Ranger Energy Services Inc

Previous wording

The following discussion and analysis should be read in conjunction with the historical financial statements and related notes included elsewhere in this Annual Report. This discussion contains “forward‑looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. These statements include certain risks and uncertainties. Please read “Cautionary Statement Regarding Forward‑Looking Statements” and he risk factors described under “Part I, Item 1A.-Risk Factors” for more details.

Current wording

The following discussion and analysis should be read in conjunction with the historical financial statements and related notes included elsewhere in this Annual Report. This discussion contains “forward‑looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. These statements include certain risks and uncertainties. Please read “Cautionary Statement Regarding Forward‑Looking Statements” and the risk factors described under “Part I, Item 1A.-Risk Factors” for more details.

Previous wording

We are a provider of onshore high specification well service rigs and complementary services in the United States. We provide an extensive range of well site services to leading U.S. exploration and production (“E&P”) companies that are fundamental to establishing, maintaining and enhancing the flow of oil and natural gas throughout the productive life of a well. Additionally, we serve to assist our customers in decommissioning wells at the end of their economic life. A comprehensive discussion of each of our reporting segments is included below in the section titled How We Evaluate Our Operations.

Current wording

We are a provider of onshore high specification well service rigs and complementary services in the United States. We provide an extensive range of well site services to leading U.S. E&P companies that are fundamental to establishing, maintaining and enhancing the flow of oil and natural gas throughout the productive life of a well. Additionally, we serve to assist our customers in decommissioning wells at the end of their economic life. A comprehensive discussion of each of our reporting segments is included below in the section titled “How We Evaluate Our Operations.”

Previous wording

During 2021, 2022 and 2023, the Company has placed significant focus on acquiring and integrating assets and associated operations, described below, into current business processes. Through these acquisitions and their subsequent integrations, Ranger has continued to refine its business strategies and processes to focus on the performance of the Company and anticipates that acquisitions will continue to play a key role in the business going forward.

Current wording

During 2021, 2022, 2023 and 2024, the Company placed significant focus on acquiring and integrating assets and associated operations, described below, into current business processes. Through these acquisitions and their subsequent integrations, Ranger has continued to refine its business strategies and processes to focus on the performance of the Company and anticipates that acquisitions will continue to play a key role in the business going forward.

Previous wording

The largest of its recent acquisitions took place during the fall of 2021 when Ranger Energy Acquisition, LLC, entered into an Asset Purchase Agreement for certain assets of Basic and certain of its subsidiaries. As consideration for the assets acquired, the Company paid $36.7 million in cash, where such cash was generated through the issuance of Series A Preferred Stock. Purchased assets included well servicing rigs, fishing and rental assets, coiled tubing units, and rolling stock assets required to support the operating assets as well as certain real property. Separately, during 2021, the Company made two additional acquisitions of wireline service providers that operated through Permian, Denver-Julesburg and Powder River Basins and Bakken Shale basins. These acquisitions significantly expanded the scale and scope of the existing wireline business.

Current wording

The largest of its recent acquisitions took place during the fall of 2021 when Ranger Energy Acquisition, LLC, entered into an Asset Purchase Agreement for certain assets of Basic and certain of its subsidiaries. As consideration for the assets acquired, the Company paid $36.7 million in cash, where such cash was generated through the issuance of Series A Preferred Stock. Purchased assets included well servicing rigs, fishing and rental assets, coiled tubing units, and rolling stock assets required to support the operating assets as well as certain real property. Separately, during 2021, the Company made two additional acquisitions of wireline service providers that operated throughout the Permian, Denver-Julesburg and Powder River Basins and the Bakken Shale. These acquisitions significantly expanded the scale and scope of the existing wireline business.

Previous wording

During 2023, the Company complemented the earlier acquisitions with the purchase of certain pumping assets and associated equipment to continue to bolster its wireline segment capabilities and remains active in the pursuit of accretive opportunities during 2024.

Current wording

During 2023, the Company complemented the earlier acquisitions with the purchase of certain pumping assets and associated equipment to continue to bolster its wireline segment capabilities. While no deals were completed in 2024, we remained active in the pursuit of accretive opportunities and will continue to do so during 2025.

Previous wording

We and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting as of December 31, 2022. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023 based on the guidelines established in the Internal Control—Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023. For further information, please see “Part II, Item 9A. Controls and Procedures.”

Current wording

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the guidelines established in the Internal Control—Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2024. For further information, please see “Part II, Item 9A. Controls and Procedures.”

Previous wording

We provide services within the United States that are organized into three reporting segments, which include: High Specification Rigs, Wireline Services, and Processing Solutions and Ancillary Services, which are described below. The reportable segments have been categorized based on the nature of services provided within each line of business.

Current wording

We provide services within the United States that are organized into three reporting segments: High Specification Rigs, Wireline Services, and Processing Solutions and Ancillary Services, which are described below. The reportable segments have been categorized based on the nature of services provided within each line of business.

Previous wording

Our service offerings consist of well completion support, workover, well maintenance, wireline, other complementary services, as well as installation, commissioning and operating of modular equipment, which are conducted in three reportable segments, as follows:

Current wording

Our service offerings consist of well completion support, workover, well maintenance, wireline, other complementary services, as well as well installation, commissioning and operating of modular equipment, which are conducted in three reportable segments, as follows:

Previous wording

•Processing Solutions and Ancillary Services. Provides complimentary services often utilized in conjunction with our High Specification Rigs and Wireline Services segments. The services primarily include equipment rentals, coil tubing, plug and abandonment, snubbing and processing solutions.

Current wording

•Processing Solutions and Ancillary Services. Provides complimentary services often utilized in conjunction with our High Specification Rigs and Wireline Services segments. The services primarily include equipment rentals, coil tubing, plug and abandonment, and processing solutions.

Previous wording

•Other. Other represents costs not allocable to the reporting segments and includes corporate general and administrative expense and depreciation of corporate furniture and fixtures, amortization, impairments, debt retirements and other items similar in nature.

Current wording

•Other. Other represents costs not allocable to the reporting segments and includes corporate general and administrative expenses and depreciation of corporate furniture and fixtures, amortization, impairments, debt retirements and other items similar in nature.

Previous wording

Rig hours and stage counts, as it relates to our High Specification Rigs and Wireline Services segments, respectively, are important indicators of our activity levels and profitability. Rig hours represent the aggregate number of hours that our well service rigs actively worked, whereas stage counts represent the number of completed stages during the periods presented for the completion service line within our Wireline Services segment. Generally, during the period our services are being provided, our customers are billed on an hourly basis for our high specification rig services or, as it relates to our wireline services, they are billed on an hourly basis for our high specification rigs services. As it relates to our wireline services, services are billed upon the completion of the well, on a monthly basis, or on a per job basis. The rates for which the customer is billed is generally predetermined based upon a contractual agreement.

Current wording

Rig hours and stage counts, as it relates to our High Specification Rigs and Wireline Services segments, respectively, are important indicators of our activity levels and profitability. Rig hours represent the aggregate number of hours that our well service rigs actively worked. Stage counts represent the number of completed stages during the periods presented for the completion service line within our Wireline Services segment. Generally, during the period our services are being provided, our customers are billed on an hourly basis for our high specification rig services or, as it relates to our wireline services, customers are billed upon the completion of the well, on a monthly basis, or on a per job basis. The rates for which the customer is billed is generally predetermined based upon a contractual agreement.

Previous wording

Cost of Services. Our primary costs associated with our cost of services are related to personnel expenses, repairs and maintenance of our fixed assets and, additionally, as it relates to our Wireline Services segment, perforating and gun costs. A significant portion of these expenses are variable, and therefore typically managed based on industry conditions and demand for our services. Further, there is generally a correlation between our revenue generated and personnel and repairs and maintenance costs, which are dependent upon the operational activity.

Current wording

Cost of Services. The primary costs associated with our cost of services are related to personnel expenses and repairs and maintenance of our fixed assets. A significant portion of these expenses are variable, and therefore typically managed based on industry conditions and demand for our services. Further, there is generally a correlation between our revenue generated and personnel and repairs and maintenance costs, which are dependent upon the operational activity.

Previous wording

Personnel costs associated with our operational employees represent the most significant cost of our business. A substantial portion of our labor costs is attributable to our field crews and is partly variable based on the requirements of specific customers. A key component of personnel costs relates to the ongoing training of our employees, which improves safety rates and reduces attrition.

Current wording

Personnel costs associated with our operational employees represent the most significant cost of our business. A substantial portion of our labor costs is attributable to our field crews and is partly variable based on the requirements of specific customers.

Previous wording

We analyze our operating income or loss by segment, which we have defined as revenue less cost of services and depreciation expense. We believe this is a key financial metric as it provides insight on profitability and operational performance based on the historical cost basis of our assets.

Current wording

We analyze our operating income or loss by segment, which we have defined as revenue less cost of services and depreciation expense. While we believe this is a key financial metric as it provides insight on profitability and operational performance based on the historical cost basis of our assets.

Previous wording

We view Adjusted EBITDA, which is a non‑GAAP financial measure, as an important indicator of performance. We define Adjusted EBITDA as net income or loss before net interest expense, income tax expense, depreciation and amortization, equity‑based compensation, acquisition‑related and severance costs, gain or loss on disposal of assets, significant and unusual legal fees and settlements, and other non‑cash and certain other items that we do not view as indicative of our ongoing performance. See “—Results of Operations” and “—Note Regarding Non‑GAAP Financial Measure” for more information and reconciliations of net income (loss) to Adjusted EBITDA, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

Current wording

We view Adjusted EBITDA, which is a non‑GAAP financial measure, as an important indicator of performance. The CODM primarily uses Adjusted EBITDA to assess segment profitability and make resource allocation decisions. We define Adjusted EBITDA as net income or loss before net interest expense, income tax expense, depreciation and amortization, equity‑based compensation, loss on debt retirement, gain or loss on disposal of property and equipment, acquisition‑related costs, severance and reorganization costs, significant and unusual legal fees and settlements, impairment of fixed assets, and certain other non‑cash and certain other items that we do not view as indicative of our ongoing performance. See “—Results of Operations” and “—Note Regarding Non‑GAAP Financial Measure” for more information and reconciliations of net income (loss) to Adjusted EBITDA, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).

Previous wording

The following is an analysis of our operating results. See “—How We Evaluate Our Operations” for definitions of rig hours, stage counts and other analogous information, as well as key operating metrics.

Current wording

The following is an analysis of our operating results. See “—How We Evaluate Our Operations” for definitions of rig hours, stage counts and other analogous information, as well as key operating metrics (in millions).

Previous wording

Revenue. Revenue increased $28.1 million, or 5%, to $636.6 million for the year ended December 31, 2023 from $608.5 million for the year ended December 31, 2022. The change in revenue by segment was as follows:

Current wording

Revenue. Revenue decreased $65.5 million, or 10%, to $571.1 million for the year ended December 31, 2024 from $636.6 million for the year ended December 31, 2023. The change in revenue by segment was as follows:

Previous wording

Processing Solutions and Ancillary Services. Processing Solutions and Ancillary Services revenue increased $5.9 million, or 5%, to $124.2 million for the year ended December 31, 2023 from $118.3 million for the year ended December 31, 2022. The increase in processing solutions and ancillary services revenue is primarily attributable to our plugging and abandonment, coil tubing and logistics services which accounted for $7.0 million, $4.1 million, and $1.3 million of the segment increase, respectively. This was offset by a decrease in our rentals and snubbing services which accounted for $4.6 million and $2.3 million of the segment decrease, respectively.

Current wording

Processing Solutions and Ancillary Services. Processing Solutions and Ancillary Services revenue increased $0.6 million, to $124.8 million for the year ended December 31, 2024 from $124.2 million for the year ended December 31, 2023. The increase reflects higher activity in other Ancillary Services lines with revenue growth in our rentals, plugging and abandonment, and logistics service lines of $5.5 million, $1.1 million, and $1.1 million, respectively. Our Torrent gas processing business has continued to expand, generating $8.5 million in revenue for the year ended December 31, 2024, compared to $5.0 million for the year ended December 31, 2023, an increase of $3.5 million. These increases were partially offset by declines in our coil tubing and snubbing services, which decreased by $4.5 million and $2.3 million, respectively.

Previous wording

Cost of services (exclusive of depreciation and amortization). Cost of services (exclusive of depreciation and amortization) increased $27.8 million, or 6%, to $531.7 million for the year ended December 31, 2023 from $503.9 million for the year ended December 31, 2022. As a percentage of revenue, cost of services was approximately 84% and 83% for the years ended December 31, 2023 and 2022, respectively. The change in cost of services by segment was as follows:

Current wording

Cost of services (exclusive of depreciation and amortization). Cost of services (exclusive of depreciation and amortization) decreased $58.9 million, or 11%, to $472.8 million for the year ended December 31, 2024 from $531.7 million for the year ended December 31, 2023. As a percentage of revenue, cost of services was approximately 83% and 84% for the years ended December 31, 2024 and 2023, respectively. The change in cost of services by segment was as follows:

Previous wording

High Specification Rigs. High Specification Rig cost of services increased $16.5 million, or 7%, to $249.2 million for the year ended December 31, 2023 from $232.7 million for the year ended December 31, 2022. The increase was primarily attributable to an increase in variable expenses, notably employee-related labor costs, travel costs, and repair and maintenance costs of $10.6 million, $3.7 million and $2.4 million, respectively. As a percentage of revenue, cost of services increased 1% from the prior year, mostly due to an increase in medical costs of $1.9 million. The increased costs largely correspond with the increase in revenues as inflationary pressures on costs continued during the year.

Current wording

High Specification Rigs. High Specification Rig cost of services increased $17.9 million, or 7%, to $267.1 million for the year ended December 31, 2024 from $249.2 million for the year ended December 31, 2023. The increase was primarily attributable to an increase in variable expenses, notably employee-related labor, repair and maintenance, and travel costs of $11.4 million, $3.2 million and $2.6 million, respectively. As a percentage of High Specification Rigs Services revenue, cost of services improved from 80% for the year ended December 31, 2023 to 79% for the year ended December 31, 2024.

Previous wording

General and Administrative. General and administrative expenses decreased $10.4 million, or 26%, to $29.5 million for the year ended December 31, 2023 from $39.9 million for the year ended December 31, 2022. The decrease in general and administrative expenses is primarily due to decreases in acquisition and integration related costs in legal, accounting, and professional fees and other integration related matters of $5.3 million. This is slightly offset by an increase in compensation expense due to the build out of internal capabilities.

Current wording

General and Administrative. General and administrative expenses decreased $1.7 million, or 6%, to $27.8 million for the year ended December 31, 2024 from $29.5 million for the year ended December 31, 2023. The decrease in general and administrative expenses is primarily due to lower personnel costs and professional fees relative to the year ended December 31, 2023.

Previous wording

Depreciation and Amortization. Depreciation and amortization decreased $4.5 million, or 10%, to $39.9 million for the year ended December 31, 2023 from $44.4 million for the year ended December 31, 2022. The decrease was largely attributable to fixed assets disposed of during the year ended December 31, 2023.

Current wording

Depreciation and Amortization. Depreciation and amortization increased $4.2 million, or 11%, to $44.1 million for the year ended December 31, 2024 from $39.9 million for the year ended December 31, 2023. The increase was largely attributable to capital expenditures during the year ended December 31, 2024.

Previous wording

Interest Expense, net. Net interest expense decreased $3.8 million, or 52%, to $3.5 million for the year ended December 31, 2023 from $7.3 million for the year ended December 31, 2022. The decrease in net interest expense was attributable the decreased principal balances on the debt instruments offset by increases in interest rates across certain instruments.

Current wording

Interest Expense, net. Net interest expense decreased $0.9 million, or 26%, to $2.6 million for the year ended December 31, 2024 from $3.5 million for the year ended December 31, 2023. The decrease in net interest expense was attributable to the decreased levels of borrowings year over year in conjunction with refinancings completed during the second quarter of 2023 resulting in lower borrowing costs.

Previous wording

Income Tax Expense. Income tax expense increased $6.3 million, or 700%, to $7.2 million for the year ended December 31, 2023 from $0.9 million for the year ended December 31, 2022. The increase in income tax expense was attributable to the increased operational activity during the year ended December 31, 2023.

Current wording

Income Tax Expense. Income tax expense increased $0.4 million, or 6%, to $7.6 million for the year ended December 31, 2024 from $7.2 million for the year ended December 31, 2023. The increase in income tax expense resulted from a one-time discreet benefit recorded during the year ended December 31, 2023.

Previous wording

Adjusted EBITDA is not a financial measure determined in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). We define Adjusted EBITDA as net income or loss before net interest expense, income tax expense, depreciation and amortization, equity‑based compensation, gain on disposal of assets, significant and unusual legal fees and settlements legal fees and settlements, and other non-cash and certain other items that we do not view as indicative of our ongoing performance.

Current wording

Adjusted EBITDA is not a financial measure determined in accordance with U.S. GAAP. We define Adjusted EBITDA as net income or loss before net interest expense, income tax expense, depreciation and amortization, equity‑based compensation, loss on debt retirement, gain or loss on disposal of property and equipment, acquisition related costs, severance and reorganization costs, significant and unusual legal fees and settlements, impairment of fixed assets, and certain other non-cash and certain other items that we do not view as indicative of our ongoing performance.

Previous wording

We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income determined in accordance with U.S. GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from Adjusted EBITDA. Our computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies. The following table presents reconciliations of net income to Adjusted EBITDA, our most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

Current wording

We believe Adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) determined in accordance with U.S. GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from Adjusted EBITDA. Our computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies. The following table presents reconciliations of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

Previous wording

The following is an analysis of our Adjusted EBITDA. See “Item 1. Financial Information—Note 15—Segment Reporting” and “—Results of Operations” for further details (in millions).

Current wording

The following is an analysis of our Adjusted EBITDA. See “Part II, Item 8. Financial Statements and Supplementary Data—Note 16—Segment Reporting” and “—Results of Operations” for further details (in millions).

Previous wording

Adjusted EBITDA for the year ended December 31, 2023 increased $4.9 million to $84.4 million from $79.5 million for the year ended December 31, 2022. The change by segment was as follows:

Current wording

Adjusted EBITDA for the year ended December 31, 2024 decreased $5.5 million to $78.9 million from $84.4 million for the year ended December 31, 2023. The change by segment was as follows:

Previous wording

High Specification Rigs. High Specification Rigs Adjusted EBITDA increased $3.6 million to $64.1 million from $60.5 million primarily due to an increase in revenue of $20.1 million partially offset by an increase in cost of services of $16.5 million.

Current wording

High Specification Rigs. High Specification Rigs Adjusted EBITDA increased $6.4 million to $70.5 million from $64.1 million primarily due to an increase in revenue of $22.8 million partially offset by an increase in cost of services of $17.9 million.

Previous wording

Processing Solutions and Ancillary Services. Processing Solutions and Ancillary Services Adjusted EBITDA decreased $3.1 million to $22.4 million from $25.5 million due to an increase in cost of services of $9.0 million, driven by increasing operational activity, partially offset by an increase in revenue of $5.9 million.

Current wording

Processing Solutions and Ancillary Services. Processing Solutions and Ancillary Services Adjusted EBITDA increased $4.2 million to $26.6 million from $22.4 million due to an increase in revenue of $0.6 million coupled with a decrease in cost of services of $3.4 million, driven by increasing operational activity and increased contribution from higher margin service lines.

Previous wording

Other. Other Adjusted EBITDA improved $2.9 million for the year ended December 31, 2023 to a loss of $22.2 million from a loss of $25.1 million due to decreased general and administrative expenses, which was related to elevated acquisition and integration costs in legal, accounting and professional fees in the latter half of the prior year. The balances included in Other reflect other general and administrative costs, which are not directly attributable to High Specification Rigs, Wireline Services or Processing Solutions and Ancillary Services.

Current wording

Other. Other Adjusted EBITDA improved $0.5 million for the year ended December 31, 2024 to a loss of $21.7 million from a loss of $22.2 million. The balances included in Other reflect other general and administrative costs, which are not directly attributable to High Specification Rigs, Wireline Services or Processing Solutions and Ancillary Services. The year over year reduction is attributable to certain reduced personnel costs and professional fees.

Previous wording

We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, investments and acquisitions. Our primary sources of liquidity have historically been cash generated from operations and borrowings under our credit facilities. As of December 31, 2023, we had total liquidity of $85.1 million, consisting of $15.7 million of cash on hand and availability under our Wells Fargo Revolving Credit Facility of $69.4 million. Under the Wells Fargo Revolving Credit Facility, the total loan capacity was $72.6 million, net of zero borrowings and $3.2 million in Letters of Credit open under the facility. This compares to the Company’s available borrowings under the Eclipse Business Capital LLC (“EBC”) Revolving Credit Facility of $57.3 million as of December 31, 2022, with the increased liquidity related to reduced debt, new debt instruments and increased operating activity. We strive to maintain financial flexibility and proactively monitor potential capital sources to meet our investment and target liquidity requirements that permit us to manage the cyclicality associated with our business. We currently expect to have sufficient funds to meet the Company’s short and long term liquidity requirements and comply with our covenants of our debt agreements. For further details, see “— Debt Agreements.”

Current wording

We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet and equipment, organic growth initiatives, investments and acquisitions. Our primary sources of liquidity have historically been cash generated from operations and borrowings under our credit facilities. As of December 31, 2024, we had total liquidity of $112.1 million, consisting of $40.9 million of cash on hand and availability under our Wells Fargo Revolving Credit Facility of $71.2 million. Under the Wells Fargo Revolving Credit Facility, the total loan capacity was $75.0 million, net of no borrowings and $3.8 million in Letters of Credit open under the facility. This compares to the Company’s available borrowings under the Wells Fargo Revolving Credit Facility of $72.6 million as of December 31, 2023. We strive to maintain financial flexibility and proactively monitor potential capital sources to meet our investment and target liquidity requirements that permit us to manage the cyclicality associated with our business. We currently expect to have sufficient funds to meet the Company’s short and long-term liquidity requirements and comply with the covenants of our debt agreements. For further details, see “— Debt Agreements.”

Previous wording

Net cash flows from operating activities increased $46.3 million to $90.8 million for the year ended December 31, 2023 compared to $44.5 million for the year ended December 31, 2022. The change in cash flows provided by operating activities is attributable to increased operational activity and efficiencies. Cash provided by working capital increased to $12.9 million for the year ended December 31, 2023 from cash used of $19.1 million for the year ended December 31, 2022 which was largely due to increased cash receipts on outstanding accounts receivable.

Current wording

Net cash flows from operating activities decreased $6.3 million to $84.5 million for the year ended December 31, 2024 compared to $90.8 million for the year ended December 31, 2023. The change in cash flows from operating activities is primarily attributable to the change in working capital which decreased to $7.6 million for the year ended December 31, 2024 from $12.9 million for the year ended December 31, 2023 which was largely due to a decrease in contract assets and accounts payable balances, offset by collections of accounts receivable.

Previous wording

During the year ended December 31, 2023, the Company added fixed assets of $10.0 million and $1.1 million primarily related to finance leased assets and asset trades, respectively, across all operating segments. Additionally, the Company paid approximately $1.4 million in interest related to debt and finance leased assets.

Current wording

During the year ended December 31, 2024, the Company added fixed assets of $8.6 million and $4.6 million primarily related to finance leased assets and asset trades, respectively, across all operating segments. This compares to $10.0 million and $1.1 million primarily related to finance leased assets and asset trades, respectively, for the year ended December 31, 2023. Additionally, the Company paid approximately $2.0 million in interest related to debt and finance leased assets during 2024, compared to $1.4 million during 2023.

Previous wording

Our working capital, which we define as total current assets less total current liabilities, was $66.4 million and $65.6 million as of December 31, 2023 and 2022, respectively. Increasing cash balances coupled with efforts to pay down debt, contributed most significantly to the working capital increase year over year.

Current wording

Our working capital, which we define as total current assets less total current liabilities, was $78.7 million and $66.4 million as of December 31, 2024 and 2023, respectively. Increasing cash balances contributed most significantly to the working capital increase year over year.

Previous wording

On May 31, 2023, the Company entered into a Credit Agreement with Wells Fargo Bank, N.A., providing the Company with a secured credit facility (“Wells Fargo Revolving Credit Facility”) in an aggregate principal amount of up to $75.0 million. Debt under the Credit Agreement is secured by a lien on substantially all of the Company’s assets. The Company was in compliance with the Credit Agreement covenant by maintaining a fixed charge coverage ratio of greater than 1.0 as of December 31, 2023.

Current wording

On May 31, 2023, the Company entered into a Credit Agreement with Wells Fargo Bank, N.A., providing the Company with the Wells Fargo Revolving Credit Facility in an aggregate principal amount of up to $75.0 million. Debt under the Credit Agreement is secured by a lien on substantially all of the Company’s assets. The Company was in compliance with the Credit Agreement covenant by maintaining a fixed charge coverage ratio (“FCCR”) of greater than 1.0 as of December 31, 2024, which is applicable only under certain borrowing levels.

Previous wording

In addition, on September 25, 2023, the Company entered into an agreement with Wells Fargo Bank, N.A. which designated an additional Letter of Credit in the amount of $1.6 million as part of incremental collateral requirements for the Company’s 2023 insurance renewal. This line of credit falls under the Wells Fargo Revolving Credit Facility aggregate principal amount and matures on September 25, 2024. The interest rate for this Letter of Credit was approximately 1.8% for the month ended December 31, 2023.

Current wording

The Company has up to $5.0 million available under the Wells Fargo Revolving Credit Facility for letters of credit, subject to assignment. At loan origination, the Company had a Letter of Credit in the amount of $1.6 million, to be utilized for working capital and general corporate purposes, as needed. On September 25, 2023, the Company entered into an agreement with Wells Fargo Bank, N.A. which designated an additional Letter of Credit in the amount of $1.6 million as part of incremental collateral requirements for the Company’s 2024 insurance renewal. The initial maturity date was September 25, 2024, with provisions for automatic annual renewal related to the same insurance policy. On September 25, 2024, the amount of the Letter of Credit was increased to $2.1 million as part of incremental collateral requirements for the Company’s 2025 insurance renewal, with a new maturity date of September 25, 2025. The interest rate for this Letter of Credit was approximately 1.8% for the month ended December 31, 2024.

Previous wording

The Wells Fargo Revolving Credit Facility was drawn in part on May 31, 2023, to repay the Revolving Credit Facility, M&E Term Loan Facility, and the Secured Promissory Note. The undrawn portion of the Wells Fargo Revolving Credit Facility is available to fund working capital and other general corporate expenses and for other-permitted uses, including the financing of permitted investments and restricted payments, such as dividends and share repurchases. The Wells Fargo Revolving Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the Company’s eligible accounts receivable less certain reserves. The Company’s eligible accounts receivable serve as collateral for the borrowings under the Wells Fargo Revolving Credit Facility, which is scheduled to mature on May 31, 2028. The Wells Fargo Revolving Credit Facility includes an acceleration clause and cash dominion provisions under certain circumstances that permits the administrative agent to sweep cash daily from certain bank accounts into an account of the administrative agent to repay the Company’s obligations under the Wells Fargo Revolving Credit Facility. The borrowings of the Wells Fargo Revolving Credit Facility, therefore, will be classified as Long-term debt, current portion on the Condensed Consolidated Balance Sheet.

Current wording

The Wells Fargo Revolving Credit Facility was drawn in part on May 31, 2023, to repay the prior EBC Revolving Credit Facility, M&E Term Loan Facility, and the secured promissory note. The undrawn portion of the Wells Fargo Revolving Credit Facility is available to fund working capital and other general corporate expenses and for other permitted uses, including the financing of permitted investments and restricted payments, such as dividends and share repurchases. The Wells Fargo Revolving Credit Facility is subject to a borrowing base that is calculated based upon a percentage of the Company’s eligible accounts receivable and unbilled revenue less certain reserves. The Company’s eligible accounts receivable serve as collateral for the borrowings under the Wells Fargo Revolving Credit Facility, which is scheduled to mature on May 31, 2028. The Wells Fargo Revolving Credit Facility includes an acceleration clause and cash dominion provisions which under certain circumstances permits the administrative agent to sweep cash daily from certain bank accounts into an account of the administrative agent to repay the Company’s obligations under the Wells Fargo Revolving Credit Facility. The borrowings of the Wells Fargo Revolving Credit Facility, therefore, are classified as Long-term debt, current portion on the Consolidated Balance Sheet.

Previous wording

Under the Wells Fargo Revolving Credit Facility, the total loan capacity is $72.6 million, which is based on a borrowing base certificate in effect as of December 31, 2023. The Company did not have any borrowings under the Wells Fargo Revolving Credit Facility. The Company does have a $3.2 million in Letters of Credit open under the facility, leaving a residual $69.4 million available for borrowings as of December 31, 2023. Borrowings under the Revolving Credit Facility bear interest at a rate per annum ranging from 1.75% to 2.25% in excess of SOFR and 0.75% to 1.25% in excess of the Base Rate, dependent on the average excess availability. The weighted average interest rate for the loan was approximately 7.0% for the year ended December 31, 2023.

Current wording

Under the Wells Fargo Revolving Credit Facility, the total loan capacity is $75.0 million, which is based on a borrowing base certificate in effect as of December 31, 2024. On June 17, 2024, the Company entered into the First Amendment to the Wells Fargo Revolving Credit Facility, which allows for a percentage of unbilled revenue to be included in the calculation of the borrowing base. The Company did not have any borrowings under the Wells Fargo Revolving Credit Facility as of December 31, 2024. The Company does have $3.8 million in Letters of Credit open under the facility, leaving a residual $71.2 million available for borrowings as of December 31, 2024. Borrowings under the Wells Fargo Revolving Credit Facility bear interest at a rate per annum ranging from 1.75% to 2.25% in excess of SOFR and 0.75% to 1.25% in excess of the Base Rate, dependent on the average excess availability. The weighted average interest rate for the loan was approximately 7.2% for the year ended December 31, 2024.

Previous wording

On September 27, 2021, the Company entered into a loan and security agreement with Eclipse Business Capital LLC (“EBC”) and Eclipse Business Capital SPV, LLC, as administrative agent providing the Company with a senior secured credit facility in an aggregate principal amount of $77.5 million (the “EBC Credit Facility”), consisting of (i) a revolving credit facility in an aggregate principal amount of up to $50.0 million (the “Revolving Credit Facility”), (ii) a machinery and equipment term loan facility in an aggregate principal amount of up to $12.5 million (the “M&E Term Loan Facility”) and (iii) a term loan B facility in an aggregate principal amount of up to $15.0 million (the “Term Loan B Facility”).

Current wording

On September 27, 2021, the Company entered into a loan and security agreement with Eclipse Business Capital LLC (“EBC”) and Eclipse Business Capital SPV, LLC, as administrative agent providing the Company with a senior secured credit facility in an aggregate principal amount of $77.5 million, consisting of (i) a revolving credit facility in an aggregate principal amount of up to $50.0 million (the “EBC Revolving Credit Facility”), (ii) a machinery and equipment term loan facility in an aggregate principal amount of up to $12.5 million (the “M&E Term Loan Facility”) and (iii) a term loan B facility in an aggregate principal amount of up to $15.0 million (the “Term Loan B Facility”). On August 16, 2022, the Company fully repaid the Term Loan B Facility and M&E Term Loan Facility, making principal payments totaling $12.4 million and $1.5 million, respectively. On May 31, 2023, the Company extinguished the Eclipse Revolving Credit Facility and Eclipse M&E Term Loan Facility, paying the remaining principal amount of $8.4 million to extinguish the debt, using funds from the Wells Fargo Revolving Credit Facility. The Company recognized a loss on the retirement of debt of $2.4 million in connection with the initiation of the Wells Fargo Revolving Credit Facility.