Flotek Industries (FTK) 8 May 242024 Q1 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Flotek Industries First Quarter 2024 Earnings Conference Call. [Operator Instructions]. This call is being recorded on Wednesday, May 8, 2024. I would now like to turn the conference over to Michael Critelli, Director of Finance. Please go ahead.

morning. good and you, Thank We appreciate Conference Quarter Earnings Flotek's participation in Call. First XXXX your

on are Joining Executive call the me today Bond Chief Officer; Ryan Clement, Financial Officer. and Chief Ezell,

business provide remarks the will quarter as full for XXXX as of financial year we First, XXXX. first concerning our results operations prepared for guidance the well and

Following will open questions have. that, up any we you the call for

was quarter financial and issued release yesterday XXXX press afternoon. first Flotek's results operating

referencing our be today's earnings the presentation We can that be call. also posted updated all will These an Investor QX we Relations website. on found on section of

In regarding addition, following will the being or events future projections made note statements. and website be this of a comments call. Please expectations for today's replay call forward-looking is conclusion that are our call available today's on the webcast, on

release Forward-looking cause a statements and and advise of which non-GAAP of risk These results beyond presentation reconciliations our the to the in uncertainties, Please discussed review expectations. earnings actual uncertainties from SEC. this and on be factors our to many to with risks risks are in will discussing release management our filings materially current control. to and refer as are the press can corporate metrics call. listeners number provided earnings our subject We differ

I'll turn Ryan CEO, that, With the call our over Ezell. to

a the demonstrates of but chemistry a as and analytic and transformative in to quarter consistent discuss a pleased first appreciate energized quarter in accelerate shareholder I'm what's come and new Flotek XXXX first XXXX performance solutions. our us data XXXX revitalized financial We as doubt, interest good even will for year a era, that everyone's a XXXX you, was morning. the into Without we we and this more our Thank expansion differentiated Mike, for joining operational about value with profitability Flotek today and results. organization, beginning be of and year.

completion strategic provide production of reduced utilization better challenging increased There it's industry's positioned most Whether is solutions such to problems. BOE, looking our complex variety water to no company challenges for as a companies real-time solving pumping and to gas There's operators regulations unique technologies. be to or a never oil advance to flare meet through exciting were been differentiation new Flotek. the racing measurement their EPA at time their operators maximizing and more

With of quarter that year-over-year surpassed XXXX. just touch highlights in of turn XXth EBITDA EBITDA, and for net for Slide to adjusted of as QX will on quarter Bob in I'd Notably, delivered gross mind, We that an the like to improvements gross entire moment. and total our adjusted key the the X consecutive leading in of the significant income, discuss EBITDA consecutive a profit, adjusted in to third profit XXXX detail quarter improved percentage a revenue. year adjusted

gross gross realized and of adjusted respectively. profit We profit margin margin XX%, XX% and

of fleet external in pattern and the each XXXX the sales years QX first as down were last achieved up over the was were highest chemistry counts is XX% And the sequentially, Our first quarter ago well years this although year-over-year. this as in with down turnaround consistent X X sequentially. average in in quarter

of thanks saw in growth revenues. ] progress Our revenue $X.XX the to our analytics in part continued [ data quarter-over-quarter data segment service

recordable days lost spectrometer we XXXX a testing over which time field In were these And our without for most with accomplished forward to of in operations, of field all midyear with incidents is addition streak of recordable progress, incident. the track push achievements extending and still X the to release. to Flotek's on this importantly, continue a Cal-X XXX current new

build I every the to in safety upon continue these commitment and throughout service outstanding this take Now time results. to momentum like to achieving employee quality us their to single thank I'd for XXXX. to expect

Now sales decrease chemistry This lower QX is in at attributable external XXXX. mostly quarter revenue looking to sequentially. granularity, versus down more slightly was the

this years observed consistent X have strategic the seasonality We since turnaround organization began ago. its over

X. XX% was glance period. the chemistry versus counts chemistry At with America revenues XXXX on XXXX. QX frac same our revenue average This up during sales the of were last Slide QX external largest for North lowest reported land during the in X a the years detailed external QX fleet

corporate of strategy indicates count This share market execution of cycle are the as platform. each annual common by value the fleet creation utilizing we through gaining chemistry stabilization our

continued deliver complex chemistry approach, proprietary combined We adoption that business engineering technologies leverages customized adjacent of wells. our prescriptive are outperform seeing to wells NanoFlu our our with management model competitor but

remain market, from including Flotek improved new drive microfluidic the of of address to and advancements to in multidisciplinary water forefront the bring AI-driven nanopore hydrocarbons each innovation inhibition, technologies preferential will and impacts we of ultimate at modeling behavior the environments recovery reservoir as asset.

and We all total To XXXX. for our we related already April anticipate our in that expect of revenue. XXXX. chemistry chemistry what external substantial customer QX a increase chemistry over the external realized ProFrac sales external have annual growth in quarter did sequential during achieved sales We second of growth note, XX% in XX%

from scale The operations to chemistry market stability. per supply contained and requirements were economies agreement provide designed operational to Flotek the the long-term insulation and of mitigate in volatility maintaining ProFrac with the of some

regards a into offering E&P truly efficiency to continues reservoir for Our in operators evolve overall to and partnership performance. transformational

segment increased of analytics XXXX. XX% the quarter data from fourth revenues Our

data the expects in to Data model, system, to to measurement combined the market XXXX. launch as XX% analytics with grow a opportunities in success of continues Service unlock business continued significant upstream the converting a by next-generation company JPX the Our as

remain in and with for services energy-related natural XX% and first more to service XXXX, On to Long-term by add decade next substantial incremental over XXXX. supply. near-term for over the despite decades, providing fundamentals The further maintain energy, create overall volatility needed forms is the electricity will requirements intensity short which increase within the demand. necessary oil the of the global sector. will all and through barrel current And time macro continue expected commodity economy the gas with gas required in production demand for to the investments of both level, in cycles a be for expand long for pricing, will demand climb nearly the of demand will XX% the our expansion U.S. X strong. And in for

positioned on market at XXXX, As are on efforts capitalize growth, our remainder we look value we the efficiency revenue opportunities, gains expansion, of both and as and shareholder remain domestically well cost on laser-focused internationally. to share returns

confident unique We expanding our our solutions provide to positions to superior us that and are customers' maximize of suite chain. services value

call key provide financial highlights. over Now I'll Bond to turn the to

morning, Thanks, everyone. Ryan. Good

XXXX relatively gas related oil reflect directed despite performance results quarter service first solid Our demand completions. soft to natural

and impacted While by continued fleet trend by financial lower results, we highlighted grew the activity, frac revenue strong was margins of another quarter of improving seasonality adjusted and EBITDA.

be of presentation accomplishments items XXXX. posted improvement Let for our Slide quarter first X the financial I'll website strong in me financial the through first run handful to that and we quarter highlights key the of referring slides a we to our yesterday. delivered.

of by year-over-year million, $X.X the gains by Headlining improved were in our noncash adjusted profit of income $X.X by results Gross quarter million. and was gross for $X.X million when adjusting higher first profit $XX adjusted increased XXXX. million growth EBITDA net

associated the chemistry that quarter to decline of lower revenue partially revenues ProFrac activity was XX% we which last reported a first offset for Regarding attributable revenue the total from million, year. party related with was by increase of versus external This $XX in was quarter, down customers.

of start in first a Ryan each current we revenues decline external strong expect a mentioned in earlier and in customer X, April, on quarter chemistry in during Slide As years. X a showed the and jump revenues quarter. external second Based significant on we've experienced past chemistry the projections

generated second of the by last low first year segment XX% chemistry a as revenues during With strong growth this associated in JPX from respect quarter XX% to revenue sequentially. of As point as to quarter reminder, analytics, with the data XXXX. increased the external increased compared we

our half is our XXXX We and analyzer. for in toward analytics line expect commercial weighted of deployment to of in new revenue growth second of timing the which the with the expectations data be

gross Fourth consecutive for XX. Slide the increased to profit Moving quarter quarter. fifth

gross XXXX. comparable of in gross $X quarter by to XXX% million profit compared of $X.X the nearly grew First million profit period are just

It's XXXX important in during the the our requirements of the measurement the chemistry minimum not of June the began XXXX that in supply but effect first were requirements quarter last purchase purchase agreement minimum year. on to first of as note quarter of X

over strategically our during the and reduced continuing from supply quarter mile generate cost the year on to by requirements, revenue yards quarter a Touching us as additional how examples roughly focus utilizing first staging the few quarter. a trucking The improve to are XX% of result a improvements margins last continued freight specific of improve as margins executed with us last revenue our same of limiting during we year allowed on and costs we included strong agreement to numerous efficiency the percentage to the initiatives of versus past allow deliveries. placed dedicated combined

we made year, in materials. improvements how Over purchase the past have we also great

leverage rebates. We have and to to vendors pricing negotiate consolidated our spend better

buying order spend reduce P&L. of focused the to middleman on also have We highest margins our eliminate direct our efforts in on to layers costly

Quickly on SG&A.

$X.X was professional to lower to last costs the year and million, a declined compared sequentially. about of This SG&A quarter quarter result first X% same decline was improvement Our and of which personnel a fees.

of million for Adjusted to that to third the of quarter, XX. in first second compared last increase goes This back quarter positive the Moving $X.X the improvement year. quarter XXth a to is Slide consecutive EBITDA EBITDA, of of adjusted was quarter consecutive the streak XXXX. an

March lower year-end. of $X.X Going than net on noncash first $X.X to to adjusting we net had had $X.X the income first loss a which $XX under the of was we in line, of or in the sheet. compared At during million at million ABL, XXXX Touching we for when the million our balance gains. million $X.X million quarter bottom XX% reported quarter a drawn XX, reduction

adjusted our of moved a XX-month EBITDA March result, as As to to XX. trailing down debt X.Xx

Quickly commenting XXXX guidance. our on

guidance and quarter not year. natural believe last activity, around revenues generally revenues we timing annual did of completion specific the the lowest will approximate mark improved the and the impact XXXX year, of corresponding pricing will we revenue that quarter due that for to on XXXX uncertainty, we first While expect give gas

to to on to very we profit full compares expect result adjusted compared during between EBITDA Based increase the and of related drive strong margins in the again projections, is adjusted period which impact As adjusted million, increase and XXXX adjusted for anticipate range of of repeatable higher profitability. significant just performance margin range numerous a natural of pricing, half we slope XXXX of substantial XX%, as of continues expected, minimum we to profit a we purchase XXXX With current gas reductions cost we into margin XXXX EBITDA back anticipate year. anticipate closing, chemistry focused XX% to gross $X.X positive requirements, favorably XX%. on the a million. In our $XX XXXX to which measurement $XX implemented resilient activity curve XXXX. Based million the on a margins the Flotek the in move year our gross the between completion over current higher

However, as in resiliency our event strong activity. throughout the first bottom levels demonstrate and the flat remained year, light activity growth quarter of margins that we in our relatively a achieved line quarter results

close With that, I'll it call to Ryan back to out. turn the over

Thanks, Bond.

Flotek about have that Analytics represents potential our opportunity extremely chemistry Turning to were compelling growth Data in XXXX investment XX. segments We and excited tremendous Slide a as we and we both believe date. to

first Our solutions. collaborative for results partner and growth profitability of for chemistry continue the sustained sustainable as to choice data positioned we and be delivered quarter

forward further I'm continued I'm share the and forward. that the regarding excitement made, have Flotek the progress. in our proud going we We support confident progress ability reporting future stakeholders, we that of look and you execute and of appreciate to of our hope all our we to

now we take Operator, questions. ready to are

[Operator Instructions].

first Your of line from from comes Global Jeff Alliance question the Partners. Grampp

time to of as specifically on can or as Question are you line working kind guesstimate on update relates JPX, Any the provide EPA regulatory guys the best there it towards. today. approval you

in expecting if that curve or and that thinking expect are from of or get that the approval? guys adoption you you might you do terms what wondering then when And pace

EPA and now, come there. by about the right Tom happy the the adoption doing EPA. of our are progress time line job we're with and that we're regulations a our phenomenal expecting production interaction with So continued right comes team now, And to in midyear. online with the

solid making fronts. a is to a what's we're progress And I really of So our both of massive those exciting see continuing think percentage we're Data on adoption Service been revenue. as as

our of 'XX, of Data back about In it revenue. was was QX Service XX%. If as at you a almost QX look XX% 'XX, of

Cal-X Gen think year. So production the which significant measurement into opportunities there. seen our middle full comes And the is online of our unit by the X new model, I as

regulatory be the I a half give EPA body we with think should year. where it line will in with And the back are right boost that. of us in in the

Great.

And question. allocation my I for more a follow-up, appreciate that. good. Sounds capital of

the have meaningful the transition kind Given generative and and debt modest a you the cash to more becoming company. model, capital-light guys of EBITDA obviously,

guys guys kind on that potential you kind of business think kind M&A considering? or be the of do about may looking or of reinvesting table other in at How you the options any

deliver some invested be amount costs. of long-haul will basin, So for capital allocation. is some couple bringing savings here, in things that since our in significant be capitalization quite chemistry few been doing trucking to some components. the in a a would time of have I've but We'll we've we're a logistics This first provide for our we which into trucking

We're advancement on we're M&A. to continuing the some at building also Data growth model. evaluate as year, continuing support around Service the CapEx the in opportunities a to to half of JPX of particularly spend potential the the And back units in

excited comparatively data look I at the and technologies fragmentation look there, the there's when or at some some end that to when markets in new look JPX the at and do to there the we chemistry side, in opportunities potential you bringing the on believe mechanism consolidation E&P on on front business. advancements opportunities

opportunities there. So we evaluate to continuing are

into. there extremely to be accretive proceeds needs capital that most with on to biggest The things organization put the use of we thing

Your Crist from Rice. Johnson of next comes from question the line Don

it I is customer far. been pleased project. that, and wanted to Obviously, going while pilot ask about the that the process it's pretty appears now, for with a so

progress out kind and trips being going any made But have seeing that's operators kind with field the of you sensor of other the had there? other seeing

pilot there is the just company And to a extrapolate there versus other doing between anything potential sales with?

Yes.

base. customers of So And an in can't we've names increase the looking field monitoring bit customer time. the a drop what in we've would Don. I is number But seen had in exact flares at I in real that, expansion quite of gas, you we've the necessarily tell expansion seen of monitoring

We've an measurements geographic also seen foundations chain and multiple in we field and and of custody the field have process locations. increase trials exponential around on

excited. So we're really

deployed everything running double-digit about opportunities line the spectrometer We've got in these. making excited pursuing former these Cal-X hard -- sure lined direction run paces that in is and really Particularly unit at the out number typically, We're through to the And continue make units of to got we're this. come different and the areas. its sure we in to and effectively. us, with

that CapEx as larger would significant is you that to you of of ramp significant goes opportunity up? I sensors kind any obviously, front anything assume requirements or I place already? you, Or of in Okay. out look mean is plan. set everything to But And the the amount in build look as to forward, you need?

the little in -- forecasting XXXX, to build we We that say, right where now $X million the just front capital growth over alignment to load dedicated on So range. units. in, XX% advance a we're

Now that much cost $X they Varex than Cal-X building further goes the units have in the unit. million base a original because lower

the with with we'll of processes parts capital improvement early there. in So solid growth a forward then kind much now additional adoptions the of through there. at the going how around XXXX, expecting we're the And we're looking it's that bring

though. But not this it's point, at Okay. significant

a we units $X.X units, because can and of say, the No, the put let's the drop year. you between million, of I the in when end we few I would substantial on now bring it cost -- could a quite like say have

Don, about to Yes. that important the because XX% of was remember, you'll of best less thing generation to the generation. analyzer the costs moving this roughly next XX% are

subscription subscription mean, more model. either I past, buy making of wanting but or from Right. negative sold over everything's you influence with with on feedback properly going you're model to a to are had the the more customers in these in running people Exactly. And forward. they any are know positive you've you happy I shift to units, Have Or way? sure or trying still these?

great a question. That's

because think or purchase to application. it, I how if more depends expand unit look of the prefer you're upstream, would What we when business utilized. at of is be the with lot capital just in on midstream we it customers I applications the in A consider downstream part. golden to of the midstream continue the that

business type in either, model installation. large What for as percent the Service hybrid a model capital or Data minimal in we're XX-plus predominance of with subscription-based be the seeing a terms investment upstream a the the one, with is to service upfront a

it preference think kind I subscription is still purchase bifurcation depends So based on to and pretty part. in heavy capital the upstream, application, much the but there's of midstream the on little a the

some gave DaaS when in Ryan XQ the pure stats at versus you from 'XX XQ. DaaS quarter in revenue 'XX. revenue versus percentage Don, quarter, percentages versus XX% first first up sales, look Yes. capital those Included it's of on quarter-over-quarter, just

So people the are certainly. migrating to model, DaaS

That's sustainable back. guys. I appreciate higher hear. turn and much gets the good color, It's to it a I'll more multiple.

Your of Capital. from question comes Swergold from next Eric Firestorm line the

progress. been in on pieces number about thought the industry a of AI your the hard talking There's E&P use Congratulations space. of

AI chemistry Can to E&Ps? you how data for this into segments speak new fit your analytics framework and

that last years. that around that X actually to for modelings us, we've had the on of is I is leveraging JPX things the would a AI-oriented chemometric This most the samples frontier database side, and initially, that exciting X we're doing were of activities our we're real, Eric, Yes. that say, crude over large doing

the the particularly advancements that when to say, rebate to continues we're I at making that a large we're and accelerate would the there. group that. stuff And chain accelerate be you the part and pressure models, so fits And look custody of of accuracy, a for measurement, there's lot AI doing of

We've really we reservoir some chemistry took been innovative company step in of exciting when is an patents look the with have advanced and with if said, back technologies XX,XXX interactions and and things. been for hey, What's a these you and at data space nanopore at you've modeling and these XXX component on what goes over interaction things. we chemistry wells, the production surface influences level completed

AI and of make with to changes So we've using how In to oil look data where of and total create to crunch different take our future cubes going what the that. recovery to for advancing data life and we be small them now formulation chemistry in actually sets, the be gone in these actually at advance the asset. of improved we're I the consider performance

talking And So and what Flotek our platform, and be it's the Conference, in bit it's of to of amount to some a of some synergy an the us essential part I at about and talk on accelerate we for this Denver later thinking create we're quite going to to work. we really is playing think, think do going and and going chemistry that an upcoming Energy Louisiana what to starting that the to technology data do events we're have side. the a the both unique August, be I we're Intercom about presenting

Your B.J. comes Kirk and from individual next line question investor. the of

Singular with Research. B.J. Kirk

a I'm here, external bit. it about I curious, to chemistry expect adding I on your volume this just new quite talked guys but to operators anticipate you or year. guys it's know platform. You increase determined are external

to U.S. we and What quarter the [indiscernible] here, bit. component least discipline have tenure QX we the look to to the be ] to QX, shift our chemistry external being off Yes, little some that chemistry QX is seasonality the to on We've here a the and -- the be bit seen traditionally mean used sales now on on has little at plans active of capital turn way shift that. of with biggest XXX%. the [ the our I seen we've at external part a been in look Spigit ability probably and in seasonality

done But and compared fleet those frac over the go be go in revenues seen substantially. you've we've this speaking to turnaround, tenure continue to down, average our quarters that up

backside this pipeline the a got into As at, chemistry customer you of a for adoption is of the a the base quite understanding robust management prescriptive with healthy rest stickier coming and the QX we've our prominence. and at on continued few of say, call opportunities a QX to substantial. really new technologies through year, activity reservoir we here of strong We've and what got our look our group are

operators infield well to you're lot of downspacing As do on how see design these they a moving their starting completions. and

have Presenters, don't time. please continue. We further this at questions

by Conference May be joining be corporate for Thank with a Ryan the at discussions be you participating on CFO, and Clement, joined in service will hosting copy p.m. of in He the XXXX used will on website be prior will at us today. CEO, Louisiana will Ezell, the meetings industry a Flotek's available X:XX again to Bond XX, panel investors presentation on the investors the the with event. Energy

with look meeting to today. for again to additional any if great forward us Please day. us Thanks free a you have Have questions. contact We feel joining you.

This concludes your Thank conference today's you participation. for call.

may disconnect. now You