the historical consolidated financial information may not provide an accurate indication of what our actual results would have been if the 2024 Business Combination had been completed at the beginning of the earliest period presented. In addition, we entered into a Tax Receivable Agreement with the TRA Participants. This agreement generally provides for the payment by us to the TRA Participants of 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually

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realize or are deemed to realize in certain circumstances as a result of certain increases in tax basis and imputed interest. We will retain the benefit of the remaining 15% of such net cash savings. For additional information regarding the Tax Receivable Agreement, see “Part 1. Item 1A. Risk Factors – Risk Factors Related to our Organizational Structure.”

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Income Taxes. Our accounting predecessors are a collective limited liability companies that constitute as partnerships for U.S. federal income tax purposes, and therefore are not subject to U.S. federal income taxes and the provisions for income tax calculations thereof. As the IPO occurred subsequent to the last date presented in this Annual Report, we do not report any income tax benefit or expense attributable to us. Subsequent to the IPO, we are taxed as a corporation under the Internal Revenue Code and subject to U.S. federal income taxes (currently at a statutory rate of 21% of pretax earnings, as adjusted by the Internal Revenue Code), as well as state income taxes, for our interest ownership in Flowco LLC.

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2025 Equity and Incentive Plan. To incentivize individuals providing services to us or our affiliates, our Board of Directors adopted an omnibus 2025 Equity and Incentive Plan (the “Equity Plan”) prior to the completion of our IPO. The Equity Plan provides for the grant, from time to time, at the discretion of our Board of Directors or a committee thereof, of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, other stock awards, substitute awards and performance awards. Any individual who is our officer or employee or an officer or employee of any of our affiliates, and any other person who provides services to us or our affiliates, including members of our Board of Directors, will be eligible to receive awards under the Equity Plan at the discretion of our Board of Directors. In connection with the IPO, we granted 665,205 restricted stock unit (“RSU”) awards, which will vest within three years, to certain of our employees, officers, and non-employee directors. Awards of RSUs to our officers and employees will vest on the third anniversary of the grant date, while awards of RSUs to our non-employee directors will vest pro rata quarterly over three years. For these awards granted in connection with our IPO, we will recognize equity compensation expenses aggregating up to $6.6 million per year, starting in 2025, over the applicable vesting terms related to these RSU issuances.

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Noncontrolling Interests. As a result of the IPO and a series of related reorganization transactions in connection with the IPO (the “Transactions”), Flowco Holdings became the sole managing member of Flowco LLC and consolidates entities in which it has a controlling financial interest. Consequently, the financial statements for periods prior to the IPO included in this Annual Report have been adjusted to combine each of the previously separated Merging Entities. For periods after the completion of our IPO, the financial position and results of operations include those of Flowco Holdings and report the noncontrolling interests related to the portion of LLC Interests not owned by Flowco Holdings. Additionally, all shares of our Class B common stock are held by noncontrolling

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interest owners. The noncontrolling interests will only impact future financial statements presentations and not the financial statements included in this Annual Report.

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.

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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.

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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

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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.

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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

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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.

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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

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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

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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

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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.

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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

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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

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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.

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