Flowco Holdings Inc. 2026 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Flowco Holdings Inc. reported second quarter 2020 adjusted EBITDA of approximately $94 million with adjusted EBITDA margins of roughly 40%.
- Revenue increased 13% sequentially to $236 million, driven by growth in production solutions and a full quarter contribution from the acquisition of Valiant.
- Rental revenue accounted for 56% of total revenue, providing high revenue visibility, while asset-light sales businesses generated strong cash conversion.
- Free cash flow for the quarter was approximately $50 million, with $45 million invested in capital expenditures primarily to expand rental fleets and support Valiant.
- Production Solutions segment revenue increased 22% sequentially to $171 million, with adjusted segment EBITDA up 16% to $71 million, driven by downhole components including Valiant.
- Adjusted segment EBITDA margin decreased by 229 basis points due to revenue mix shift and higher operating and maintenance expenses, including lubricant and fuel costs.
- Natural Gas Technology segment revenue and adjusted EBITDA each decreased 6% sequentially to approximately $65 million and $28 million, respectively, due to lower vapor recovery system sales.
- Corporate expenses decreased to $5 million from $5.6 million in the prior quarter, primarily due to lower professional fees.
- Flowco generated an annualized adjusted return on capital employed of approximately 18% for the quarter.
- Available liquidity increased with borrowings of approximately $274 million under a $722 million credit facility and $446 million of available capacity.
- The board approved a one-time special dividend of $0.14 per Class A share in addition to the quarterly discretionary dividend of $0.09 per share.
- Flowco continues to benefit from North American positioning amid rising domestic energy production and increasing operator focus on production optimization.
- Management emphasized disciplined cost management and operational efficiency to mitigate cost pressures and improve rental fleet utilization.
- Valiant acquisition integration is substantially complete, performing ahead of expectations, and expanding customer base through cross-selling opportunities.
- Flowco is leveraging operational data and AI-driven predictive analytics to optimize artificial lift systems and rental fleet maintenance.
- Management highlighted the importance of free cash flow and return on capital as key performance metrics and plans to maintain strong free cash flow conversion.
- Flowco's vertically integrated manufacturing model provides flexibility to respond efficiently to customer demand and focus capital on high-return opportunities.
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Transcript
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Good morning. Welcome to Flowco Holdings Inc.'s second quarter 2026 earnings call. Today's call is being recorded. We have allocated one hour for prepared remarks and questions and answers. At this time, I would like to turn the conference over to Andrew Leonpacher, Vice President of Finance, Corporate Development, and Investor Relations at Flowco. Thank you. You may begin.
Good morning, everyone, and thanks for joining us to discuss Flowco's second quarter results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties, and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this morning's press release, as well as our filings with the SEC, which can be found on our website at ir.flowco-inc.com. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP financial information. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business.
The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Reconciliation of GAAP to non-GAAP measures can be found in this morning's press release and in our SEC filings. Joining me on the call today are our President and Chief Executive Officer, Joe Bob Edwards, and our Chief Financial Officer, Jon Byers. Following our prepared remarks, we will open the call for your questions. With that, I will turn the call over to Joe Bob.
Thank you, Andrew. Good morning, everybody, and thank you for joining us today. I will begin today's call with a review of our second quarter performance and key highlights. Jon will then discuss our financial results, segment performance, capital allocation, and balance sheet in more detail. I will conclude with our perspective on the current market environment and our outlook for the third quarter. Flowco delivered solid results in the second quarter, generating adjusted EBITDA of approximately $94 million, while maintaining our top quartile adjusted EBITDA margins of roughly 40%. Revenue increased 13% quarter-over-quarter, while adjusted EBITDA grew 10%, reflecting solid execution across the business. These results were supported by better than expected performance from recently acquired Valiant, continued growth in rental revenue across our surface equipment and vapor recovery businesses, and a stronger quarter in downhole components product sales.
Flowco generated $50 million of free cash flow during the quarter, further enhancing our balance sheet and reinforcing the strength of our business model. 56% of our revenue in the quarter was generated from rental revenue, which provide a high degree of revenue visibility, while our asset-light sales businesses continue to generate attractive returns and strong cash conversion. This balanced model enables us to consistently generate meaningful free cash flow while we invest in Flowco's long-term growth prospects. Overall, I am very pleased with our execution during the quarter. While we experienced the cost headwinds discussed in our mid-quarter update, which Jon will discuss in greater detail, our team remains focused on the factors within our control, superior service quality, efficient execution, and delivering the solutions that help operators generate more attractive returns from their existing assets. This disciplined approach enabled us to deliver results within our original expectations.
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