Flowco Holdings Inc. Q4 FY2024 earnings call

• Flowco was formed in June 2024 via merger of Estis Compression, Logistics, and Flowco Production Solutions, each with over a decade of market leading positions in production optimization.
• Operates through two divisions: Production Solutions (artificial lift products) and Natural Gas Technologies (vapor recovery solutions).
• Has over 4,300 active systems in equipment rentals and sells downhole and some surface equipment.
• Has 1,270 employees with field service locations in major US shale basins and a vertically integrated US supply chain.
• In 2024, achieved 10% pro forma revenue growth organically by investing in HPGL and vapor recovery, and expects 2025 to be a year of profitable growth with similar capital deployment.

In the fourth quarter, Production Solutions had revenue of $113.3 million with adjusted segment EBITDA of $49.9 million, an increase of 1.5% and 5.2% respectively from the third quarter, with adjusted segment EBITDA margins up roughly 150 basis points. Natural Gas Technologies had revenue of $72.7 million in the fourth quarter, a decrease of 6.5% from the third quarter, but adjusted EBITDA grew 4.5% to $27.8 million, with adjusted EBITDA margins up 400 basis points due to strong performance of Vapor Recovery. In 2024, pro forma revenue increased 10% versus 2023, driven by organic growth in high pressure gas lift and vapor recovery, which are the two fastest growing business lines.

• For the first quarter of 2025, expects adjusted EBITDA of $74 million to $78 million.
• Anticipates similar level of capital investment in 2025 as in 2024, mostly for rental fleet, with incremental returns in excess of 20% expected to drive profitability in the second half of 2025.
• Expect 2025 to be another year of profitable growth based on customer demand, US production outlook, and industry activity.

• Geopolitical uncertainty impacting supply chain stability.
• Volatility in commodity prices and tariff changes affecting business operations.
• Potential rollback of environmental policies (like IRA waste emissions charges) could impact the financial viability of vapor recovery solutions, though the product's financials are not heavily reliant on such policies.

Q: General questions on macro environment since IPO, including impact of tariffs and Ukraine-Russia conflict resolution.

A: Joe Bob Edwards talks about US Shale durability, domestic supply chain as a defensive mechanism against tariff volatility, and that the business is levered to production volumes not drilling/completion expenditures.

Q: Margin progression in 2025.

A: Joe Bob Edwards states margin progression is due to mix shift toward rental (higher margin) and growth capital investment in surface equipment fleet for HPGL and vapor recovery.

Q: Administration policy impact on VRU.

A: Joe Bob Edwards discusses IRA waste emissions charge, noting if rolled back, it doesn't impact VRU's financial viability and that midstream customers are a new incremental market for VRU.

Q: Customer base for HPGL.

A: Joe Bob Edwards talks about the size of the US onshore artificial lift market, Flowco's market leading position in HPGL, and plans to expand penetration into the market by pushing the operating envelope of HPGL technology.

Q: eGrizzly unit.

A: Joe Bob Edwards explains it's an electric multi well high pressure gas lift unit, developed for places with embedded power infrastructure, with good customer reception as rolled out.

Q: Vertically integrated manufacturing and supply chain.

A: Joe Bob Edwards talks about domestic manufacturing, ability to ramp up/down capital investment quickly, and less tariff exposure compared to competitors with overseas supply chains.

Q: M&A opportunities.

A: Jon Gatlin talks about disciplined M&A, focus on returns-oriented acquisitions in areas that make sense, and being prudent with leverage given the current valuation and market conditions