What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-04-21 compared with 2022-10-21 · 333 added, 491 removed, 486 unchanged (63% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(Dollars in thousands, except share data)

September 30, 2022 December 31, 2021

(In thousands, except share data)

March 31, 2023 December 31, 2022

Current assets:

11 unchanged sentences

Operating lease right-of-use assets 92,930 97,232

Other assets 98,669 82,289

Deferred tax assets 262 607

Other assets (including amounts from related parties of $ 13,099 and $ 11,799 , respectively)

103,906 105,300

Deferred tax asset 21,240 12,592

Total assets $ 2,760,622 $ 2,575,932

5 unchanged sentences

239,748 276,819

Income taxes payable 61,946 2,294

Deferred revenue 3,419 3,859

14 unchanged sentences

Common Stock:

Class A, $ 0.01 par value, 400,000,000 shares authorized and 182,158,820 issued and outstanding as of September 30, 2022 and 183,385,111 issued and outstanding as of December 31, 2021

Class B, $ 0.01 par value, 400,000,000 shares authorized and 325,902 issued and outstanding as of September 30, 2022 and 2,632,347 issued and outstanding as of December 31, 2021

Class A, $ 0.01 par value, 400,000,000 shares authorized and 173,945,136 issued and outstanding as of March 31, 2023 and 178,753,125 issued and outstanding as of December 31, 2022

Class B, $ 0.01 par value, 400,000,000 shares authorized and 0 issued and outstanding as of March 31, 2023 and 250,222 issued and outstanding as of December 31, 2022

Additional paid in capital 1,208,183 1,266,097

Retained earnings (accumulated deficit) 90,779 ( 155,954 )

Retained earnings 388,064 234,525

Accumulated other comprehensive loss ( 7,867 ) ( 7,396 )

8 unchanged sentences

(In thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Revenue $ 1,232,320 $ 770,481

6 unchanged sentences

Depreciation, depletion, and amortization 94,401 74,588

Gain on disposal of assets ( 4,277 ) ( 79 ) ( 3,041 ) ( 1,076 )

Loss on disposal of assets 487 4,672

Total operating costs and expenses 1,036,957 788,931

Operating income (loss) 182,983 ( 39,566 ) 297,426 ( 117,789 )

Other expense (income):

Loss (gain) on remeasurement of liability under tax receivable agreements 28,900 ( 4,947 ) 33,233 ( 8,252 )

Gain on investments ( 2,525 ) — ( 2,525 ) —

Operating income 225,120 3,839

Other expense:

Loss on remeasurement of liability under tax receivable agreements — 4,165

Interest income—related party ( 373 ) —

Interest expense, net 8,264 4,324

Total other expense (income) 33,148 ( 940 ) 46,667 3,276

Total other expense 7,891 8,489

Net income (loss) before income taxes 217,229 ( 4,650 )

15 unchanged sentences

(In thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net income (loss) $ 162,746 $ ( 5,480 )

9 unchanged sentences

(In thousands, except per unit and per share data)

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital (Accumulated Deficit) Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders ’ Equity

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive (Loss) Total Stockholders ’ Equity

Non-controlling Interest Total Equity

2 unchanged sentences

Offering Costs — — — — ( 223 ) — — ( 223 ) — ( 223 )

Other distributions and advance payments to non-controlling interest unitholders — — — — — — — — 924 924

Effect of exchange on deferred tax asset, net of liability under tax receivable agreements — — — — 7,782 — — 7,782 — 7,782

Deferred tax impact of ownership changes from issuance of Class A Common Stock — — — — 103 — — 103 — 103

$ 0.05 /share of Class A Common Stock dividend

— — — — — ( 9,116 ) — ( 9,116 ) — ( 9,116 )

Share repurchases ( 5,167 ) — ( 52 ) — ( 74,573 ) — ( 74,625 ) ( 23 ) ( 74,648 )

Excise tax on share repurchases — — — — ( 539 ) — — ( 539 ) — ( 539 )

Stock-based compensation expense — — — — 7,175 — — 7,175 3 7,178

Vesting of restricted stock units 109 — — — 1 — — 1 ( 1 ) —

Tax withheld on vesting of restricted stock units — — — — ( 9,701 ) — — ( 9,701 ) — ( 9,701 )

Currency translation adjustment — — — — — — ( 471 ) ( 471 ) 1 ( 470 )

Net income — — — — — 162,655 — 162,655 91 162,746

Balance—September 30, 2022 182,159 326 $ 1,822 $ 3 $ 1,320,731 $ 90,779 $ ( 8,595 ) $ 1,404,740 $ 2,698 $ 1,407,438

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income Total Stockholders ’ Equity

Balance—March 31, 2023 173,945 — $ 1,739 $ — $ 1,208,183 $ 388,064 $ ( 7,867 ) $ 1,590,119 $ — $ 1,590,119

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total Stockholders ’ Equity

Non-controlling Interest Total Equity

5 unchanged sentences

Vesting of restricted stock units 84 — 1 — 7 — — 8 ( 8 ) —

Restricted stock and RSU forfeitures — — — — — 2 — 2 — 2

Tax withheld on vesting of restricted stock units — — — — ( 24 ) — — ( 24 ) — ( 24 )

Currency translation adjustment — — — — — — 1,049 1,049 7 1,056

Net loss — — — — — ( 5,376 ) — ( 5,376 ) ( 104 ) ( 5,480 )

Balance—September 30, 2021 178,310 1,860 $ 1,783 $ 19 $ 1,278,073 $ ( 100,365 ) $ 191 $ 1,179,701 $ 12,153 $ 1,191,854

Balance—March 31, 2022 185,761 340 $ 1,858 $ 3 $ 1,389,987 $ ( 161,330 ) $ 743 $ 1,231,261 $ 2,405 $ 1,233,666

See Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(Dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Depreciation, depletion, and amortization 94,401 74,588

Gain on disposal of assets ( 3,041 ) ( 1,076 )

Inventory write-down 1,724 —

Loss on disposal of assets 487 4,672

Amortization of debt issuance costs 1,176 336

Non-cash lease expense 861 1,034

Stock-based compensation expense 7,178 6,813

Deferred income tax expense 316 6,124

Loss (gain) on remeasurement of liability under tax receivable agreements 33,233 ( 8,252 )

Other non-cash (income) expense, net ( 1,007 ) 2,449

Loss on remeasurement of liability under tax receivable agreements — 4,165

Changes in operating assets and liabilities:

12 unchanged sentences

Investment in sand logistics — ( 795 )

Investment in Fervo Energy Company and Natron Energy, Inc.

Proceeds from sale of assets 3,484 927

3 unchanged sentences

Proceeds from borrowings on line-of-credit 242,000 185,000

Repayments of borrowings on line-of-credit ( 411,000 ) ( 84,000 )

Repayments on borrowings on line-of-credit ( 147,000 ) ( 95,000 )

Repayments of borrowings on term loan ( 104,716 ) ( 438 )

3 unchanged sentences

Share repurchases ( 74,648 ) —

Tax withholding on restricted stock unit vesting ( 9,701 ) ( 3,585 )

Tax withholding on restricted stock units — ( 24 )

Payments of equity issuance costs ( 223 ) ( 62 )

Payments of debt issuance costs ( 1,566 ) ( 224 )

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents before translation effect 4,377 ( 34,028 )

Net cash (used in) provided by financing activities

( 97,095 ) 88,958

Net (decrease) increase in cash and cash equivalents before translation effect ( 22,810 ) 12,653

Translation effect on cash 10 274

4 unchanged sentences

(Dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental disclosure of cash flow information:

Cash paid for income taxes $ 6,502 $ —

Net cash (received) paid for income taxes $ ( 3,473 ) $ 4,828

Cash paid for interest $ 5,765 $ 3,847

9 unchanged sentences

On April 19, 2022, the stockholders of the Company approved an amendment to the Company’s Amended and Restated Certificate of Incorporation for the purpose of changing the Company’s name from “Liberty Oilfield Services Inc.” to “Liberty Energy Inc.” and thereafter, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation to reflect the new name, effective April 25, 2022.

The Company has no material assets other than its ownership of units in Liberty LLC (“Liberty LLC Units”).

Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 22, 2022 (the “Annual Report”) for additional information on the Corporate Reorganization and IPO that were completed on January 17, 2018.

The Company, together with its subsidiaries, is a leading integrated oilfield services and technology company focused on providing innovative hydraulic fracturing services and related technologies to onshore oil and natural gas exploration and production (“E&P”) companies in North America.

Effective January 31, 2023, Liberty LLC was merged into the Company, with the Company surviving the merger (the “Merger”).

In connection with the Merger, all outstanding shares of the Company’s Class B Common Stock, par value $ 0.01 per share (the “Class B Common Stock”) were redeemed and exchanged for an equal number of shares of the Company’s Class A Common Stock, par value $ 0.01 per share (the “Class A Common Stock”).

The Company did not make any distributions or receive any proceeds in connection with this exchange.

Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 10, 2023 (the “Annual Report”), for additional information on the Merger completed on January 31, 2023, and the Corporate Reorganization and IPO that were completed on January 17, 2018.

The Company, together with its subsidiaries, is a leading integrated energy services and technology company focused on providing innovative hydraulic fracturing services and related technologies to onshore oil and natural gas exploration and production (“E&P”) companies in North America.

We offer customers hydraulic fracturing services, together with complementary services including wireline services, proppant delivery solutions, data analytics, related goods (including our sand mine operations), and technologies that will facilitate lower emission completions, thereby helping our customers reduce their emissions profile.

2 unchanged sentences

Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with the annual financial statements and notes thereto included in the Annual Report.

The accompanying unaudited condensed consolidated financial statements and related notes present the condensed consolidated financial position of the Company as of September 30, 2022 and December 31, 2021, and the results of operations, cash flows, and changes in equity of the Company as of and for the three and nine months ended September 30, 2022 and 2021.

The accompanying unaudited condensed consolidated financial statements and related notes present the condensed consolidated financial position of the Company as of March 31, 2023 and December 31, 2022, and the results of operations, cash flows, and equity of the Company as of and for the three months ended March 31, 2023 and 2022.

The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim period.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, 2022.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, 2023.

Further, these estimates and other factors, including those outside the Company’s control, such as the impact of sustained lower commodity prices, could have a significant adverse impact to the Company’s financial condition, results of operations and cash flows.

3 unchanged sentences

Reclassifications

Certain amounts in the prior period financial statements have been reclassified from interest income to interest expense, net in the accompanying unaudited condensed consolidated statements of operation to conform to the presentation of the current period financial statements.

Additionally, amounts in the prior period financial statements have been reclassified from provision for credit losses to other non-cash (income) expense, net in the accompanying unaudited condensed consolidated statement of cash flows to conform to the presentation of the current period financial statements.

These reclassifications had no effect on the previously reported net income or loss.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Note 3— The PropX Acquisition

On October 26, 2021, the Company entered into the certain Unit Purchase Agreement (the “Transaction Agreement”) with Proppant Express Investments, LLC to acquire the assets and liabilities of Proppant Express Solutions, LLC (“PropX”), which provides last-mile proppant delivery solutions, including proppant handling equipment and logistics software across North America (the “PropX Acquisition”).

PropX was acquired in exchange for $ 11.9 million in cash and 3,405,526 shares of the Company’s Class A Common Stock, par value $ 0.01 per share (the “Class A Common Stock”) and 2,441,010 shares of the Company’s Class B Common Stock, par value $ 0.01 per share (the “Class B Common Stock”, and together with the Class A Common Stock, the “Common Stock”), for total consideration of $ 103.0 million based on the October 26, 2021 closing price of Class A Common Stock of $ 15.58 .

In connection with the issuance of 2,441,010 shares of Class B Common Stock, Liberty LLC also issued 2,441,010 Liberty LLC Units to the Company.

The Liberty LLC Units are redeemable for an equivalent number of shares of Class A Common Stock at any time, at the election of the shareholder.

The Company accounted for the PropX Acquisition using the acquisition method of accounting.

The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair value at the date of the acquisition.

The estimated fair values of certain assets and liabilities require significant judgments and estimates.

The majority of the measurements of assets acquired and liabilities assumed, are based on inputs that are not observable in the market and thus represent Level 3 inputs.

In accordance with ASC Topic 805, an acquirer is allowed a period, referred to as the measurement period, in which to complete its accounting for the transaction.

Such measurement period ends at the earliest date that the acquirer a) receives the information necessary or b) determines that it cannot obtain further information, and such period may not exceed one year.

As the PropX Acquisition closed on October 26, 2021 the Company completed the purchase price allocation, particularly as it relates to current assets and current liabilities, during the nine months ended September 30, 2022.

The following table summarizes the fair value of the consideration transferred in the PropX Acquisition and the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed as of October 26, 2021, the date of the closing of the PropX Acquisition:

($ in thousands)

Total Purchase Consideration:

Consideration $ 103,023

Cash and cash equivalents $ 53

Accounts receivable and unbilled revenue 4,089

Prepaid and other current assets 1,722

Property and equipment (1)

Intangible assets (included in other assets in the accompanying consolidated balance sheet as of December 31, 2021) (2)

Total identifiable assets acquired 107,109

Accounts payable 2,152

Accrued liabilities 1,934

Total liabilities assumed 4,086

Total purchase consideration $ 103,023

(1) Useful lives average of 10 years, see Note 5—Property and Equipment

(2) Definite lived intangibles with an amortization period ranging from seven to 10 years

Transaction costs, costs associated with issuing additional equity and integration costs were recognized separately from the acquisition of assets and assumptions of liabilities in the PropX Acquisition.

Transaction costs consist of legal and professional fees.

Integration costs consist of expenses incurred to integrate PropX’s operations, aligning accounting processes and procedures, and integrating its enterprise resource planning system with those of the Company.

Merger and integration costs are expensed as incurred, and equity offering costs were recorded as a reduction to additional paid in capital.

Certain amounts in the prior period financial statements have been reclassified from accrued liabilities to income tax payable in the accompanying unaudited condensed consolidated balance sheets to conform to the presentation of the current period financial statements.

This reclassification had no effect on the previously reported net income or loss.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

The Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2021 do not include any results from PropX operations as the PropX Acquisition closed on October 26, 2021.

The Company does not present pro forma financial information for the periods prior to the PropX Acquisition as such information, after elimination of PropX’s historical transactions with the Company, is not materially different than the results presented in the accompanying condensed consolidated statements of operations for three and nine months ended September 30, 2021.

Note 3— Inventories

Inventories consist of the following:

September 30, December 31,

March 31, December 31,

($ in thousands) 2023 2022

1 unchanged sentence

Chemicals 28,359 32,392

Maintenance parts 134,352 93,184

Maintenance parts and other 146,541 150,712

$ 196,675 $ 214,454

During the three and nine months ended September 30, 2022, the lower of cost or net realizable value analysis resulted in the Company recording a write-down to the inventory carrying value of $ 1.7 million.

The Company did not record any write-down to the inventory carrying value during the year ended December 31, 2021.

During the three months ended March 31, 2023, the Company did not record any write-downs to inventory carrying values.

During the year ended December 31, 2022, the lower of cost or net realizable value analysis resulted in the Company recording a write-down to the inventory carrying value of $ 1.7 million recorded during the quarter ended September 30, 2022 .

Note 4— Property and Equipment

Property and equipment consist of the following:

(in years) September 30, December 31,

(in years) March 31, December 31,

($ in thousands) 2023 2022

14 unchanged sentences

Construction in-progress N/A 172,921 158,518

$ 1,295,189 $ 1,199,287

Depreciation expense for the three months ended September 30, 2022 and 2021 was $ 77.5 million and $ 61.1 million, respectively.

During the nine months ended September 30, 2022 and 2021, the Company recognized depreciation expense of $ 219.9 million and $ 175.9 million, respectively.

Depletion expense for the three months ended September 30, 2022 and 2021was $ 0.3 million and $ 0.3 million, respectively.

Depletion expense for the nine months ended September 30, 2022 and 2021 was $ 0.9 million and $ 1.0 million, respectively.

As of September 30, 2022 and December 31, 2021, the Company concluded that no triggering events that could indicate possible impairment of property and equipment had occurred, other than related to the assets held for sale discussed below.

As of September 30, 2022, the Company classified $ 2.5 million of land and $ 11.4 million of buildings, net of accumulated depreciation, of two properties that it intends to sell within the next year, and that meets the held for sale criteria, to assets held for sale, included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

The Company estimates that the carrying value of the assets were greater than the fair value less the estimated costs to sell, and therefore recorded a $ 2.7 million loss during the nine months ended September 30, 2022, included as a component of gain on disposal of assets in the accompanying unaudited condensed consolidated statements of operations.

Property and equipment, net $ 1,430,979 $ 1,362,364

During the three months ended March 31, 2023 and 2022, the Company recognized depreciation expense of $ 88.4 million and $ 69.9 million, respectively.

Depletion expense for the three months ended March 31, 2023 and 2022 was $ 0.3 million and $ 0.3 million, respectively.

As of March 31, 2023 and December 31, 2022, the Company concluded that no triggering events that could indicate possible impairment of property and equipment had occurred, other than related to the assets held for sale discussed below.

Additionally, as of March 31, 2023 and December 31, 2022, the Company classified $ 1.1 million of land and $ 6.2 million of buildings, net of accumulated depreciation, of two properties that it intends to sell within the next year, and that meet the held for sale criteria, to assets held for sale, included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

The Company estimates that the carrying value of the assets is equal to the fair value less the estimated costs to sell, net of write-downs taken in the prior period, and therefore no gain or loss was recorded during the three months ended March 31, 2023.

As of March 31, 2022, the Company classified $ 3.4 million of land and $ 8.4 million of buildings, net of accumulated depreciation, of two properties as assets held for sale.

The Company estimated that carrying value of the assets was greater than the fair value less the estimated costs to sell, and therefore recorded a $ 4.4 million loss during the three months ended March 31, 2022, included as a component of loss on disposal of assets in the accompanying unaudited condensed consolidated statements of operations.

LIBERTY ENERGY INC.

6 unchanged sentences

All other variable lease payments are excluded from the measurement of lease assets and liabilities, and are recognized in the period in which the obligation for those payments is incurred.

The components of lease expense for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

The components of lease expense for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended March 31,

($ in thousands) 2023 2022

4 unchanged sentences

Variable lease cost 1,246 1,091

Short-term lease costs 2,121 1,479 5,113 3,483

Short-term lease cost 2,051 1,546

Total lease cost $ 16,801 $ 13,374

Sup plemental cash flow and other information related to leases for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Supplemental cash flow and other information related to leases for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended March 31,

($ in thousands) 2023 2022

5 unchanged sentences

Finance leases 2,789 —

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

During the nine months ended September 30, 2022, the Company amended certain operating leases, the change in terms of which caused the leases to be reclassified as finance leases.

In connection with the amendments, the Company wrote-off operating lease right-of-use assets of $ 0.2 million and liabilities of $ 0.1 million.

Additionally, the Company recognized finance lease right-of-use assets of $ 2.7 million and liabilities of $ 2.7 million.

During the nine months ended September 30, 2021, the Company amended certain finance leases, the change in terms of which caused the leases to be reclassified to operating leases.

In connection with the amendments the Company wrote-off finance lease right-of-use assets of $ 13.7 million and liabilities of $ 10.6 million.

Additionally, the Company recognized operating lease right-of-use assets of $ 11.8 million and liabilities of $ 8.8 million.

There was no gain or loss recognized as a result of these amendments.

Lease terms and discount rates as of September 30, 2022 and December 31, 2021 were as follows:

September 30, 2022 December 31, 2021

Lease terms and discount rates as of March 31, 2023 and December 31, 2022 were as follows:

March 31, 2023 December 31, 2022

Weighted-average remaining lease term:

4 unchanged sentences

Finance leases 8.1 % 8.2 %

Future minimum lease commitments as of September 30, 2022 are as follows:

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Future minimum lease commitments as of March 31, 2023 are as follows:

($ in thousands) Finance Operating

7 unchanged sentences

Less imputed interest ( 5,309 ) ( 11,094 )

Total Liability $ 24,556 $ 102,155

Total $ 34,005 $ 93,001

The Company’s vehicle leases typically include a residual value guarantee.

For the Company’s vehicle leases classified as operating leases, the total residual value guaranteed as of September 30, 2022 is $ 12.9 million;

For the Company’s vehicle leases classified as operating leases, the total residual value guaranteed as of March 31, 2023 is $ 13.3 million;

the payment is not probable and therefore has not been included in the measurement of the lease liability and right-of-use asset.

1 unchanged sentence

Lessor Arrangements

The Company leases dry and wet sand containers and conveyor belts to customers through PropX.

PropX leases to customers through operating leases, where the lessor for tax purposes is considered to be the owner of the equipment during the term of the lease.

The Company leases dry and wet sand containers and conveyor belts to customers through operating leases, where the lessor for tax purposes is considered to be the owner of the equipment during the term of the lease.

The lease agreements do not include options for the lessee to purchase the underlying asset at the end of the lease term for either a stated fixed price or fair market value.

2 unchanged sentences

The Company does not record any lease assets or liabilities related to these variable items.

The carrying amount of equipment leased to others, included in property, plant and equipment, under operating leases as of September 30, 2022 and December 31, 2021 were as follows:

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

($ in thousands) September 30, 2022 December 31, 2021

Equipment leased to others - at original cost $ 90,897 $ 64,770

The carrying amount of equipment leased to others, included in property, plant and equipment, under operating leases as of March 31, 2023 and December 31, 2022 were as follows:

($ in thousands) March 31, 2023 December 31, 2022

Lease Equipment $ 110,844 $ 106,087

Accumulated depreciation ( 14,699 ) ( 11,408 )

Equipment leased to others - net $ 82,609 $ 63,393

Future payments receivable for operating leases commenced and committed but not delivered as of September 30, 2022 are as follows:

Lease Equipment - net $ 96,145 $ 94,679

Future payments receivable for operating leases commenced as of March 31, 2023 are as follows:

($ in thousands)

1 unchanged sentence

Total $ 22,661

Revenues from operating leases for the three and nine months ended September 30, 2022 were $ 6.7 million and $ 18.4 million, respectively.

There was no revenue from operating leases for the three and nine months ended September 30, 2021.

Revenues from operating leases for the three months ended March 31, 2023 and 2022 were $ 8.6 million and $ 5.9 million, respectively.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Note 6— Accrued Liabilities

Accrued liabilities consist of the following:

($ in thousands) September 30, 2022 December 31, 2021

($ in thousands) March 31, 2023 December 31, 2022

Accrued vendor invoices $ 102,805 $ 119,801

3 unchanged sentences

Debt consists of the following:

September 30, December 31,

March 31, December 31,

($ in thousands) 2023 2022

6 unchanged sentences

Total debt, net of deferred financing costs and original issue discount $ 210,000 $ 218,446

On September 19, 2017, the Company entered into two credit agreements, a revolving line of credit up to $ 250.0 million, subsequently increased to $ 425.0 million, see below, (the “ABL Facility”) and a $ 175.0 million term loan (the “Term Loan Facility”, and together with the ABL Facility the “Credit Facilities”).

On July 18, 2022, the Company entered into an amendment to the ABL Facility (the “Seventh ABL Amendment”).

The Seventh ABL Amendment amended certain terms, provisions and covenants of the ABL Facility, including among other things:

(i) increasing the maximum borrowing amount by $ 75.0 million to $ 425.0 million, subject to certain borrowing base limitations

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

based on percentage of eligible accounts receivable and inventory, (ii) modifying certain covenant and reporting-related baskets, and (iii) replacing LIBOR with the secured overnight financing rate (“SOFR”) as the interest rate benchmark.

On August 12, 2022, the Company entered into an amendment to the Term Loan Facility (the “Sixth Term Loan Amendment”).

The Sixth Term Loan Amendment amended certain terms, provisions and covenants of the Term Loan Facility, including among other things:

(i) a waiver of the fixed charge coverage ratio requirements for up to $ 100.0 million of restricted payments made in connection with the Company’s 2022 stock repurchase program for its common stock;

(ii) the addition of a minimum liquidity requirement of $ 150.0 million in order to make selected restricted payments, including those made under the 2022 stock repurchase program;

(iii) the modification of certain covenant and reporting-related terms, including an increase in the allowance for permitted purchase money indebtedness from $ 50.0 million to $ 70.0 million;

(iv) the addition of a prepayment premium of 1.0 % through the first anniversary of the Sixth Term Loan Amendment effective date;

and (v) the addition and modification of several provisions to replace LIBOR with SOFR as the interest rate benchmark.

The weighted average interest rate on all borrowings outstanding as of September 30, 2022 and December 31, 2021 was 7.0 % and 7.9 %, respectively.

On September 19, 2017, the Company entered into two credit agreements for a revolving line of credit up to $ 250.0 million, subsequently increased to $ 525.0 million, see below, (the “ABL Facility”) and a $ 175.0 million term loan (the “Term Loan Facility”, and together with the ABL Facility the “Credit Facilities”).

Effective January 23, 2023, the Company entered into an Eighth Amendment to the ABL Facility (the “Eighth ABL Amendment”).

The Eighth ABL Amendment amends certain terms, provisions and covenants of the ABL Facility, including, among other things:

(i) increasing the maximum revolver amount from $ 425.0 million to $ 525.0 million (the “Upsized Revolver”);

(ii) increasing the amount of the accordion feature from $ 75.0 million to $ 100.0 million;

(iii) extending the maturity date from October 22, 2026 to January 23, 2028;

(iv) modifying the dollar amounts of various credit facility triggers and tests proportionally to the Upsized Revolver;

(v) permitting repayment under the Term Loan Facility prior to February 10, 2023;

and (vi) increasing certain indebtedness, intercompany advance, and investment baskets.

The Eighth ABL Amendment also includes an agreement from the Wells Fargo Bank, National Association, as administrative agent, to release its second priority liens and security interests on all collateral that served as first priority collateral under the Term Loan Facility, with such release to occur within 120 days after January 23, 2023.

Additionally, on January 23, 2023, the Company withdrew $ 106.7 million on the ABL Facility and used the proceeds to pay off the Term Loan Facility.

The amount paid includes the balance of the Term Loan Facility upon pay off of $ 104.7 million, $ 0.9 million of accrued interest, and a $ 1.1 million prepayment premium or 1 % of the principal.

Additionally, there were $ 0.2 million in bank and legal fees included in the pay off.

The weighted average interest rate on all borrowings outstanding as of March 31, 2023 and December 31, 2022 was 6.7 % and 9.0 %, respectively.

Term Loan Facility

The Term Loan Facility provided for a $ 175.0 million term loan, of which $ 0 million remained outstanding as of March 31, 2023.

In connection with the Eighth ABL Amendment and payoff of the Term Loan Facility, on January 23, 2023, the Company terminated the Term Loan Facility, see above for further discussion.

Under the terms of the ABL Facility, up to $ 525.0 million may be borrowed, subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory.

As of September 30, 2022, the borrowing base was calculated to be $ 425.0 million, and the Company had $ 150.0 million outstanding in addition to a letter of credit in the amount of $ 1.4 million, with $ 273.6 million of remaining availability.

As of March 31, 2023, the borrowing base was calculated to be $ 499.9 million, and the Company had $ 210.0 million outstanding in addition to letters of credit in the amount of $ 2.6 million, with $ 287.3 million of remaining availability.

Borrowings under the ABL Facility bear interest at SOFR or a base rate, plus an applicable SOFR margin of 1.5 % to 2.0 % or base rate margin of 0.5 % to 1.0 %, as defined in the ABL Facility credit agreement.

Additionally, borrowings as of September 30, 2022 incurred interest at a weighted average rate of 4.8 %.

The average monthly unused commitment is subject to an unused commitment fee of 0.25 % to 0.375 %.

Interest and fees are payable in arrears at the end of each month, or, in the case of SOFR loans, at the end of each interest period.

The ABL Facility matures on the earlier of (i) October 22, 2026 and (ii) to the extent the debt under the Term Loan Facility remains outstanding, 90 days prior to the final maturity of the Term Loan Facility, which matures on September 19, 2024.

Borrowings under the ABL Facility are collateralized by accounts receivable and inventory, and further secured by the Company, Liberty LLC, and R/C IV Non-U.S.

LOS Corp., a Delaware corporation and a subsidiary of the Company, as parent guarantors.

Term Loan Facility

The Term Loan Facility provides for a $ 175.0 million term loan, of which $ 105.2 million remained outstanding as of September 30, 2022.

Amounts outstanding bear interest at SOFR or a base rate, plus an applicable margin of 7.625 % or 6.625 %, respectively, and borrowings as of September 30, 2022 incurred interest at a rate of 10.18 %.

The Company is required to make quarterly principal payments of 1 % per annum of the outstanding principal balance, commencing on December 31, 2017, with final payment due at maturity on September 19, 2024.

The Term Loan Facility is collateralized by the fixed assets of LOS and its subsidiaries, and is further secured by the Company, Liberty LLC, and R/C IV Non-U.S.

LOS Corp., a Delaware corporation and a subsidiary of the Company, as parent guarantors.

The Credit Facilities include certain non-financial covenants, including but not limited to restrictions on incurring additional debt and certain distributions.

Moreover, the ability of the Company to incur additional debt and to make distributions is dependent on maintaining a maximum leverage ratio.

The Term Loan Facility requires mandatory prepayments upon certain dispositions of property or issuance of other indebtedness, as defined, and annually a percentage of excess cash flow ( 25 % to 50 %, depending on leverage ratio, of consolidated net income less capital expenditures and other permitted payments, commencing with the year ending December 31, 2018).

Certain mandatory prepayments and optional prepayments are subject to a prepayment premium of 1 % of the prepaid principal declining to 0 % after the first anniversary of the Sixth Term Loan Amendment effective date.

The Credit Facilities are not subject to financial covenants unless liquidity, as defined in the respective credit agreements, drops below a specific level.

Under the ABL Facility, the Company is required to maintain a minimum fixed charge coverage ratio, as defined in the credit agreement governing the ABL Facility, of 1.0 to 1.0 for each period if excess availability is less than 10 % of the borrowing base or $ 12.5 million, whichever is greater.

Under the Term Loan Facility, the Company is required to maintain a minimum fixed charge coverage ratio, as defined, of 1.2 to 1.0 for each trailing twelve-month period if the Company’s liquidity, as defined, is less than $ 25.0 million for at least five consecutive business days.

The Company was in compliance with these covenants as of September 30, 2022.

Additionally, borrowings as of March 31, 2023 incurred interest at a weighted average rate of 6.7 %.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

monthly unused commitment is subject to an unused commitment fee of 0.25 % to 0.375 %.

Interest and fees are payable in arrears at the end of each month, or, in the case of SOFR loans, at the end of each interest period.

The ABL Facility matures on January 23, 2028.

Borrowings under the ABL Facility are collateralized by accounts receivable and inventory, and further secured by the Company as parent guarantor.

The ABL Facility includes certain non-financial covenants, including but not limited to restrictions on incurring additional debt and certain distributions.

Moreover, the ability of the Company to incur additional debt and to make distributions is dependent on maintaining a maximum leverage ratio.

The ABL Facility is not subject to financial covenants unless liquidity, as defined in the credit agreement, drops below a specific level.

The Company is required to maintain a minimum fixed charge coverage ratio, as defined in the credit agreement governing the ABL Facility, of 1.0 to 1.0 for each period if excess availability is less than 10 % of the borrowing base or $ 52.5 million, whichever is greater.

The Company was in compliance with these covenants as of March 31, 2023.

Maturities of debt are as follows:

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Remainder of 2023 $ —

2024 $ 252,965

Thereafter 210,000

Note 8— Fair Value Measurements and Financial Instruments

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Transfers occur at the end of the reporting period.

There were no transfers into or out of Levels 1, 2, and 3 during the nine months ended September 30, 2022 and 2021.

There were no transfers into or out of Levels 1, 2, and 3 during the three months ended March 31, 2023 and 2022.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, accounts payable, accrued liabilities, long-term debt, and finance and operating lease obligations.

These financial instruments do not require disclosure by level.

The carrying values of all of the Company’s financial instruments included in the accompanying unaudited condensed consolidated balance sheets approximated or equaled their fair values on September 30, 2022 and December 31, 2021.

• The carrying values of cash and cash equivalents, accounts receivable and accounts payable (including accrued liabilities) approximated fair value on September 30, 2022 and December 31, 2021, due to their short-term nature.

• The carrying value of amounts outstanding under long-term debt agreements with variable rates approximated fair value on September 30, 2022 and December 31, 2021, as the effective interest rates approximated market rates.

• The carrying values of cash and cash equivalents, accounts receivable, and accounts payable (including accrued liabilities) approximated fair value on March 31, 2023 and December 31, 2022, due to their short-term nature.

• The carrying value of amounts outstanding under long-term debt agreements with variable rates approximated fair value on March 31, 2023 and December 31, 2022, as the effective interest rates approximated market rates.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

• The carrying values of amounts outstanding under finance and operating lease obligations approximated fair value on March 31, 2023 and December 31, 2022, as the effective borrowing rates approximated market rates.

Nonrecurring Measurements

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These items are not measured at fair value on an ongoing basis but may be subject to fair value adjustments in certain circumstances.

These assets and liabilities include those acquired through the PropX Acquisition, which are required to be measured at fair value on the acquisition date in accordance with ASC Topic 805 .

See Note 3—The PropX Acquisition.

As of September 30, 2022, the Company recorded $ 2.5 million of land and $ 11.4 million of buildings of two properties that met the held for sale criteria, to assets held for sale at a total fair value of $ 11.2 million, which are included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

The Company estimated the fair value of the properties based on a purchase and sale agreement and a communicated selling price, which are Level 3 inputs.

As of March 31, 2023 and December 31, 2022, the Company recorded $ 1.1 million of land and $ 6.2 million of buildings of two properties that met the held for sale criteria, to assets held for sale at a total fair value of $ 6.3 million, which are included in prepaid and other current assets in the accompanying unaudited condensed consolidated balance sheet.

The Company estimated the fair value of the properties based on a purchase and sale agreement for one property and a communicated selling price, which are Level 3 inputs.

Recurring Measurements

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Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts.

As of September 30, 2022 and December 31, 2021, the Company had cash equivalents, measured at fair value, of $ 0.3 million and $ 0.3 million, respectively.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

As of March 31, 2023 and December 31, 2022, the Company had cash equivalents, measured at fair value, of $ 0.3 million and $ 0.3 million, respectively.

Nonfinancial assets

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The inputs used to determine such fair value are primarily based upon internally developed cash flow models and would generally be classified within Level 3 in the event that such assets were required to be measured and recorded at fair value within the unaudited condensed consolidated financial statements.

No such measurements were required as of September 30, 2022 and December 31, 2021 as no triggering event was identified.

No such measurements were required as of March 31, 2023 and December 31, 2022 as no triggering event was identified.

The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents, and trade receivables.

The Company’s cash and cash equivalent balances on deposit with financial institutions total $ 24.0 million and $ 20.0 million as of September 30, 2022 and December 31, 2021, respectively, which exceeded FDIC insured limits.

The Company’s cash and cash equivalent balances on deposit with financial institutions total $ 20.9 million and $ 43.7 million as of March 31, 2023 and December 31, 2022, respectively, which exceeded FDIC insured limits.

The Company regularly monitors these institutions’ financial condition.

The majority of the Company’s customers have payment terms of 45 days or less.

As of September 30, 2022 and December 31, 2021, customer A accounted for 10.5 % and 11.8 %, respectively, of total consolidated accounts receivable and unbilled revenue.

During the three and nine months ended September 30, 2022 and 2021, no customers accounted for 10% of consolidated revenues.

As of March 31, 2023 and December 31, 2022, customer A accounted for 14 % and 11 %, respectively, of total accounts receivable and unbilled revenue.

During the three months ended March 31, 2023 and March 31, 2022, customer A accounted for 12 % and 10 %, respectively, of revenues.

The Company mitigates the associated credit risk by performing credit evaluations and monitoring the payment patterns of its customers.

As of September 30, 2022 and December 31, 2021, the Company had $ 0.9 million in allowance for credit losses as follows:

As of March 31, 2023 and December 31, 2022, the Company had $ 0.9 million in allowance for credit losses as follows:

($ in thousands)

Allowance for credit losses at December 31, 2021 $ 884

Provision for credit losses on December 31, 2022 $ 884

Credit Losses:

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Amounts written off —

Allowance for credit losses at September 30, 2022 $ 884

Provision for credit losses on March 31, 2023 $ 884

LIBERTY ENERGY INC.

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RSUs were granted with vesting terms up to five years .

Changes in non-vested RSUs outstanding under the LTIP during the nine months ended September 30, 2022 were as follows:

Changes in non-vested RSUs outstanding under the LTIP during the three months ended March 31, 2023 were as follows:

Number of Units Weighted Average Grant Date Fair Value per Unit

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Forfeited ( 25,297 ) 11.69

Outstanding at September 30, 2022 3,014,235 $ 12.15

Outstanding as of March 31, 2023 3,404,956 $ 12.71

Performance Restricted Stock Units

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If such performance targets are not met, or are not expected to be met, no compensation expense is recognized and any recognized compensation expense is reversed.

Changes in non-vested PSUs outstanding under the LTIP during the nine months ended September 30, 2022 were as follows:

Changes in non-vested PSUs outstanding under the LTIP during the three months ended March 31, 2023 were as follows:

Number of Units Weighted Average Grant Date Fair Value per Unit

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Granted 341,928 15.64

Vested ( 329,277 ) 14.93

Forfeited — —

Outstanding at September 30, 2022 1,390,588 $ 11.87

Outstanding as of March 31, 2023 1,732,516 $ 12.61

Stock-based compensation is included in cost of services and general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations.

The Company recognized stock-based compensation expense of $ 6.1 million and $ 17.1 million for the three and nine months ended September 30, 2022, respectively.

The Company recognized stock-based compensation of $ 4.2 million and $ 15.1 million for the three and nine months ended September 30, 2021, respectively.

There was approximately $ 36.2 million of unrecognized compensation expense relating to outstanding RSUs and PSUs as of September 30, 2022.

The Company recognized stock-based compensation expense of $ 7.2 million and $ 6.8 million for the three months ended March 31, 2023 and 2022, respectively.

There was approximately $ 36.9 million of unrecognized compensation expense relating to outstanding RSUs and PSUs as of March 31, 2023.

The unrecognized compensation expense will be recognized on a straight-line basis over the weighted average remaining vesting period of two years .

On April 2, 2020, the Company suspended future quarterly dividends until business conditions warrant reinstatement.

As of September 30, 2022 dividends had not been reinstated by the Company.

Subsequent to quarter end, the Company reinstated a quarterly dividend of $ 0.05 per share of Class A Common Stock, refer to Note 17—Subsequent Events for more information.

As of September 30, 2022 and December 31, 2021, the Company had $ 0.1 million and $ 0.2 million of dividends payable related to RSUs to be paid upon vesting, respectively.

The Company paid cash dividends of $ 0.05 per share of Class A Common Stock on March 20, 2023 to stockholders of record as of March 6, 2023.

The Company paid the cash dividend to all holders of shares of Class A Common Stock as of March 6, 2023, which totaled $ 8.8 million.

As of March 31, 2023 and December 31, 2022, the Company had $ 0.5 million and $ 0.2 million of dividend equivalents payable related to RSUs and PSUs to be paid upon vesting, respectively.

Dividends related to forfeited RSUs will be forfeited.

Share Repurchase Program

On July 25, 2022, the Company’s Board of Directors authorized and the Company announced a share repurchase program that allows the Company to repurchase up to $ 250.0 million of the Company’s Class A Common Stock beginning immediately and continuing through and including July 31, 2024.

The shares may be repurchased from time to time in open market or

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

privately negotiated transactions or by other means in accordance with applicable state and federal securities laws.

Share Repurchase Program

On July 25, 2022, the Company’s board of directors authorized and the Company announced a share repurchase program that allows the Company to repurchase up to $ 250.0 million of the Company’s Class A Common Stock beginning immediately and continuing through and including July 31, 2024.

Additionally, on January 24, 2023 the Board authorized and the Company announced an increase to the share repurchase program that increased the Company’s cumulative repurchase authorization to $ 500.0 million.

The shares may be repurchased from time to time in open market or privately negotiated transactions or by other means in accordance with applicable state and federal securities laws.

The timing, as well as the number and value of shares repurchased under the program, will be determined by the Company at its discretion and will depend on a variety of factors, including management’s assessment of the intrinsic value of the Company’s Class A Common Stock, the market price of the Company’s Class A Common Stock, general market and economic conditions, available liquidity, compliance with the Company’s debt and other agreements, applicable legal requirements, and other considerations.

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The Company expects to fund the repurchases by using cash on hand, borrowings under its revolving credit facility and expected free cash flow to be generated through July 2024.

During the nine months ended September 30, 2022, Liberty LLC purchased and retired 4,702,166 LLC Units from the Company for $ 70.1 million, and the Company repurchased and retired 4,702,166 shares of Class A Common Stock for $ 70.1 million or $ 14.91 average price per share including commissions, under the share repurchase program.

As of September 30, 2022, $ 180.0 million remained authorized for future repurchases of Class A Common Stock under the share repurchase program.

During the three months ended March 31, 2023, the Company repurchased and retired 5,166,730 shares of Class A Common Stock for $ 74.6 million or $ 14.45 average price per share including commissions, under the share repurchase program.

As of March 31, 2023, $ 300.0 million, including commissions paid, remained authorized for future repurchases of Class A Common Stock under the share repurchase program.

The Company accounts for the purchase price of repurchased common shares in excess of par value ($ 0.01 per share of Class A Common Stock) as a reduction of additional paid-in capital, and will continue to do so until additional paid-in capital is reduced to zero.

Thereafter, any excess purchase price will be recorded as a reduction to retained earnings.

As enacted by the Inflation Reduction Act of 2022 (“IRA”), the Company has accrued stock repurchase excise tax of $ 0.5 million for the three months ended March 31, 2023.

LIBERTY ENERGY INC.

4 unchanged sentences

The Company uses the “if-converted” method to determine the potential dilutive effect of its Class B Common Stock and the treasury stock method to determine the potential dilutive effect of outstanding restricted stock and RSUs.

The following table reflects the allocation of net income (loss) to common stockholders and net loss per share computations for the periods indicated based on a weighted average number of common stock outstanding:

Three Months Ended Nine Months Ended

(In thousands) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

The following table reflects the allocation of net income (loss) to common stockholders and net income (loss) per share computations for the periods indicated based on a weighted average number of Class A Common Stock and Class B Common Stock outstanding:

Three Months Ended

(In thousands, except per share data) March 31, 2023 March 31, 2022

Basic Net Income (Loss) Per Share

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In accordance with GAAP, diluted weighted average common shares presented above do not include certain weighted average shares of Class B Common Stock and restricted stock units, because to do so would have had an antidilutive effect, as follows:

Three Months Ended Nine Months Ended

(In thousands) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Three Months Ended

(In thousands) March 31, 2023 March 31, 2022

Weighted average shares of Class B Common Stock — 2,092

4 unchanged sentences

Liberty LLC’s members, including the Company, are liable for federal, state and local income taxes based on their share of Liberty LLC’s pass-through taxable income.

Effective January 31, 2023, the Company adopted a plan of merger, pursuant to which Liberty LLC merged into the Company, ceasing the existence of Liberty LLC with the Company remaining as the surviving entity.

Liberty LLC will file a final tax return during the 2023 calendar year.

The Company is still party to the TRAs, as defined below, of which the Company’s liability under the TRAs’ is $ 119.5 million, presented as $ 4.7 million as a current liability included in accrued

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

liabilities in the accompanying unaudited condensed consolidated balance sheet, and $ 114.8 million as a non-current liability as of March 31, 2023.

The Company may distribute cash from foreign subsidiaries to its U.S.

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If such earnings were to be distributed, any income and/or withholding tax would not be significant.

The effective global income tax rate applicable to the Company for the nine months ended September 30, 2022 was 1.5 %, compared to ( 7.8 )%, for the period ended September 30, 2021.

The Company’s effective tax rate is less than the statutory federal income tax rate of 21.0% due to the Company’s full valuation allowance on its U.S.

net deferred tax assets while calculating income tax expense on Canada operations that are not subject to a valuation allowance.

The Company’s effective tax rate is also less than the statutory rate because of the non-controlling interest’s share of Liberty LLC’s pass-through results for federal, state and local income tax reporting, upon which no taxes are payable by the Company.

The Company recognized an income tax expense of $ 2.6 million and $ 3.6 million during the three and nine months ended September 30, 2022, respectively.

The Company recognized an income tax expense of $ 0.8 million and $ 9.4 million during the three and nine months ended September 30, 2021, respectively, which included the impact of recording a valuation allowance on a portion of the Company’s net deferred tax assets.

Per the Coronavirus Aid, Relief and Economic Security (“CARES”) Act enacted on March 27, 2020, net operating losses (“NOL”) incurred in 2019 and 2020 may be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The Company has applied for and expects to receive a NOL carryback refund to recover $ 5.5 million of cash taxes paid by the Company in 2018.

This amount has been reflected as a receivable in prepaids and other current assets line item in the accompanying unaudited condensed consolidated balance sheets.

The remaining deferred tax asset for net operating losses available for carryforward are presented net of the Company’s valuation allowance.

The Company recognized a deferred tax liability in the amount of $ 0.6 million as of September 30, 2022 and December 31, 2021.

The Company also recognized a deferred tax asset related to foreign jurisdictions in the amount of $ 0.3 million and $ 0.6 million as of September 30, 2022 and December 31, 2021, respectively.

The effective global income tax rate applicable to the Company for the three months ended March 31, 2023 was 25.1 % , compared to ( 17.8 )% for the period ended March 31, 2022.

The Company’s effective tax rate is greater than the statutory federal income tax rate of 21.0% due to the Company’s Canadian operations, state income taxes in the states the Company operates, as well as nondeductible executive compensation.

The Company recognized an income tax expense of $ 54.5 million an d $ 0.8 million during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023 and December 31, 2022, the Company recognized a deferred tax liability in the amount of $ 1.0 million and $ 1.0 million, respectively.

As of March 31, 2023 and December 31, 2022, the Company recognized a net deferred tax asset in the amount of $ 21.2 million and $ 12.6 million, respectively.

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

The Company evaluated its deferred tax assets as of September 30, 2022 and considered both positive and negative evidence in applying the guidance of ASC 740 Income Taxes (“ASC 740”) related to the realizability of its deferred tax assets.

Consistent with the prior quarter, in accordance with ASC 740, the objective negative evidence of remaining in a three year cumulative pre-tax book loss position, primarily due to COVID-19 related losses, outweighed the consideration of the Company’s subjective positive evidence of expected future profitability in evaluating the realizability of its deferred tax assets.

The CHIPS and Science Act of 2022 (“CHIPS”) and the Inflation Reduction Act (“IRA”) of 2022 were recently signed into law by President Biden on August 9, 2022 and August 16, 2022, respectively.

The legislation introduces new options for monetizing certain credits, a corporate alternative minimum tax, and a stock repurchase excise tax.

The Company is currently evaluating the impact of both CHIPS and IRA, but at present does not expect that any of the provisions included would result in a material impact to the Company’s deferred tax assets, liabilities, or income taxes payable.

Tax Receivable Agreements

In connection with the IPO, on January 17, 2018, the Company entered into two Tax Receivable Agreements (the “TRAs”) with R/C Energy IV Direct Partnership, L.P.

and the then existing owners that continued to own Liberty LLC Units (each such person and any permitted transferee, a “TRA Holder” and together, the “TRA Holders”).

and the then existing owners that continued to own units in Liberty LLC (“Liberty LLC Units”) (each such person and any permitted transferee, a “TRA Holder” and together, the “TRA Holders”).

The TRAs generally provide for the payment by the Company of 85% of the net cash savings, if any, in U.S.

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federal income tax purposes) of all or a portion of such TRA Holder’s Liberty LLC Units in connection with the IPO or pursuant to the exercise of redemption or call rights, (ii) any net operating losses available to the Company as a result of the Corporate Reorganization, and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under the TRAs.

During the nine months ended September 30, 2022, exchanges of Liberty LLC Units and shares of Class B Common Stock initially resulted in a net increase of $ 6.5 million in deferred tax assets, and an increase of $ 5.5 million, in amounts payable under the TRAs, all of which are subject to the valuation allowance and remeasurement of TRA liability discussed below, and which are recorded through equity.

There were no redemptions of Liberty LLC units for the three months ended

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

September 30, 2022.

In addition, the Company did not make any TRA payments for the nine months ended September 30, 2022.

At September 30, 2022 and December 31, 2021, the Company ’ s liability under the TRAs was $ 70.8 million and $ 37.6 million, respectively, all of which is presented as a component of long-term liabilities, and the related deferred tax asset totaled $ 97.8 million and $ 91.3 million, respectively, of which a valuation allowance on the net deferred tax asset has been recorded.

The Company also remeasured the liability under the TRAs as of September 30, 2022 and recorded a loss on remeasurement of liabilities subject to the TRAs for the nine months ended September 30, 2022 of $ 33.2 million recorded as part of continuing operations.

The increase in the liability under the TRA is primarily driven by increased pre-tax book earnings, current additions of property and equipment and amortization of expected tax benefits that are subject to the valuation allowance, which are expected to be realized in the foreseeable future.

On January 31, 2023, the last redemption of the Liberty LLC Units occurred.

During the three months ended March 31, 2023, exchanges of Liberty LLC Units and shares of Class B Common Stock resulted in a net increase of $ 0.7 million in deferred tax assets, and an increase of $ 0.6 million in amounts payable under the TRAs, all of which are recorded through equity.

The Company did not make any TRA payments for the three months ended March 31, 2023.

On January 31, 2023 the Company also recorded an increase of $ 7.8 million of deferred tax assets for the impact of the adopted plan of merger of Liberty LLC into the Company, all of which was recorded through equity.

During the three months ended March 31, 2022, exchanges of Liberty LLC Units and shares of Class B Common Stock resulted in a net increase of $ 6.5 million in deferred tax assets, and an increase of $ 5.5 million in amounts payable under the TRAs, all of which were recorded through equity.

The Company did not make any TRA payments for the three months ended March 31, 2022.

As of March 31, 2023, the Company ’ s liability under the TRAs was $ 119.5 million, of which $ 4.7 million is presented as a current liability included in accrued liabilities in the accompanying unaudited condensed consolidated balance sheet, and $ 114.8 million is presented as a component of long-term liabilities.

As of December 31, 2022, the Company ’ s liability under the TRAs was $ 118.9 million, all of which is presented as a component of long-term liabilities.

At March 31, 2023 and December 31, 2022 the related deferred tax assets totaled $ 99.9 million and $ 99.9 million, respectively.

Note 12— Defined Contribution Plan

The Company sponsors a 401(k) defined contribution retirement plan covering eligible employees.

The Company has historically made matching contributions at a rate of $ 1.00 for each $1.00 of employee contribution, subject to a cap of 6 % of the employee’s salary and federal limits.

Contributions made by the Company wer e $ 6.8 million and $ 5.4 million for the three months ended September 30, 2022 and 2021, respectively, and $ 18.8 million and $ 13.3 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company makes matching contributions at a rate of $ 1.00 for each $1.00 of employee contribution, subject to a cap of 6 % of the employee’s salary and federal limits.

Contributions made by the Company w ere $ 7.7 million an d $ 6.0 million f or the three months ended March 31, 2023 and 2022, respectively.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Note 13— Related Party Transactions

OneStim Acquisition and Related Transaction

On December 31, 2020 the Company acquired certain assets and liabilities of Schlumberger Technology Corporation (“Schlumberger”) and Schlumberger Canada Limited OneStim® business (“OneStim”), which provides hydraulic fracturing pressure pumping services in onshore United States and Canada (the “OneStim Acquisition”).

As of September 30, 2022 Schlumberger owned 23,069,461 shares of Class A Common Stock of the Company, or approximately 12.6 % of the issued and outstanding shares of Common Stock.

In conjunction with closing the OneStim Acquisition, the Company entered into a transition services agreement with Schlumberger under which Schlumberger provides certain administrative transition services until the Company fully integrates the acquired business.

The Company incurred $ 0.0 million and $ 5.7 million of fees payable to Schlumberger for such transaction services during the three and nine months ended September 30, 2021.

No fees were incurred during the three and nine months ended September 30, 2022.

During 2021, a subsidiary of the Company and Schlumberger entered into a property swap agreement under which the Company exchanged with Schlumberger a property acquired in the OneStim Acquisition and $ 4.9 million in cash for a separate property that the Company will utilize with its existing operations.

The Company did not recognize any gain or loss on the transaction.

Following the OneStim Acquisition, in the normal course of business, the Company purchases chemicals, proppant and other equipment and maintenance parts from Schlumberger and its subsidiaries.

During the three and nine months ended September 30, 2022, total purchases from Schlumberger were approximately $ 7.4 million and $ 15.5 million, respectively.

During the three and nine months ended September 30, 2021, total purchases from Schlumberger were approximately $ 6.5 million and $ 26.4 million, respectively.

As of September 30, 2022 amounts due to Schlumberger were $ 3.8 million and $ 1.1 million included in accounts payable and accrued liabilities, respectively.

As of December 31, 2021 amounts due to Schlumberger were $ 2.7 million and $ 1.1 million, included in accounts payable and accrued liabilities, respectively, in the unaudited condensed consolidated balance sheet.

Schlumberger Limited

During 2020, the Company acquired certain assets and liabilities of Schlumberger Technology Corporation (“Schlumberger”).

During the three months ended March 31, 2023, the Company repurchased and retired 3,000,000 shares of Class A Common Stock for $ 45.0 million or $ 15.00 average price per share from Schlumberger, under the share repurchase program.

Effective January 31, 2023, after the repurchase and retirement, Schlumberger owns no shares of Class A Common Stock of the Company and no longer qualifies as a related party.

Within the normal course of business, the Company purchases chemicals, proppant and other equipment and maintenance parts from Schlumberger and its subsidiaries.

During the period from January 1, 2023 until January 31, 2023, total purchases from Schlumberger were approximately $ 1.7 million.

During the three months ended March 31, 2022 total purchases from Schlumberger were approximately $ 3.6 million.

As of December 31, 2022 amounts due to Schlumberger were $ 2.6 million and $ 0.7 million, included in accounts payable and accrued liabilities, respectively, in the accompanying unaudited condensed consolidated balance sheet.

Although the Company continues to do business with Schlumberger, the Company no longer presents cash flows with Schlumberger as related party in the accompanying unaudited condensed consolidated statements of cash flows.

Franklin Mountain Energy, LLC

Effective on June 15, 2021, Audrey Robertson was appointed to the board of directors of the Company.

During 2021, Audrey Robertson was appointed to the board of directors of the Company.

Robertson serves as the Chief Financial Officer of Franklin Mountain Energy, LLC (“Franklin Mountain”).

During the three and nine months ended September 30, 2022 the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $ 55.5 million or 4.7 % and $ 79.0 million or 2.7 % of the Company’s revenues for such periods, respectively.

During the three and nine months ended September 30, 2021 the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $ 7.0 million or 1.1 % and $ 7.0 million or 0.4 % of the Company’s revenues for such periods, respectively.

Amounts included in unbilled revenue from Franklin Mountain as of September 30, 2022 and December 31, 2021 were $ 26.1 million and $ 0.0 million , respectively.

Receivables from Franklin Mountain as of September 30, 2022 and December 31, 2021 were $ 0.0 million .

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

During the three months ended March 31, 2023 the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $ 23.3 million or 1.8 % of the Company’s revenues for such period.

During the three months ended March 31, 2022 the Company performed hydraulic fracturing services for Franklin Mountain in the amount of $ 22.3 million or 2.8 % of the Company’s revenues for such period.

Amounts included in unbilled revenue from Franklin Mountain as of March 31, 2023 and December 31, 2022, were $ 9.7 million and $ 13.9 million, respectively.

Receivables from Franklin Mountain as of March 31, 2023 and December 31, 2022 were $ 14.3 million and $ 0.0 million , respectively.

Liberty Resources LLC

Liberty Resources LLC, an oil and gas exploration and production company, and its successor entity (collectively, the “Affiliate”) has certain common ownership and management with the Company.

The amounts of the Company’s revenue related to hydraulic fracturing services provided to the Affiliate for the three months ended September 30, 2022 and 2021 was $ 10.3 million and $ 0.0 million , respectively, and $ 10.3 million and $ 1.2 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, there were $ 10.3 million outstanding accounts receivable with the Affiliate.

PropX Acquisition

During 2016, Liberty Holdings entered into a future commitment to invest and become a non-controlling minority member in PropX, the provider of proppant logistics equipment.

Effective October 26, 2021, the Company completed the purchase of all membership interest in PropX, refer to Note 3—PropX Acquisition for further discussion of the transaction.

During the three and nine months ended September 30, 2021, prior to the PropX Acquisition, the Company leased proppant logistics equipment from PropX for $ 3.2 million and $ 7.3 million, respectively.

R/C IV Liberty Big Box Holdings, L.P., a Riverstone Holdings LLC (“Riverstone”) fund and a former significant stockholder of the Company, held a greater than 10 % equity interest in PropX.

Christopher Wright, the Chief Executive Officer, Michael Stock, the Chief Financial Officer and Ron Gusek, the President of the Company, held a less than 5 % equity interest in PropX through Big Box Proppant Investments LLC.

Cary Steinbeck, a director of the Company, served on the PropX board of the directors and held a less than 5 % indirect equity interest in PropX.

In addition, Brett Staffieri, a Riverstone appointed director, served on the board of the directors of the Company until June 15, 2021 and on the PropX board of directors until the acquisition date.

The PropX Acquisition was reviewed and approved by the disinterested members of the Board and pursuant to the Company’s related party transactions policy.

Secondary Offering by Selling Stockholder

On April 29, 2022, the Company, Liberty LLC, Schlumberger, and BofA Securities, Inc.

Morgan Securities LLC (together, the “Underwriters”), entered into an underwriting agreement, dated as of April 29, 2022, pursuant to which Schlumberger sold 14,500,000 shares of Class A Common Stock at a price of $ 15.50 per share to the Underwriters (the “Sale”).

The Sale closed on May 3, 2022.

Following the Sale, Schlumberger held 35,101,961 shares of Class A Common Stock.

The Company did not receive any proceeds from the Sale.

The amounts of the Company’s revenue related to hydraulic fracturing services provided to the Affiliate for the three months ended March 31, 2023 and 2022 was $ 6.5 million and $ 0.0 million , respectively.

On December 28, 2022 (the “Agreement Date”), the Company entered into an agreement with the Affiliate to amend payment terms for outstanding invoices due as of the Agreement Date to be due on April 1, 2024.

Amounts outstanding from the Affiliate as of March 31, 2023 and December 31, 2022 were $ 13.1 million and $ 11.8 million, respectively, included in other assets in the accompanying unaudited condensed consolidated balance sheet.

Any receivable amount outstanding at the end of each month is subject to 12 % interest through March 31, 2023, 15 % from April 1, 2023 through September 30, 2023, and 18 % thereafter.

During the three months ended March 31, 2023 and 2022, interest income from the Affiliate was $ 0.4 million and $ 0.0 million , respectively.

Note 14— Commitments & Contingencies

Purchase Commitments (tons and gallons are not in thousands)

Purchase Commitments (tons are not in thousands)

The Company enters into purchase and supply agreements to secure supply and pricing of proppants, chemicals, and equipment.

As of September 30, 2022 and December 31, 2021, the agreements commit the Company to purchas e 1,664,421 and 89,317 tons, respectively, of proppant through March 31, 2024.

Amounts below also include commitments to pay for transport fees on minimum amounts of proppants.

Additionally, related proppant transload service commitments extend into 2023.

Future proppant, transload, equipment and mancamp commitments are as follows:

As of March 31, 2023 and December 31, 2022, the agreements provide pricing and committed supply sources for the Company to purchas e 2,822,891 and 2,915,172 tons, respectively, of proppant through December 31, 2024.

Amounts above also include commitments to pay for transport fees on minimum amounts of proppants.

Additionally, related proppant transload service commitments run through 2023.

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

Future proppant, transload, and equipment commitments are as follows:

($ in thousands)

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In circumstances where the Company does not make the minimum purchase required under the contract, the Company and its suppliers have a history of amending such minimum purchase contractual terms and in rare cases does the Company incur shortfall fees.

If the Company were unable to make any of the minimum purchases and the Company and its suppliers cannot come to an agreement to avoid such fees, the Company could incur shortfall fees in the amounts of $ 17.0 million, $ 9.8 million, and $ 0.7 million for the remainder of 2022

LIBERTY ENERGY INC.

Notes to Condensed Consolidated Financial Statements

and the years ended 2023 and 2024, respectively.

If the Company were unable to make any of the minimum purchases and the Company and its suppliers cannot come to an agreement to avoid such fees, the Company could incur shortfall fees in the amounts of $ 51.0 million and $ 7.8 million for the remainder of 2023 and year ended 2024, respectively.

Based on forecasted levels of activity, the Company does not currently expect to incur significant shortfall fees.

Included in the commitments for the remainder of 2022 are $ 8.5 million of payments expected to be made to Schlumberger, in conjunction with a permissive use agreement provided by Schlumberger, in the fourth quarter of 2022 for the use of certain light duty trucks, heavy tractors and field equipment used to various degrees in frac and wireline operations.

Included in the commitments for the remainder of 2023 are approximately $ 7.9 million of payments expected to be made in the second quarter of 2023 for the use of certain light duty trucks, heavy tractors and field equipment used to various degrees in frac and wireline operations.

The Company is in negotiations with the third-party owner of such equipment to lease or purchase some or all of such aforementioned vehicles and equipment, subject to agreement on terms and conditions.

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Notwithstanding the uncertainty as to the final outcome, based upon the information currently available, management does not believe any matters in aggregate will have a material adverse effect on its financial position or results of operations.

Note 16— Selected Quarterly Financial Data

The following tables summarizes consolidated changes in equity for the three months ended September 30, 2022 and 2021:

Noncontrolling Interest Total Equity

Balance—June 30, 2022 186,859 326 $ 1,869 $ 3 $ 1,384,134 $ ( 56,174 ) $ ( 2,263 ) $ 1,327,569 $ 2,447 $ 1,330,016

Offering Costs — — — — 485 — — 485 — 485

Share repurchases ( 4,702 ) ( 47 ) ( 69,987 ) — ( 70,034 ) ( 60 ) ( 70,094 )

Stock-based compensation expense 6,100 — — 6,100 12 6,112

Vesting of restricted stock units 2 — — — — — — — —

Tax withheld on vesting of restricted stock units — — — — ( 1 ) — — ( 1 ) ( 1 )

Currency translation adjustment — — — — — — ( 6,332 ) ( 6,332 ) ( 11 ) ( 6,343 )

Net income — — — — — 146,953 — 146,953 310 147,263

Balance—September 30, 2022 182,159 326 $ 1,822 $ 3 $ 1,320,731 $ 90,779 $ ( 8,595 ) $ 1,404,740 $ 2,698 $ 1,407,438

Noncontrolling Interest Total Equity

Balance—June 30, 2021 178,310 $ 1,860 $ 1,783 $ 19 $ 1,274,031 $ ( 61,475 ) $ 2,454 $ 1,216,812 $ 12,622 $ 1,229,434

Offering Costs — — — — ( 159 ) — — ( 159 ) — ( 159 )

Stock-based compensation expense — — — — 4,201 — — 4,201 44 4,245

Currency translation adjustment — — — — — — ( 2,263 ) ( 2,263 ) ( 24 ) ( 2,287 )

Net loss — — — — — ( 38,890 ) — ( 38,890 ) ( 489 ) ( 39,379 )

Balance—September 30, 2021 178,310 1,860 1,783 19 1,278,073 ( 100,365 ) 191 1,179,701 12,153 $ 1,191,854

Note 15— Subsequent Events

On October 18, 2022, the Company’s board of directors approved a quarterly dividend of $ 0.05 per share of Class A Common Stock, and a distribution of $ 0.05 per Liberty LLC Unit, to be paid on December 20, 2022 to holders of record as of December 6, 2022.

The Company will use the proceeds from the Liberty LLC distribution to pay the dividend.

No other significant subsequent events have occurred that would require recognition or disclosure in the unaudited condensed consolidated financial statements.

On April 18, 2023, the Company’s board of directors approved a quarterly dividend of $ 0.05 per share of Class A Common Stock to be paid on June 20, 2023 to holders of record as of June 6, 2023.

On April 10, 2023, the Company acquired Siren Energy (“Siren”), a Permian focused integrated natural gas compression and compressed natural gas (“CNG”) delivery business.

At the acquisition date, Siren had 16 MMcf per day of natural gas compression capacity at two expandable Permian sites and transportation, logistics, and pressure reduction services.

Siren currently delivers fuel to customers in both the drilling and completions markets, and its logistics system is designed to deliver CNG, renewable natural gas (“RNG”), or hydrogen to remote locations.

The Company acquired Siren for an aggregate cash purchase price of $ 78.0 million, subject to normal closing adjustments.

The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time between the acquisition date and the date these financial statements are issued.

Further, it is impracticable for us to provide all of the disclosures required for a business combination pursuant to ASC 805 Business Combinations .

No other significant subsequent events have occurred that would require recognition or disclosure in the unaudited condensed consolidated financial statements and notes thereto.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in “Cautionary Note Regarding Forward-Looking Statements,” the Annual Report under the heading “Item 1A.

Risk Factors,” and in “Part II – Other Information, Item 1A.–Risk Factors” included herein.

Risk Factors,” and in "Part II – Other Information, Item 1A.

Risk Factors" included therein.

We assume no obligation to update any of these forward-looking statements.

We have grown from one active hydraulic fracturing fleet in December 2011 to over 40 active fleets as of September 30, 2022.

We have grown from one active hydraulic fracturing fleet in December 2011 to over 40 active fleets as of March 31, 2023.

We provide our services primarily in the Permian Basin, the Eagle Ford Shale, the DJ Basin, the Williston Basin, the San Juan Basin, the Powder River Basin, the Haynesville Shale, the SCOOP/STACK, the Marcellus Shale, Utica Shale, and the Western Canadian Sedimentary Basin.

Additionally, we operate two sand mines in the Permian Basin.

On December 31, 2020, the Company acquired certain assets and liabilities of Schlumberger’s OneStim business, which provides hydraulic fracturing pressure pumping services in onshore United States and Canada, including its pressure pumping, pumpdown perforating and Permian frac sand business, in exchange for consideration resulting in a total of 66,326,134 shares of the Class A Common Stock being issued in connection with the OneStim Acquisition.

As of October 18, 2022, Schlumberger owned 12.6% of the issued and outstanding shares of our Common Stock.

The combined company delivers best-in-class completion services for the sustainable development of unconventional resource plays in the United States and Canada onshore markets.

On October 26, 2021, the Company acquired PropX in exchange for $11.9 million in cash and 3,405,526 shares of Class A Common Stock and 2,441,010 shares of Class B Common Stock, and 2,441,010 Liberty LLC Units, for total consideration of $103.0 million, based on the Class A Common Stock closing price of $15.58 on October 26, 2021, subject to customary post-closing adjustments.

The Liberty LLC Units are redeemable for an equivalent number of shares of Class A Common Stock at any time, at the election of the shareholder.

Founded in 2016, PropX is a leading provider of last-mile proppant delivery solutions including proppant handling equipment and logistics software across North America.

PropX offers innovative environmentally friendly technology with optimized dry and wet sand containers and wellsite proppant handling equipment that drive logistics efficiency and reduce noise and emissions.

We believe that PropX wet sand handling technology is a key enabler of the next step of cost and emissions reductions in the proppant industry.

PropX also offers customers the latest real-time logistics software, PropConnect, for sale or as hosted software as a service.

We believe technical innovation and strong relationships with our customer and supplier bases distinguish us from our competitors and are the foundations of our business.

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(iv) our dual fuel dynamic gas blending fleets that allow our engines to run diesel or a combination of diesel and natural gas, to optimize fuel use, reduce emissions and lower costs;

(v) the successful test of digiFrac™, our innovative, purpose-built electric frac pump that has approximately 25% lower CO2e emission profile than the Tier IV DGB;

and (vi) our PropX wet sand handling technology which eliminates the need to dry sand, enabling the deployment of mobile mines nearer to wellsites.

In addition, our integrated supply chain includes proppant, chemicals, equipment, logistics and integrated software which we believe promotes wellsite efficiency and leads to more pumping hours and higher productivity throughout the year to better service our customers.

(v) our first digiFleet℠, comprising digiFrac℠ pumps, our innovative, purpose-built electric frac pump that has approximately 25% lower CO2e emission profile than the Tier IV DGB;

and (vi) our wet sand handling technology which eliminates the need to dry sand, enabling the deployment of mobile mines nearer to wellsites.

In addition, our integrated supply chain includes proppant, chemicals, equipment, natural gas fueling services, logistics and integrated software which we believe promotes wellsite efficiency and leads to more pumping hours and higher productivity throughout the year to better service our customers.

In order to achieve our technological objectives, we carefully manage our liquidity and debt position to promote operational flexibility and invest in the business throughout the full commodity cycle in the regions we operate.

Recent Trends and Outlook

Current global macroeconomic concerns include rising interest rates, elevated inflation levels, and Chinese Covid lockdowns.

Despite these headwinds, oil and gas markets remained tight in the third quarter.

As we look ahead, risks to the delicate balance in oil and gas markets appear to come from both demand and supply.

With regards to demand, while a mild recession may modestly impact the global demand for energy, and may already be reflected in prices, a global economic downturn could result in increased demand destruction, further pressuring commodity prices.

At the same time, global supply risks are also present.

OPEC+ preemptive cuts to production quotas may result in a decline in production from key producers including Saudi Arabia and the United Arab Emirates.

Currently, Russian oil exports have been modestly curbed since the Ukraine invasion, however, impending sanctions on Russian seaborne crude could further lower global oil supplies.

Low levels of spare production capacity, worldwide oil and gas commercial inventories, and global strategic petroleum reserves further exacerbate supply concerns.

Together, these factors may strengthen the demand for secure North American energy.

Today’s commodity prices continue to offer returns for E&P operators, even after the decline in oil and gas prices in recent months.

The combination of capital discipline among many public operators and tight supply chains, particularly in the frac services market, have constrained activity levels to deliver only modest U.S.

oil production growth.

The limited capital being deployed is expected to be primarily directed towards the buildout of next generation frac fleet capacity at levels roughly sufficient to offset aging equipment with next generation fleets in demand.

We believe that the current frac market is relatively tight with near full utilization of available capacity.

Tight service supply has made service quality and reliability important for customers.

Given that we pride ourselves on both our service quality and fleet modernization program, these two factors may further strengthen Liberty’s competitive position.

During the third quarter of 2022, the posted WTI price traded at an average of $93.06 per barrel (“Bbl”), as compared to the third quarter of 2021 average of $70.58 per Bbl, and second quarter of 2022 average of $108.83 per Bbl.

In addition, the average domestic onshore rig count for the United States and Canada was 942 rigs reported in the third quarter of 2022, up from the third quarter of 2021 of 634 and an increase from the second quarter of 2022 of 810, according to a report from Baker Hughes.

Recent Trends, Developments and Outlook

Tight frac markets persist in North America.

Domestic natural gas markets are now beginning to show signs of a widely anticipated slowdown, but the softness is likely transitory ahead of a wave of LNG and Mexico pipeline export growth.

The vast majority of frac services are weighted toward oilier basins and are working to simply maintain production levels.

The fundamental outlook for North American hydrocarbons is strong, as constrained global oil supply is confronted by rising demand in emerging markets and a gradual recovery in China.

North American E&P companies have demonstrated strength and discipline amidst economic turbulence.

Development programs are largely unchanged, as production has been roughly aligned with oil demand in the years since the pandemic and E&P companies are financially healthier relative to prior cycles.

In early spring, financial sector stresses and the heightened perceived recessionary risk on global oil demand resulted in an abrupt fall in oil prices.

Concerns have since eased as markets digested the news and economic data showed resiliency.

A surprise collective and proactive output cut from OPEC+ members coupled with falling Russian supply drove oil prices back to pre-bank stress levels.

We believe the frac market will remain strong at least into the second quarter, where we are seeing stable pricing and normal seasonality.

High utilization and demand in larger, oilier basins will likely offset softer conditions isolated to gas basins.

During the first quarter of 2023, the posted WTI price traded at an average of $75.93 per barrel (“Bbl”), as compared to the first quarter of 2022 average of $95.18 per Bbl, and fourth quarter of 2022 average of $82.79 per Bbl.

In addition, the average domestic onshore rig count for the United States and Canada was 965 rigs reported in the first quarter of 2023, up from the first quarter of 2022 of 816 and the fourth quarter of 2022 of 947, according to a report from Baker Hughes.

On April 10, 2023, the Company acquired Siren, a Permian focused integrated natural gas compression and CNG delivery business.

At the acquisition date, Siren had 16 MMcf per day of natural gas compression capacity at two expandable Permian sites and transportation, logistics, and pressure reduction services.

Siren currently delivers fuel to customers in both the drilling and completions markets, and its logistics system is designed to deliver CNG, RNG, or hydrogen to remote locations.

The Company acquired Siren for an aggregate cash purchase price of $ 78.0 million, subject to normal closing adjustments.

Results of Operations

Three months ended September 30, 2022 compared to three months ended September 30, 2021

Three months ended September 30,

Description 2022 2021 Change

(in thousands)

Revenue $ 1,188,247 $ 653,727 $ 534,520

Cost of services, excluding depreciation, depletion, and amortization shown separately 874,453 593,683 280,770

General and administrative 50,473 32,281 18,192

Transaction, severance and other costs 1,767 1,556 211

Depreciation, depletion, and amortization 82,848 65,852 16,996

Gain on disposal of assets (4,277) (79) (4,198)

Operating income (loss) 182,983 (39,566) 222,549

Other expense (income), net 33,148 (940) 34,088

Net income (loss) before income taxes 149,835 (38,626) 188,461

Income tax expense 2,572 753 1,819

Net income (loss) 147,263 (39,379) 186,642

Net income (loss) attributable to non-controlling interests 310 (489) 799

Net income (loss) attributable to Liberty Energy Inc.

stockholders $ 146,953 $ (38,890) $ 185,843

Our revenue increased $534.5 million , or 81.8% , to $1.2 billion for the three months ended September 30, 2022 compared to $653.7 million for the three months ended September 30, 2021.

The increase in revenue is attributable to higher service pricing and an activity-driven increase in fleet utilization and efficiency commensurate with increased demand for hydraulic fracturing services.

Cost of Services

Cost of services (excluding depreciation, depletion, and amortization) increased $280.8 million , or 47.3% , to $874.5 million for the three months ended September 30, 2022 compared to $593.7 million for the three months ended September 30, 2021.

The increase in expense was primarily related to increases in materials and parts consumption and higher labor costs related to higher fleet utilization as well as ongoing inflationary increases impacting costs for materials, labor, and maintenance parts.

General and Administrative

General and administrative expenses increased $18.2 million , or 56.4% , to $50.5 million for the three months ended September 30, 2022 compared to $32.3 million for the three months ended September 30, 2021 primarily related to increases in performance-based variable compensation, labor cost inflation, and corporate costs related to increased activity.

Transaction, Severance and Other Costs

Transaction, severance and other costs of $1.8 million and $1.6 million for the three months ended September 30, 2022 and 2021, respectively, consist of integration cost, investment banking, legal, accounting, and other professional services provided in connection with the OneStim Acquisition and PropX Acquisition.

Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization expense increased $17.0 million , or 25.8% , to $82.8 million for the three months ended September 30, 2022 compared to $65.9 million for the three months ended September 30, 2021.

The increase in 2022 was due to additional equipment placed in service since the prior year period and additional depreciation from property acquired in the PropX Acquisition.

Gain on Disposal of Assets

The Company recognized a gain on disposal of assets of $4.3 million for the three months ended September 30, 2022 primarily as a result of the sale of used field equipment and light duty trucks in a strong used vehicle and equipment market compared to a gain of $0.1 million for the three months ended September 30, 2021 due to miscellaneous equipment disposals.

All disposals recorded during the three months ended September 30, 2022 and 2021 were in the normal course of business.

Operating Income (Loss)

The Company recorded operating income of $183.0 million for the three months ended September 30, 2022 compared to operating loss of $39.6 million for the three months ended September 30, 2021, an increase in operating results of $222.5 million, or 562.5%.

The increase in operating income is primarily due to the $534.5 million, or 81.8%, increase in total revenue only partially offset by a $312.0 million increase in total operating expenses, the significant components of which are discussed above.

Other Expense (Income), net

The Company recognized other expense of $33.1 million for the three months ended September 30, 2022 compared to other income of $0.9 million for the three months ended September 30, 2021.

Other expense (income), net is comprised of loss (gain) on remeasurement of liability under the TRAs, gain on investments, and interest expense, net.

The Company remeasured the liability under the TRAs resulting in a loss of $28.9 million for the three months ended September 30, 2022, compared to a gain of $4.9 million for the three months ended September 30, 2021.

A $2.5 million gain on investments was recorded during the three months ended September 30, 2022, compared to no gain for the three months ended September 30, 2021.

Additionally, interest expense, net increased $2.8 million as a result of increased borrowings under the credit facility along with higher interest rates.

Net Income (loss) before Income Taxes

The Company realized net income before income taxes of $149.8 million for the three months ended September 30, 2022 compared to net loss before income taxes of $38.6 million for the three months ended September 30, 2021.

The increase in income is primarily attributable to an increase in revenue, as discussed above, related to the increase in activity and service pricing.

Income Tax Expense

Income tax expense increased $1.8 million to $2.6 million for the three months ended September 30, 2022, at an effective rate of 1.7%, compared to a tax expense of $0.8 million, at an effective rate of (1.9)%, recognized during the three months ended September 30, 2021.

The increase in income tax expense is primarily attributable to the increase in Company’s foreign operations as a valuation allowance was recorded on the Company’s U.S.

net deferred tax assets, beginning in the second quarter of 2021.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021

Nine months ended September 30,

Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022

Three months ended March 31,

Description 2023 2022 Change

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Depreciation, depletion, and amortization 94,401 74,588 19,813

Gain on disposal of assets (3,041) (1,076) (1,965)

Operating income (loss) 297,426 (117,789) 415,215

Loss on disposal of assets 487 4,672 (4,185)

Operating income 225,120 3,839 221,281

Other expense, net 7,891 8,489 (598)

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stockholders $ 162,655 $ (5,376) $ 168,031

Our revenue increased $1.1 billion, or 63.6%, to $2.9 billion for the nine months ended September 30, 2022 compared to $1.8 billion for the nine months ended September 30, 2021.

Our revenue increased $469.3 million , or 59.2% , to $1.3 billion for the three months ended March 31, 2023 compared to $792.8 million for the three months ended March 31, 2022.

The increase in revenue is attributable to higher service pricing, the addition and reactivation of several fleets subsequent to the prior year period, and an activity-driven increase in fleet utilization and efficiency commensurate with increased demand for hydraulic fracturing services.

Cost of Services

Cost of services (excluding depreciation, depletion, and amortization) increased $643.6 million, or 39.9%, to $2.3 billion for the nine months ended September 30, 2022 compared to $1.6 billion for the nine months ended September 30, 2021.

The higher expense was primarily related to increases in materials and parts consumption and higher labor costs related to higher fleet utilization as well as inflationary increases impacting costs for materials, labor, and maintenance parts.

Cost of services (excluding depreciation, depletion, and amortization) increased $218.4 million , or 32.6% , to $888.4 million for the three months ended March 31, 2023 compared to $670.0 million for the three months ended March 31, 2022.

The increase in expense was primarily related to increases in materials and parts consumption and higher labor costs related to additional fleets and higher fleet utilization as well as ongoing inflationary increases impacting costs for materials, labor, and maintenance parts.

General and Administrative

General and administrative expenses increased $42.9 million, or 48.7%, to $131.0 million for the nine months ended September 30, 2022 compared to $88.0 million for the nine months ended September 30, 2021 primarily related to increases from reinstated bonus programs which had been temporarily suspended during the first quarter of 2020 as a result of the COVID-19 pandemic, labor cost inflation, and corporate costs related to increased levels of activity.

General and administrative expense s increased $14.7 million , or 38.4% , to $53.0 million for the three months ended March 31, 2023 compared to $38.3 million for the three months ended March 31, 2022, primarily related to an increase in performance-based variable compensation, labor cost inflation, and corporate costs related to increased levels of activity.

Transaction, Severance, and Other Costs

Transaction, severance and other costs decreased $6.9 million, or 56.5%, to $5.3 million for the nine months ended September 30, 2022 compared to $12.2 million for the nine months ended September 30, 2021.

The costs incurred in the nine months ended September 30, 2021 primarily related to integration costs, investment banking, legal, accounting, and other professional services provided in connection with the OneStim Acquisition and PropX Acquisition.

Such costs were lower during the nine months ended September 30, 2022 as the integration efforts move towards completion.

Transaction, severance and other costs decreased $0.7 million , or 53.7%, to $0.6 million for the three months ended March 31, 2023 compared to $1.3 million for the three months ended March 31, 2022.

The costs incurred in the three months ended March 31, 2023 consist of due diligence work for the acquisition of Siren.

See Note 15— Subsequent Events to the unaudited condensed consolidated financial statements included in “Item 1.

Financial Statements (Unaudited)” for further details.

Depreciation, Depletion, and Amortization

Depreciation, depletion, and amortization expense increased $43.7 million, or 22.9%, to $234.8 million for the nine months ended September 30, 2022 compared to $191.1 million for the nine months ended September 30, 2021.

The increase in 2022 was due to additional equipment placed in service since the prior year period and additional depreciation from property acquired in the PropX Acquisition.

Gain on disposal of assets

Gain on disposal of assets increased $2.0 million, or 182.6%, to $3.0 million for the nine months ended September 30, 2022, compared to $1.1 million for the nine months ended September 30, 2021 due to miscellaneous equipment disposals in the normal course of business.

The increase was a result of the sale of used field equipment and light duty trucks in a strong used vehicle and equipment market offset by the loss on sale of one and plan of sale for two other non-strategic facilities acquired in the OneStim Acquisition

Operating Income (Loss)

The Company recorded operating income of $297.4 million for the nine months ended September 30, 2022 compared to operating loss of $117.8 million for the nine months ended September 30, 2021, the operating income is primarily due to the $1.1 billion, or 63.6%, increase in total revenue partially offset by a $721.4 million increase in total operating expenses, the significant components of which are discussed above.

Depreciation, depletion, and amortization expense increased $19.8 million, or 26.6% , to $94.4 million for the three months ended March 31, 2023 compared to $74.6 million for the three months ended March 31, 2022.

The increase in 2023 was due to additional equipment placed in service since the prior year period.

Loss on Disposal of Assets

The Company recorded a loss on disposal of assets of $0.5 million for the three months ended March 31, 2023 compared to $4.7 million for the three months ended March 31, 2022.

The loss as of March 31, 2023 was a result of the Company regularly selling equipment that is no longer in use as part of normal course fleet and equipment management.

The loss as of March 31, 2022 was as a result of plans to sell two non-strategic facilities.

Operating Income

The Company recorded operating income of $225.1 million for the three months ended March 31, 2023 compared to operating income of $3.8 million for the three months ended March 31, 2022.

The increase in operating income is primarily due to the $469.3 million, or 59.2%, increase in total revenue partially offset by a $248.0 million increase in total operating expenses, the significant components of which are discussed above.

Other Expense, Net

Other expense, net increased $43.4 million to $46.7 million for the nine months ended September 30, 2022 compared to $3.3 million for the nine months ended September 30, 2021.

Other expense, net is comprised of loss on remeasurement of liability under the TRAs, gain on investments, and interest expense, net.

The Company remeasured the liability under the TRAs resulting in a loss of $33.2 million for the nine months ended September 30, 2022, compared to a gain of $8.3 million for the nine months ended September 30, 2021.

A $2.5 million gain on investments was recorded during the nine months ended September 30, 2022, compared to no gain for the nine months ended September 30, 2021.

Additionally, interest expense increased $4.4 million as a result of increased borrowings under the credit facility along with higher interest rates.

Other expense, net decreased by $0.6 million, or 7.0%, to $7.9 million for the three months ended March 31, 2023 compared to $8.5 million for the three months ended March 31, 2022.

Other expense, net is comprised of loss on remeasurement of liability under the TRAs, interest income—related party, and interest expense, net.

The Company remeasured the liability under the TRAs resulting in a loss of $4.2 million for the three months ended March 31, 2022, there was no such remeasurement required during the three months ended March 31, 2023.

Interest income—related party increased $0.4 million related to a note receivable agreement executed in December 2022.

Additionally, interest expense, net increased $3.9 million as a result of increased borrowings and higher interest rates under the credit facility during the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Net Income (Loss) before Income Taxes

The Company realized net income before income taxes of $250.8 million for the nine months ended September 30, 2022 compared to net loss before income taxes of $121.1 million for the nine months ended September 30, 2021.

The increase in results is primarily attributable to an increase in revenue, as discussed above, related to the increase in activity and service pricing.

The Company realized net income before income taxes of $217.2 million for the three months ended March 31, 2023 compared to a net loss before income taxes of $4.7 million for the three months ended March 31, 2022.

The increase in results is primarily attributable to an increase in revenue, as discussed above, related to the fleet deployments and an increase in activity and service pricing.

Income Tax Expense

Income tax expense decreased $5.8 million to $3.6 million for the nine months ended September 30, 2022, at an effective rate of 1.5%, compared to $9.4 million, at an effective rate of (7.8)%, recognized during the nine months ended September 30, 2021.

This decrease in income tax expense is primarily attributable to the Company recording a valuation allowance on its U.S.

net deferred tax assets, beginning in the second quarter of 2021, resulting in income tax expense for that period, while in subsequent periods no tax expense or benefit is recognized on U.S.

state and federal income or loss.

The Company recognized income tax expense of $54.5 million for the three months ended March 31, 2023, an effective rate of 25.1%, compared to $0.8 million, an effective rate of (17.8)%, recognized for the three months ended March 31, 2022.

The increase in income tax expense is primarily attributable to the Company recording taxes on the Company ’ s U.S.

activity during the three months ended March 31, 2023, compared to having a valuation allowance on its U.S.

net deferred tax assets for the three months ended March 31, 2022.

Comparison of Non-GAAP Financial Measures

We view EBITDA and Adjusted EBITDA as important indicators of performance.

We define EBITDA as net income before interest, income taxes, and depreciation, depletion, and amortization.

We define EBITDA as net income (loss) before interest, income taxes, and depreciation, depletion, and amortization.

We define Adjusted EBITDA as EBITDA adjusted to eliminate the effects of items such as non-cash stock-based compensation, new fleet or new basin start-up costs, fleet lay-down costs, costs of asset acquisitions, gain or loss on the disposal of assets, bad debt reserves, transaction, severance, and other costs, the loss or gain on remeasurement of liability under our tax receivable agreements, the gain or loss on investments, and other non-recurring expenses that management does not consider in assessing ongoing performance.

Our board of directors, management, investors, and lenders use EBITDA and Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation, depletion, and amortization) and other items that impact the comparability of financial results from period to period.

amortization) and other items that impact the comparability of financial results from period to period.

We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.

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Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net loss, which is the most directly comparable GAAP measure for the periods presented:

Three and nine months ended September 30, 2022 compared to three and nine months ended September 30, 2021:

The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net income (loss), which is the most directly comparable GAAP measure for the periods presented:

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022:

EBITDA and Adjusted EBITDA

Three Months Ended September 30, Nine Months Ended September 30,

Description 2022 2021 Change 2022 2021 Change

Three Months Ended March 31,

Description 2023 2022 Change

(in thousands)

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Fleet start-up and lay-down costs 2,082 585 1,497

Transaction, severance and other costs 1,767 1,556 211 5,293 12,173 (6,880)

Gain on disposal of assets (4,277) (79) (4,198) (3,041) (1,076) (1,965)

Provision for credit losses — — — — 745 (745)

Loss (gain) on remeasurement of liability under tax receivable agreements 28,900 (4,947) 33,847 33,233 (8,252) 41,485

Gain on investments $ (2,525) $ — $ (2,525) $ (2,525) $ — $ (2,525)

Transaction, severance, and other 617 1,334 (717)

Loss (gain) on disposal of assets 487 4,672 (4,185)

Loss on remeasurement of liability under tax receivable agreements — 4,165 (4,165)

Adjusted EBITDA $ 329,885 $ 91,831 $ 238,054

EBITDA was $239.5 million for the three months ended September 30, 2022 compared to $31.2 million for the three months ended September 30, 2021.

Adjusted EBITDA was $276.9 million for the three months ended September 30, 2022 compared to $32.0 million for the three months ended September 30, 2021.

The increases in EBITDA and Adjusted EBITDA primarily resulted from improved market conditions and activity levels as described above under the captions Revenue , Cost of Services , and General and Administrative Expenses for the Three Months Ended September 30, 2022 compared to the Three Months Ended September 30, 2021 .

EBITDA was $501.5 million for the nine months ended September 30, 2022 compared to $81.6 million for the nine months ended September 30, 2021.

Adjusted EBITDA was $564.8 million for the nine months ended September 30, 2022 compared to $100.3 million for the nine months ended September 30, 2021.

The increases in EBITDA and Adjusted EBITDA primarily resulted from improved market conditions and activity levels as described above under the captions Revenue , Cost of Services , and General and Administrative Expenses for the Nine months ended September 30, 2022 compared to the Nine months ended September 30, 2021 .

EBITDA was $319.5 million for the three months ended March 31, 2023 compared to $74.3 million for the three months ended March 31, 2022.

Adjusted EBITDA was $329.9 million for the three months ended March 31, 2023 compared to $91.8 million for the three months ended March 31, 2022.

The increases in EBITDA and Adjusted EBITDA primarily resulted from improved market conditions and increased activity levels as described above under the captions Revenue , Cost of Services , and General and Administrative for the Three Months Ended March 31, 2023 , Compared to the Three Months Ended March 31, 2022 .

Liquidity and Capital Resources

Historically, our primary sources of liquidity to date have been cash flows from operations, proceeds from our IPO, and borrowings under our Credit Facilities.

We expect to fund operations and organic growth with cash flows from operations and available borrowings under our Credit Facilities.

We expect to fund operations and organic growth with cash flows from operations and available borrowings under our ABL Facility.

We monitor the availability of capital resources such as equity and debt financings that could be leverage for current or future financial obligations including those related to acquisitions, capital expenditures, working capital, and other liquidity requirements.

We may incur additional indebtedness or issue equity in order to meet our capital expenditure activities and liquidity requirements, as well as to fund growth opportunities that we pursue, including via acquisition, such as with the OneStim Acquisition and the PropX Acquisition.

Our primary uses of capital have been capital expenditures to support organic growth and funding ongoing operations, including maintenance and fleet upgrades.

Cash and cash equivalents increased by $4.0 million to $24.0 million as of September 30, 2022 compared to $20.0 million as of December 31, 2021, while working capital excluding cash and current liabilities under debt and lease arrangements increased $224.1 million.

Cash and cash equivalents decreased by $22.8 million to $20.9 million as of March 31, 2023 compared to $43.7 million as of December 31, 2022, while working capital excluding cash and current liabilities under debt and lease arrangements increased $28.5 million.

We have $525.0 million committed under the ABL Facility subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory available to finance working capital needs.

As of September 30, 2022, the borrowing base was calculated to be $425.0 million, and the Company had $150.0 million outstanding, in addition to a letter of credit in the amount of $1.4 million, with $273.6 million of remaining availability.

Additionally, we have $105.2 million borrowings remaining on the Term Loan Facility, which was originally $175.0 million.

The ABL Facility has a maturity date of the earlier of (a) October 22, 2026 and (b) to the extent the debt under the Term Loan Facility remains outstanding 90 days prior to the final maturity of the Term Loan Facility, which matures on September 19, 2024.

On July 18, 2022, the Company entered into an amendment to the ABL Facility (the “Seventh ABL Amendment”).

The Seventh ABL Amendment amended certain terms, provisions, and covenants of the ABL Facility, including among other things:

(i) increasing the maximum borrowing amount by $75.0 million to $425.0 million, subject to certain borrowing base limitations based on percentage of eligible accounts receivable and inventory, (ii) modifying certain covenant and reporting-related baskets, and (iii) replacing LIBOR with the secured overnight financing rate (“SOFR”) as the interest rate benchmark.

On August 12, 2022, the Company entered into an amendment to the Term Loan Facility (the “Sixth Term Loan Amendment”).

The Sixth Term Loan Amendment amended certain terms, provisions and covenants of the Term Loan Facility, including among other things:

(i) a waiver of the fixed charge coverage ratio requirements for up to $100.0 million of restricted payments made in connection with the Company’s 2022 stock repurchase program for its common stock;

(ii) the addition of a minimum liquidity requirement of $150.0 million in order to make selected restricted payments, including those made under the 2022 stock repurchase program;

(iii) the modification of certain covenant and reporting-related terms, including an increase in the allowance for permitted purchase money indebtedness from $50.0 million to $70.0 million;

(iv) the addition of a prepayment premium of 1.0% through the first anniversary of the Sixth Term Loan Amendment effective date;

and (v) the addition and modification of several provisions to replace LIBOR with SOFR as the interest rate benchmark.

The Credit Facilities contain covenants that restrict our ability to take certain actions.

At September 30, 2022, the Company was in compliance with all debt covenants.

See Note 8 —Debt to the consolidated financial statements included in “Item 1.

As of March 31, 2023, the borrowing base was calculated to be $499.9 million, and the Company had $210.0 million outstanding, in addition to a letter of credit in the amount of $2.6 million, with $287.3 million of remaining availability.

On January 23, 2023, the Company entered into an Eighth Amendment to the ABL Facility.

The Eighth ABL Amendment amends certain terms, provisions and covenants of the ABL Facility, including, among other things:

(i) increasing the maximum revolver amount from $425.0 million to $525.0 million;

(ii) increasing the amount of the accordion feature from $75.0 million to $100.0 million;

(iii) extending the maturity date from October 22, 2026 to January 23, 2028;

(iv) modifying the dollar amounts of various credit facility triggers and tests proportionally to the Upsized Revolver;

(v) permitting repayment under the Term Loan Facility prior to February 10, 2023;

and (vi) increasing certain indebtedness, intercompany advance, and investment baskets.

Additionally, on January 23, 2023, the Company withdrew $106.7 million on the ABL Facility and used the proceeds to pay off the Term Loan Facility.

The amount paid included the balance of the Term Loan Facility upon pay off of $104.7 million, $0.9 million of accrued interest, and a $1.1 million prepayment premium or 1% of the principal.

Additionally, there were $0.2 million in bank and legal fees included in the pay off.

As such, the only outstanding debt facility after January 23, 2023 is the ABL Facility.

The ABL Facility contains covenants that restrict our ability to take certain actions.

At March 31, 2023, we were in compliance with all debt covenants.

See Note 7 — Debt to the unaudited condensed consolidated financial statements included in “Item 1.

Financial Statements (Unaudited)” for further details.

We have no material off balance sheet arrangements as of September 30, 2022, except for purchase commitments under supply agreements as disclosed above under “Item 1.

Financial Statements—Note 15—Commitments & Contingencies.” As such, we are not materially exposed to any other financing, liquidity, market, or credit risk that could arise if we had engaged in such financing arrangements.

We have no material off balance sheet arrangements as of March 31, 2023, except for purchase commitments under supply agreements as disclosed above under “Item 1.

Financial Statements (Unaudited)—Note 14—Commitments & Contingencies.” As such, we are not materially exposed to any other financing, liquidity, market, or credit risk that could arise if we had engaged in such financing arrangements.

Share Repurchase Program

Under our share repurchase program, the Company is authorized to repurchase up to $250.0 million of outstanding Class A Common Stock through and including July 31, 2024.

Shares may be repurchased from time to time for cash in the open market transactions, through block trades, in privately negotiated transactions, through derivative transactions or by other means in accordance with applicable federal securities laws.

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The following table summarizes our cash flows for the periods indicated:

Nine Months Ended September 30,

Three Months Ended March 31,

Description 2023 2022 Change

4 unchanged sentences

(129,654) (90,857) (38,797)

Net cash provided by financing activities

Net cash (used in) provided by financing activities

(97,095) 88,958 (186,053)

Analysis of Cash Flow Changes Between the Nine Months Ended September 30, 2022 and 2021

Analysis of Cash Flow Changes Between the Three Months Ended March 31, 2023 and March 31, 2022

Operating Activities .

Net cash provided by operating activities was $292.6 million for the nine month s ended September 30, 2022, compared to $80.1 million for the nine months ended September 30, 2021.

The $212.5 million increase in cash from operating activities is primarily attributable to a $1.1 billion increase in revenues, offset by a $679.6 million increase in cash operating expenses and a $238.5 million decrease in cash from changes in working capital for the nine months ended September 30, 2022, compared to a $2.8 million increase in cash from changes in working capital for the nine months ended September 30, 2021.

Net cash provided by operating activities was $203.9 million for the three months ended March 31, 2023, compared to $14.6 million for the three months ended March 31, 2022.

The $189.4 million increase in cash from operating activities is primarily attributable to a $469.3 million increase in revenues, offset by a $232.4 million increase in cash operating expenses and a $62.7 million decrease in cash from changes in working capital for the three months ended March 31, 2023, compared to a $71.1 million decrease in cash from changes in working capital for the three months ended March 31, 2022.

Investing Activities .

Net cash used in investing activities was $333.9 million for the nine months ended September 30, 2022, compared to $119.3 million for the nine months ended September 30, 2021.

Cash used in investing activities was higher during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021 as the Company continued to invest in equipment, including building new digiFrac™ fleets and deploying additional fleets, to support increased customer demand in next generation equipment and technology.

Net cash used in investing activities was $129.7 million for the three months ended March 31, 2023, compared to $90.9 million for the three months ended March 31, 2022.

Cash used in investing activities was higher during the three months ended March 31, 2023, compared to the three months ended March 31, 2022 as the Company continued to invest in equipment, including the new digiTechnologies™ suite, to support increased customer demand in next generation equipment and technology.

Financing Activities .

Net cash provided by financing activities was $45.6 million for the nine months ended September 30, 2022, compared to net cash provided by financing activities of $5.1 million for the nine months ended September 30, 2021.

The $40.5 million increase in cash provided by financing activities was primarily due to net borrowings of $132.0 million on the ABL Facility during the nine months ended September 30, 2022, compared to $16.0 million net borrowings on the ABL Facility for the nine months ended September 30, 2021.

Additionally, there was a $1.4 million decrease in payments on finance lease liabilities as the asset value of finance leases active for the full period has decreased since September 30, 2021.

These changes were offset by a $70.1 million increase in cash payments made in connection with share repurchases for the nine months ended September 30, 2022, compared to cash payments of $0.0 million for the nine months ended September 30, 2021.

Net cash used in financing activities was $97.1 million for the three months ended March 31, 2023, compared to net cash provided by financing activities of $89.0 million for the three months ended March 31, 2022.

The $186.1 million change in cash financing activities was primarily due to $74.6 million of cash payments made in connection with share repurchases for the three months ended March 31, 2023, compared to none in the three months ended March 31, 2022 as the Company reinstated the share buyback program since the prior year period.

Additionally, the Company reinstated quarterly dividends during the fourth quarter of 2022 resulting in a $8.8 million increase in dividends.

A net repayment of $9.7 million on the Credit Facilities contributed to the cash outflow due to the $104.7 million pay off of the Term Loan Facility offset by net borrowings of $95.0 million on the ABL Facility during the three months ended March 31, 2023.

There were $90.0 million of net borrowings on the ABL Facility for the three months ended March 31, 2022.

Cash Requirements

Our material cash commitments consist primarily of obligations under long-term debt, TRAs, finance and operating leases for property and equipment, cash used to pay for repurchases of shares of our Class A Common Stock, and purchase obligations as part of normal operations.

We have no material off balance sheet arrangements as of September 30, 2022, except for obligations of $44.5 million payable within 2022, $47.3 million in 2023, and $4.2 million payable thereafter.

Our material cash commitments consists primarily of obligations under long-term debt, TRAs, finance and operating leases for property and equipment, cash used to pay for repurchases of shares of our Class A Common Stock, and purchase obligations as part of normal operations.

We have no material off balance sheet arrangements as of March 31, 2023, except for obligations of $192.2 million payable within 2023 and $60.8 million payable thereafter.

See Note 14 —Commitments & Contingencies to the unaudited condensed consolidated financial statements included in “Item 1.

Financial Statements (Unaudited)” for information regarding scheduled contractual obligations.

There have been no other material changes to cash requirements since the year ended December 31, 2021.

There have been no material changes to cash requirements since the year ended December 31, 2022.

The Company is a corporation and is subject to U.S.

federal, state, and local income tax on its share of Liberty LLC’s taxable income.

federal, state, and local income tax.

The Company is also subject to Canada federal and provincial income tax on its foreign operations.

The combined effective tax rate applicable to the Company for the nine months ended September 30, 2022 and 2021 was 1.5% and (7.8)%, respectively.

The Company’s effective tax rate is significantly less than the federal statutory income tax rate of 21.0% due to the Company recording a valuation allowance on its U.S.

net deferred tax assets as of September 30, 2022, due to entering into a three year cumulative pre-tax book loss position, primarily as a result of COVID-19 related losses in 2021.

The Company’s effective tax rate is also less than the statutory rate because of foreign operations for 2021, and the non-controlling interest’s share of Liberty LLC’s pass-through results for federal, state and local income tax reporting, upon which no taxes are payable by the Company for the nine months ended September 30, 2022 and 2021.

The Company recognized income tax expense of $2.6 million and $3.6 million for the three and nine months ended September 30, 2022, respectively, and $0.8 million and $9.4 million for the three and nine months ended September 30, 2021, respectively, which included the impact of recording a valuation allowance on a portion of the Company’s net deferred tax assets.

Per the Coronavirus Aid, Relief and Economic Security (“CARES”) Act enacted on March 27, 2020, net operating losses (“NOL”) incurred in 2019, and 2020 may be carried back to each of the five preceding taxable years to generate a refund of

previously paid income taxes.

The Company has previously applied for and expects to receive a NOL carryback refund to recover $5.5 million of cash taxes paid by the Company in 2018.

This amount has been reflected as a receivable in the prepaids and other current assets line item in the accompanying audited consolidated balance sheets.

The effective global income tax rate applicable to the Company for the three months ended March 31, 2023 was 25.1% , compared to (17.8)% for the period ended March 31, 2022.

The Company recognized an income tax expense of $54.5 million an d $0.8 million during the three months ended March 31, 2023 and 2022, respectively.

We recorded a valuation allowance in the second quarter of 2021, against all of our deferred tax assets as of December 31, 2020 and continue to record a valuation allowance for the quarter ended September 30, 2022.

We intend to continue to maintain a full valuation allowance on our net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next few quarters, including as soon as the fourth quarter of 2022, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion or all of the valuation allowance will no longer be needed.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to the income tax expense for the period the release is recorded.

In addition, release of the valuation allowance would result in an increase in the tax receivable agreement liability and an increase in the tax receivable agreement loss for the period the release is recorded.

For the quarter ended September 30, 2022, the unrecognized TRA liability is approximately $50 million.

The valuation allowance as of December 31, 2021 was $91.3 million and no additional income tax benefit or expense has been recorded as a result of the valuation allowance through the quarter ended September 30, 2022.

Refer to Note 12— Income Taxes to the consolidated financial statements for additional information related to income tax expense.

In the year ended December 31, 2022, we released a valuation allowance on our U.S.

net deferred tax assets.

As of March 31, 2023, the Company’s net deferred tax assets were primarily comprised of federal and state U.S.

Net Operating Losses (“NOLs”) and TRA tax attributes, net of Property and equipment deferred tax liabilities.

Refer to Note 11—Income Taxes to the unaudited condensed consolidated financial statements for additional information related to income tax expense.

Tax Receivable Agreements

Refer to Note 12— Income Taxes to the consolidated financial statements for additional information related to tax receivable agreements.

Critical Accounting Estimates

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions (see Note 2—Significant Accounting Policies to the unaudited consolidated financial statements in this Form 10-Q and Note 2—Significant Accounting Policies and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Annual Report).

Refer to Note 11—Income Taxes to the unaudited condensed consolidated financial statements for additional information related to tax receivable agreements.

Critical Accounting Policies and Estimates

The Company’s unaudited condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions (see Note 2—Significant Accounting Policies and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Annual Report).

A critical accounting estimate is one that requires our most difficult, subjective or complex estimates and assessments and is fundamental to our results of operations.

We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

There have been no material changes in our critical accounting estimates since our Annual Report.

There have been no material changes in our evaluation of our critical accounting policies and estimates since our Annual Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements