FTK - Earnings call transcript Q2 2018 | Flotek Industries, Inc.

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Operator

Good morning, and welcome to the Flotek Industries Incorporated Second Quarter 2018 Earnings Conference Call. [Operator Instructions]. This conference is being recorded. At this time, I would like to turn the conference over to Matt Marietta, Flotek's Executive Vice President of Finance and Corporate Development. Mr. begin. may you Marietta,

Matthew Marietta

good behalf and team. the morning you, of on Flotek Thank

Josh President me Chisholm, as team. our Rich and John morning well Chief Executive Chairman, Officer; Joining of are CEO; as Flotek's other this our of our and Head President members and Accounting Snively, Operations Vice leadership Walton,

our earnings was yesterday distributed Our afternoon and website. press release is available on

be being available call addition, is webcast, and replay today's our on will website. In a

such involve variations to statements. matters are of These statements. words statements, from remind that results cause forward-looking identifying differ forward-looking formal constitute about XXXX remarks, performance. estimates of and our exclusive XXE during expects, but I such identify not could the Act applicable actual XXXX an of forward-looking Before participants believes, we reflecting and other Words Risks means of our anticipates, to Securities uncertainties the risks may that their intended Act and to plans, or call, expressions and Form of over like to made reconciliations John discussed meaning our filings, begin release forward-looking of Exchange I'll some the of our potential impact call Please discuss that, turn events SEC such are in non-GAAP refer future the Chisholm. to may in Securities our and our management XX-K. including or XXA this as on provided Flotek's the would within as press expectations Section of comments Section similar statutes earnings views, comments metrics. With statements are

John Chisholm

begin a all by remarks, will and you And financial Matt, an then operations. Matt, I'll who and Thank for introductory joining provide on thank followed update today's provide outlook. Josh overview will some you, with call.

continued employees and as quarter the time closing during it thoughts industry. our questions. company was with quarterly quarter spending the a EIA and their all to like as progressed, thank that Overall, quarter. early rig for improving industry increased with The on completions levels. I'd count within in issues has us. and the at abated. positive third both Finally, stakeholders activity momentum and weather the and a improved into your taking activity dynamic remain overall that first the U.S. steady remains challenging for at quarter before Flotek effort second end I'll year commodities our the Unquestionably, the sand-related have One sequentially,

our we began accelerated with market. channels quarter, highlighted abrupt key we year the an one in ad last of As shift

largest partnered pressures. due our also client have together. cost lost to But large since and client our We with deepened another work

well Far chemistry experienced to to it has our we've extremely difficult drive extending reverberations cost large result as their surrounding objectives efficiencies to long-term the behavior profit improve as for an moving business from and and industry significant reported isolated affirmed now energy performance. consumables, of has impact, the align starting transitioning Although transitions diesel, with behavior. disruptions, at strategy sourcing this a industry

from to our a to our multiple provide demand technology gas their in offering, technology excited the with announce shareholders time existing years our another as and we in is and our related spend of use received positive to continue at of line per increasing inflection aggressive effort we during including and by third reservoirs. clients' a large-scale our savings. expand of showing chemistry, to am of the We're cash East. revenue with project CnF is further in provide cost quarter, or on of the platform, proof we the to we've more complexities the divisions to Middle same removed Chemistry that in continue PCM the basins partnerships program. Flotek's cycle the benefit recovery minute. testing As cost second product well, large part this successes business the In will largest the into explain are validation I performance Based quarter. reducing in systems drive research, doing This a help strategy, our of to we for Josh of find new nano-Fluid maximize fluid technology. for on hydrocarbons areas with SG&A annualized clients while commercials the unconventional a million where reduction this a order of base and single to the Complex broader pleased our increase value-added an the our for of towards disruption ever is designed customized result $X our Prescriptive This opportunities gives partners, our unique seen Management full-service as client

Additionally, we've year. planned margins we forward initiatives as to expand move the throughout gross

capital third robust, our meaningfully growth we with a XXXX summary, operation, expansion high identified dynamic to level which Chemical to in increase CICT margins penetration current of We've but pressured product began is our challenging our start, component Chemistry very the to opportunities committed quarter terpene. we margin at operate a activity as Florida quarter. the temporarily Our which as In of sold Industrial investment targeted opportunities. benefit greater for Technologies continues and segment we second lower Consumer a mix and or and and is high-margin CICT expect into

Finally, newest Board we leadership channel are Richard. our as base, would, Nierenberg we committed Kate with on the David of we focused and Directors our board addition client expanding members, team, provide direct Together our bottom we to of to our improving our with I'll consistent cash now expansion, strengthening over delivering and cost ultimately, to EBITDA fixed on revenue update it line financials. on increase to Matt an turn and key Marietta flow, or profitability. operational focus and enhanced efficiencies our lowering market,

Matthew Marietta

John. you, Thank

a $X.X quarterly period, XX% and revenue For to X.X% or reported million in period, increased basis, second down million about which the just XX% XX.X%. international the $XX.X sequential quarter, conditions Energy sequential revenue we prior of remained has $XX.X prior on to and in prior-year expect to was international remained there. to Of Canada, the from of note, $XX.X quarter, the region largest our revenue Chemistry recover declined to relatively year begin a due with basis segment declined Flotek million. a compared the million domestic flat this compared in revenue X.X%. decrease while On breakup quarterly revenue

experienced compared revenue our mix X.X% ECT primarily Our and PCM quarterly margin increased Chemistry utilization, Consumer due gross segment. basis. segment period, compression, to sales consolidated Higher spot Industrial and lower the prior a to within and segment X.X% Fragrance year increased We product the on sequential administrative and plant costs start-up our compared second million a terpene key Corporate, CICT $X.X of for general by prior opportunities to million, impacted sequentially. decrease gross and increased period, profit. and timing and quarter or the X% during expense the year $X.X marginally was Flavor of XX.X% quarter

executing as second year second G&A expense second updated to expenses professional accounts, or the quarter and to million, was administrative contract decreased of was XX.X% X.X% selling Total a quarter revenue. was are in quarter, on a we quarter. XXXX million reductions and fees namely further labor. Segment $X.X was cost of percent and and while XXXX declined we corporate period decrease Noncash XX.X% sequentially. expense for selling during revenue. Our SG&A quarter compared the prior XX.X% the during buckets compensation, of compensation million the of the employee last sequentially, $X.X cash $XXX,XXX administrative Segment of the second executive $X.X

focus drive to we As are corporate-wide also we benchmark overhauls, discipline. initial have process finishing to, our as we to will to and cost John not begin cost cash Relative and rate SG&A upgrade we alluded in continue organization. $XX believe of across ERP and an million SG&A margins run have our gains efficiencies stages annual higher lowered which the efficiency further discussed, by numerous opportunities we and management gross on

million expense the down research the ago. period $X.X was year For a $X.X and quarter, same in million, innovation from

quarter For the we reported impairment ECT. of a the excluding second $X.X loss operations from of goodwill and million, of XXXX,

of incurred the items diluted second several a loss per reported net the share onetime Flotek million on during of a second or $XX fully quarter, We basis. For a loss quarter. $X.XX

goodwill impairment writeoff in testing $XX.X ECT of resulted goodwill million. of Our a our

of against effective quarter. tax our a added valuation assets impacted which we million, addition, rate the In allowance in $XX.X tax our deferred

allowance June to expenses $XX receivables during onetime XX, which down classified that now is held-for-sale At for through that projects we and balance. We or underway. receivable of revenue approximately was XX as this target, year-end accounts our quarter. million and level of of X.X% $X.X receivable down also is already months to other wound coming XXXX. of and billing of XX, expect facility, additional divest enhancing had $X.X the million to end, a days' XXXX, accounts non-core accounts processes, million days, above At quarter at our the collection is which At effort compared resulted plan remains in and company drive June in quarters approximately million an doubtful the a $XX.X the

inventory. to At compared elevated XXXX. first Inventories the to due slower $XX.X citrus year inventories million terpene $XX.X to consumption XX, half totaled internal remained June Moving in million XXXX, end XXXX. at of of

season are the into of in Additionally, line is the turning order half South seasonal the the to in sales. large in currently with for Historically, the scheduled inventory CnF start we purchases the second during citrus second that our year. were declined of balances of from which quarter, America process during harvest fulfilling year, a

revolving $X.X factor seasonal June a impact inclusion flow our million negative XXXX. working also moving liquidity just million. in capitalization we XXXX, have quarter We're to $X.X June million as under through certain facility to under our an receivables. measures was source of are borrowing XXXX to the of defer there this XX, and increased also $XX.X fund currently credit borrowing by able XX, forward. inventory and taking $XX we working availability XXXX, the base We covenant facility. operating of the credit At the proactive At expect benefit sufficient under We second capital capital view net insured and Debt cash to undrawn was testing during to million our quarter. increase of believe revolving

continue our our enhance and lender, We measures liquidity our working are grateful for proactive position. with to take to relationship

Moving capital to expenditures.

was During the million. XXXX, CapEx of $X.X quarter second

the ECT and to Last it our cash was that the to scale top given segment. shift We have line guidance ongoing program continue a quarter, within very liquidity we flexible flows position. will offer dynamic difficult to

ECT CICT filing XX-Q identify XX% call both an slight the savings not the EBITDA and current in expect our In to of and do mid- going anticipate We sequential quarter, to our I'll shows our now to recovery. gross second margins with increase discussion that stabilization for SG&A in later business comprehensive our who continue room disclosures foresee will forward, a show to For sequentially third top results, refer full file line mid-single teens. expand EBITDA. profit our further that Please to-low growth line we the with our expect Josh, digits and will the may operations. the margins turn on in our segment, we provide expansion which for update to XX% levels top a as even quarter expected an today. to to we

Joshua Snively

Matt. progressed as we levels you, second disappointing start Thank the QX monthly stabilized of activity year, rate quarter. After throughout from the a exit

these resulting This CnF new better spend chemistry of and offerings, business propriety on by cost, traditional other all we meet in equipment to door fluid and while enhancing operation have prescriptions to impact from and add resulted while the alter Many case, can margins their negative proppant the reservoir has our maximizing increase wells. PCM reservoir. of to is which chemistry client's XX%, the improving mitigate gross capacity providing Our to to to able to been continues include And primary systems has PCM their evolve as carrying reducing one fluid clients a to our design offset the well performing recent profit in damage our reduced successes, our evolving to we industry, production of personnel scale. program and demand. the continue a thereby PCM treatment changed have to to opening performance and our the and which reservoir-centric completions. Building delivery manufacturing

Our saw are further blending optimized as field tanks, mobile in operations in ahead, our and crews facility expanded efforts, a truck combined But improve. These added Monahans. platform required scaling designed with expand as margins rates that our these up our facility additional to well gross drivers chemists initiatives, To to Marlow margins. provide our of our chemistry we as in utilization and our PCM deterioration gross looking committed few system increased diagnostics. capabilities our real-time support and Waller field fluid

research enhance address through remediation. of Additionally, improved include to recovery, full and life applications our completions to the well, to and recovery acidizing secondary our tertiary flooding, of efforts, CnF the water enhanced offerings innovation beyond cycle expanding our or we have oil IOR and technology

While flagship Unconventional we are Recently, initial development update as market Resources technology, we our for new excited as frac are early applications with wells. we client the mitigate to for CnF used well Technology operator discuss partnered of in remediate how the a stages large successes. to commercial at and the technology about hits was Conference and our underperforming

can little expansion forces through higher and with on orders. While order we and behaviors our timing and fluctuations due sales lighter year-over-year that distillation sales sequentially, a product CICT strategies. flexibility our than we anticipated diversification largely line the margin increased and is clients new to segment The expected, execute terpene manufacturing of slightly column operational normal fully market of we of the performed greater our combined

While the Fragrance consistent capabilities consistent our ability Chemicals of and and available Flavor process volume clients has and molecules world-class and allowed deliver for reliable market. to products and

and orange oil relative past, to the there crop is smaller stability greening markets the to continues citrus sense a markets. keep in of projective in elevated Brazil now While

other forward, other well options as clients. citrus to disappointment. we see lemon into flavors continue as Looking the opportunities a and for specifically and techniques, cultivar expansion second processing our grapefruit was quarter Clearly, varietals for

operational improvements move However, to the forward. continue

and higher both we plant should to and our coming across through ECT our With quarters. to a margin capability the at scale positioned more and execute unmatched. for competition CICT, are as in able operating level turn gross personnel is an efficiency future we remain opportunities be Flotek capture R&I experiencing segments and

delivering to and formulating, and chemistry precise focused premium remains technology Our commitment paramount. applications manufacturing

We I'll on have go have remarks. that, more John made our plan. to execute concluding to With it to further back to progress operationally, offer turn but

John Chisholm

we like before questions, add I take And Josh. some concluding would Thanks, to thoughts.

ultimately disappointing. as received for history. quarter the CnF The we progressed, But second company's in order quarter largest the clearly was the

We next towards desire expanding outlook makes the the vocally inflection technology PCM are as clients chemistry restructuring second cost our of to experiencing our differentiated quarter are shift our the point a for identify market notable the and platform, source and and company. framework their in

which conditions with activity While leads us able our and our the and the quarter X reached in strategy. not Further, analysts trend, spending substantiates have more performance are not chemistry-centric of quarter used wells bigger many does more emerging Flotek industry's U.S. more our industry third length a wells. desire observing optimism the leading that completion establish stage growing technological being cost. and up leading and cluster month loading, improvements mechanical overall guide sand reservoir industry economic delineation. interest in is technology lateral source or recycled X water recovery necessarily market the for confidence asset limits shared multiple July both spacing, chemistry We're be despite a positioned to it's be as methods, have inflection leading our factors to and proppant optimization. This perspectives With suggests and and This and set planned and of of increasing, in greater such the for designs data, is to

Permian the Jefferies " recoveries I is their Shale their science increase recent in Energy has from here. Dive quote, findings RS to Basin. Referencing Deep As "True similar U.S. needed published and noted Report, analysis. in And

look committed As thoughts. these our resolutely and we ahead, [indiscernible] we to offer mission remain

not on transactionally companies industry that decade, enough been has cost But rather For We its too model much partners. than different. the energy on think two as conducted as benefit. they and industry focuses traditional a believe business we vendors between

shareholders, clients humbly are to employees, to will if to and create our restore for treat vision and questions. reservoir. operator, thank patience. now and as support clients Our stakeholders value enable continued With is After our that, all, to like our our the closing, to would I mission we return focus call the and in our technology energy to on open is assets. objectives protect trust clients they their we aligned we Unwaveringly, our and In own. our were assets clients

Operator

Instructions]. [Operator

Our from Rice. first George Johnson from Venturatos question coming

Georg Venturatos

the to I on wanted ECT off touch side.

little more the sequentially, disappointing. guess, this but I if breakdown. of we to potentially can a start what to was side, that of Just one, see at more get then, what line XX%, but are today? we more clarification know cost see just PCM which wanted on looking the I ramping kind the margins kind north forward, improve to margin been has know you how off strategically expansion, of guess, looking mentioned on or just of kind talked of bit the see you secondarily And detail utilization up of breakdown PCM I about is kind I baseline? time that on dramatically? And

John Chisholm

to George. that internal some Sure. help we you I'll turn over large Josh. you, question for part give your I answer there be will it think in He metrics will that follow

Joshua Snively

on that support cost, into these able baseline, get for far amounts, It's about year. ancillary And PCM QX as a demands or us field growth. a small meaningful the that ask we crews, as to have last trailers not on and us. activity. direct is hoses existence not came hire was product and line in of build-out company. CnF, PCM It clarifying we offering is ahead increase to we being need in and a that to response equipment We're the George, number. segment cost services, the growth XX-plus-percent to as specific to yes, you the And going really into dollar side, market margin adding it for build meaningful when but the of to of have with and because kind are

cost of direct to and as We're load So the build. recognition, the to starting that squeezing is have the margin get mass. front you to sales prior we critical some

today. the people the pumped on XX in stage the sit the year, right job. over field these jobs the of beginning we have sure making dosage the of field. XX/X job's each correctly We At chemistry that X until completed, the people right these gets And the in had people and

We a the them we That's sure want So wheels the training people. skill set. come we XX-day significant make is about train field. release and off normally it to training program before these in

those moving of build see to continue have. scale margins better, the we the as we people just of forward, of number we do So because getting

John Chisholm

just George. Yes, one of have think us, follow-up a is I a of completions kind which now XX% on CnF-type from there, Over value-added these like chemistry product.

that So continues this to elevate margins will grow. help the as

Georg Venturatos

Makes Okay. sense.

that up way that wanted kind wanted talk order, I Good Your a hopeful that to what as that have to still baseline what's just visibility kind orders? of largest relationship but wanted would XQ But the do magnitude this just history, single then, call. business, order? on you we'd sense there you're to the the clarifying about down the obviously, and of to order visibility, And additional get result imagine and to generally big can continue be of but line, heard And domestic for there. points like sounds excluding see, boost sequential I baked modestly X in that. it it as the type of your of a growth into get

John Chisholm

not are of is onetime to that's project sure The order. it's so thinking am lots like I question multi-year, so folks designed a just a Yes, a about. be

validation think As Middle now a I couldn't this area international always say research -- me, we have off folks in prepared then where led an result next in previous there. be asked opportunity we several work, partners this out over there. always earnings was we had And we calls, think the meaningful with this remarks, from I Obviously, our the do And know. of we feeling period the what year would the standpoint, with mentioned our work But multi-year would East. back that be?

Hopefully, things. Complex which dispense as and this that Reagan a Upton a of would project does forward, in counties, with for that County. narrative technology one, time, be the only couple to industry. or certain Number it works narrative, from will think moves I the that nano-Fluid time there's meaningful like

for month The of we of thing anniversary XX-year got the actually June, the as second in of Complex of effect a circle company And nano-Fluids. patenting is, kind ripple the Complex there's in other part the moves of of project the the that become nano-Fluids. full it sink up be to a largest forward. the going in anniversary, do history the It's we XX-year celebrated of order we aware think in people world that as the

revenue in July although multi-year assuming is way and this -- to that building a performs mentioned, has to, expects it the through be So QX, designed it client the generating was the project program.

Georg Venturatos

that, appreciate me. I from John. And Okay. one last

customer, You here. guys which of of an mentioned kind been a ongoing loss largest discussion your

can Going But I'd believe. me not back. coming within I them just in you the certainly, past, any wrong, think occurred I that's and forward, revisit, back XXXX, before and I'm to if maybe assume, forecast in has correct embedded see this wanted to

comments on remain of what have or So moving thoughts nothing, And least least the forward? forecast? are I assume at near-term with which baked in engaged customer that you in, whether you kind at any expectations still

John Chisholm

Yes.

As remainder technical respect them we're I'll and that to good But that. we no Josh and everybody with for that. Josh for the an clients. with revenue let engaged certainly to about client don't a interested ongoing talk speak come But terms are we a bit with more on basis basis of they're there to that services in, understand, specifically and On them. little level, on year. add But products is has to will our with different the

Joshua Snively

match needs points the cost largely to Yes, on characteristics. had lower some market driven new call the of by with certain we George, QX as benefit mentioned that we introduced the products

asking viscosity meet Those proppant building. So for we specifically lower-cost talked flowback We carrying our aids. designed market to about is about for. the our talked FRO lines needs are the and of

but that across well. the in we you're other And engaged asking customers about, basin so only not are the as customer certainly

constantly on doors. we knock So

are operators. give to a good interested relations meet offerings in more and them our They're at for asking those them we where very can most we have options, and they're now what We help their chemistry points. expand point price with very of

Operator

next coming the Mike from Seaport with question Urban Our Global. of line

Michael Urban

if, have the the unbundling guys done job understood the kind of So in don't towards way or quantifying just good especially ultimately to few shifts of the U.S. an trend wondering basis, you the frame that market. take just helping on how back what and a you you of us I any I think per think lower because looks for ultimately I reasons just aggregate cycles? been extent in in next market well, and recovery of have the said maybe Whether completion market, the have mechanical that plays limits? change us know of the that in prior the terms you that the Is to in kind methods you channels a like? U.S. years? their it explaining can, and step about about designs? help is out the reaching if was change where or this Is just in might relative higher over to

John Chisholm

a Yes, that. sure. I'll take at stab

broad talking says, in that. more now brush more that sand of we improving And data our RS at what's more lead geographic as looked Energy uniqueness, geological different a we that about to people those As sand uplift are several certainly, in But out can to of internal relationship own amount everywhere, the Jefferies, there's sand. the have been production have really pods called wells. reports, the performance mentioned, increased

For changing that's with value-added of of has be in a the we the sand comments, affected operators there's a cost comes opening concluded them of an in That the hesitant last bearing mentioned more to increase what more see into our chemistry. interest even what of increase can the put and pressure lot rock more year, AFEs that AFEs. on on out. that you of From what we for what these

this coming So that analyst we is improving going are science of some these about diesel the When again, but independently something is is on play think case trucks an role operators in wasn't X, familiar but everybody these X is to these to years not E&P we XX-hour ongoing the reports themselves line X-day, the de-bundling, important out, this many I initial that diesel, and of the now you to ago. pumping certainly X, with as now, started it operations, ever maybe where of provide substantiated fuel try and X, with the these out talked wells. believe, that with, production

with a efficient chemistries. trend us a can more structure more sourcing lot are these closer heard folks in of X their work the earnings by that. fluid-carrying certain become service the as But it of consumables. sole friends. to see chemistry in more XX% many us cost to prepared bordering and more the ago. for clearly, was through of not about We that sole operator. That and at is talk customizing operators. still now of the much years traditional You've And desire believes service proppant their And operators the They consider those gives sourced channel. it's chemistry. case looked to to we're companies contact a call their the heading have We We provide company the we

I think the of this a stages trend several for continue going We in is early that probably that's this. the Does to next help? think years. we're

Michael Urban

we isn't this for, forward. of lot today, people And just are to lot and going there do think a this sense but just qualitatively. I answer kind trying model a think of just about -- of how here. trends I right I a for am an get It and talked maybe countervailing to that does And there's terms now, of in this

you -- got pointing that think some kind are way if of Or in will, too right model and kind good about in the with many Is a across these market right is what's confidence anything terms quantitatively dollar the there any us aggravating it because mega-trends, directions per all to help kind to ability well, in kind trend ultimately, as us think of just of it So sounds you the out, you addressable of a like traction just of that PCM. settle are about number the as of to getting our different to now there what many this give drilled? too wells now.

John Chisholm

yes, think, certainly and the frustration your appreciate question. I we in

back really thing second were through one providing is, we uncomfortable of clarity last and to quarter, step said think the we quarter, I much that. to

feel clear. to because number quarter, is when talked direction third we second it's that starting uplift that never the greater move, will they Matt done of the move But it more become the had what over been activity it's in about before. This difficult a is to and quarter, very predict clarity, on quarter because clients of bit will which little the

I certain the way think, move. very pick moves, It's is difficult you've part, the it's or a there's certain more clients. hesitancy our when progression it's So the a proppant. will not to the date clearly, that as industry client But on a with communication the that's that they -- with seen just to

as folks, technical of cycle with to right helps the their wells for with ones to more are often And as well. All wanting group, you. to completed. There's the wave these fluid try get are, believe instead to started are And enabling are sooner become people becoming shorter more on of we at the effective indications happens a same the of that efficient. that and closer the is coupling they research way hopefully, our with this our that's next a time, experimenting this, case

Michael Urban

out. to guess, stuff And of the question which the gut all difficulty it's one in kind feeling your navigating on appreciate that's that would years X, X the No, I maybe I answer, another be, fly. is difficult a, is last it does.

a window reasonable to model where of trying So this we're stuff kind quarter-to-quarter. beyond of kind

be, your years that kind of same smaller market it may case of cycle the whatever addressable is might bigger, been the what in out, X have X, prior X, So as the in XXXX? for say in roughly doing sense your kind is or you're

John Chisholm

the of dependent -- the chemistry. wide believe that have to And And is chemistry idea, traditional high a the decoupled product use. like hard difference and model, to to folks other this so get number, $XXX,XXX it's of about carry a business per the us the the when not the is It to things sourcing can we you're to type that could we to cost overall put challenges depends chemistry, the and because end to this, was and cost-efficient want on are of in translated lateral million program is our call, changing that. the client. the your Josh the chemistry way. a wide pumping. in is XX% And completion there And the a that number to, well. there, is a times a there a you, we'll with great to much the was low bigger. it's out, one of less would EIA the get is you're between in the end tell that an type on there that of it reduction a from, to the to that's part on listening versus over for into Now market, that fluid so actually again, proppant that spread expensive but customization that kind disparity. just $X less us the meaningfully on more based these operators It certain out say to question We that XX% he just to for spoke chemistry number than spoke one is, well on give going this the folks number the length to that answer disparity a question. range multiply the at is It not completions. of going But There be a and

to to So and sell the we're we're chemistry for prescribe here more chemicals, trying more not trying cost-effective them. right

Michael Urban

Okay.

John Chisholm

Is thank you for hope that [indiscernible]. today. on [indiscernible]. and Those We were bringing that the great call that questions,

Matthew Marietta

expand on this just Matt. is Mike, this, touch. Maybe to to

grown, As the we've decline PCM in per has seen revenue a for client ECT.

quarter of end range, that quarterly are but up domestic initially spend the of an that signed begun second bottoming to clients client. we've for we the As maybe and lower revenue improvement see actually in a our at

internal numbers don't the has numbers. in come for spend see underlying begun our to So of that the us, reported metrics client per you up

that. can that maybe also So help

domestic that value-added seen pointed proposition which in out, second revenue client, clients the selling quarterly are stream, Josh per our uptick are indicates our we've of revenue our now For quarter average XX% the PCM an as up value of that crews moving chemistry.

of at I addressable with can to clients more little opportunity the clients a identify that's initially, end So increasing lower color time. PCM start market. the over a help these hope then those our build bit And products, some into of in trying and you range that that some value-added revenue the of

Michael Urban

I you're absolutely done. was this that color. I right. difficult thing the Yes, have been a And recognize appreciate

Operator

[Operator Instructions].

from Our the David question coming Capital. with next of line Hocky Sachs

David Sachs

will I questions series a just jointed, So to little here. but across, of a trying mosaic bit that we're maybe had build of come a

So us board? first, valuable uniquely what share background her that to Kate Richard's the if addition could about with a you made was

John Chisholm

Sure.

where year, and Let of the had me just consultant And back part second of at came a was result to. our an refreshing independent to everybody. board needed to board. look to strengths, share for X overall we that. as we evolved It of the that, The a at board directors process. where have was step with of the maybe that a versus last The and board concluded the a company weaknesses really brought and in

years. if go and wanted of think Kate. And we qualities of about you on real and shareholder We governance, for. the then website, history so and to I'll chance independence you'll have we'll background a to have them, had we to And also his he first, David emphasis for in for certain being get that some independence of a had to talk but the is governance, want Nierenberg look a a David, to Flotek couple I see, both

So he knew the company very well.

So through selection fill wanted interviewing him that requirement. process, a process we and to

her family side business in a her over research. a operators Oklahoma. in a her with -- in that at Regarding open They convinced way through she that is of guidance at our of ownership accomplished And the had other substantial myself, in relationship team at a lot, very evolved research And year, a why on we in Warwick became wanted to a has equity but from to. standpoint. really gas and directors she equity a interested and joint that they different clients. oil background could as our frankly, come private have met are look us performance that that Oklahoma. year the industry up guys the directors here to the of individually, our A And are X.X she wells not a their has foundation people her of ago she for -- only Kate, certainly, background lot energy age, give for more that youthful energy position perspective could a from of on clients private technical

felt certain them perspective And she able Flotek. that could be way a for clients to retain I penetrate different so bring that to as in you. helps to that we hope types a of benefit how and would

David Sachs

Okay. in step the a Certainly. direction. Hopefully, right

to process importance that maybe when current at on And for importance your and us And if as and opine your you years in today the Florida see point tomorrow? that perspective then for If and strategic strategic vision you business you vision with Flotek? it to that today Chemical perhaps X of share ago, future thought bring Florida the then were Flotek for could Chemical your acquired of for we the time?

John Chisholm

believe, as and knew much terpene or in any the that's of of segment value expand And getting, able citrus rationale. by on, sourcing continually We bright Florida secure true and Josh, I'd Sure. supply that have hasn't was way of And that, with refining more as not certainly, present oil, looking with to always Florida when avenues can you'd the interest Flotek, it been now view on the through in was think being in have care put that whether created there of -- ways that of time return that d-limonene. to light true, a certainly to in continue Chemical wore than largest undervalued. the Flotek, this XXXX, know CICT the even business chain other business a into an underappreciated more was we We certainly that other much anything way would for acquired that's at time. to model, important be a partnering well up look I refiner we that CICT were is inside there has say always especially increasing We're shareholders oil that of exploit it's the Hemisphere. to again, can you at a felt asset vertical right we in the point if Western inside us trying combination citrus that type Chemical the we We been, it for time Josh. the would to of it's anything. Josh at chime way best business further that with at markets And relationships, grow time changed. and other to, for

Joshua Snively

for On food on really flavors oils what's markets, to or around in They is ubiquitous to the products, the know segment world. pushing you that the CICT side, market demand beverage in at the consumer natural. trends if their look want beverage citrus

for CICT. runway So there orange. at there business. talked expansions in we're is about strong Really that very very, a varietal good We've

expertise with chain raw some markets future us there. do We to a fit, how complete flavor being technical tangerines. of create have are and to we're are the that it. and good optimization a value do companies, our pretty that attractive these match a we asked part beverage very manufacturing to that in materials position portion lemon a that stuff the to of these does that if lime was But you value-added of in grapefruit. really But expansion. We and available forward, globally. think for you And big and in is has of products Florida utilization That market, more think

David Sachs

or And financial vision much trying new terms suppl of business. eroded. and of the understand I'm secure acquisition going-forward acquisition, to where this, a for has up getting and to like we've for selling your businesses now Energy been that push fluids years business. was at after looking hopefully, would the an seemed the of X Okay. turn health have the initially, the company in I it margins. But value And this with chain a higher price this to pushing

would couple side, your around struggling speaking the to a just of million the core in of business. alone both some your distillation bout used? in and business, be, on people them. my control that been sort forgetting is citrus an million do X with But similarly is of for with or Energy experiencing been you multi-$XXX the Flotek being public have is capital you how been today. at growth sized Chemical past paid let price on On if of I'm how the eradicated the Florida CICT, of you is months, a equity what fairly best I without years. competitor and we're allocate And of capital, call it's for just ride potential question your a am would supply valuation how this the can ride, that $XXX And And and multiples and last prices. out profitability have only address has at sets for the has frustrating that on these value for business, of what businesses current stock opportunity least orange for limited changes extraordinarily to compromising of with about see X we market, as trading the

similar in market its doing same telling of by of the trust So allocation your is to at promises small on portfolio, us, of the and highlighted they its portion essentially and disparity thing overall capital another don't public revenues. size and within management the a the in interest company the one, company's deliver believe business in ability

be businesses, and whereas the perhaps to ability with the we we do it the business both So invest both structure? aggressively to X And of invest capital opportunity other? make sides current monetize sense in in manage the more how in could to our set does

John Chisholm

we're just right, with the appreciated feel is. Well, what look world. Directors it we talked like we additions we that you us has our everyone rigorously value, that of at for value has to about. never to Board frustrating been been particular, by believe, the that illustrate looking is, at the that confident, outside answer segment of And the better And to ways is, everything that that short in to you're

David Sachs

way to The do peer be average that best to deliver or would profitability. average industry

is burdened barely EBITDA that versus structures. fully significantly segment competitors cost Your positive are higher with

you're markets to significant think, as an under-earning recognition were be you dramatically gap, So tree public example, there a as I in business close think the would would the value. I the

John Chisholm

disclosure that, can required is a to I call to we and Well, And that counterbalance return a what right on be on ways understanding capital everyone we Flotek. the capital this believe say from that a to to are we more that's accomplish ongoing in the are you described, focused propel of needs is, accurate what that side. appropriate are segment And able there's what those now, energy tree. needs to familiar requirements as the familiar most process, in certainly the an mentioned, understanding able the thing with very be, be closer to will and with. We're to be, I could give who probably review, shareholders standpoint to inside think with capital different

David Sachs

Or marketing you're have seem the you're or expenditure. angling for not It Is would towards? correct? third like in formulation resources, about FCC. seem That last tower. that and sure the the you what made R&D about investment I'm capital talking investment that significant talking

John Chisholm

Well, we've year, which for side more orange closed be not flavor flavor on the distillation the citrus enabled third tower, meaningful of expenditure in this part us, part capital citrus was lemon and of lime, to here, out what and the lined the exposed and as early the just industry, I last that to the think side.

Florida. that fund looking year in business and to last to to internally, mechanisms the now meaningful we event, resources right from capital of at to not in capital the that into that able what us And are we that's are the the Are You're correct, be that look as for expanding what had. would team? of arrangements capital the we're industry course. people of entail, that next have. technical we've a or in out aware process Yes, That's internally expenditure

David Sachs

And significant that ECT first in on not previous hopefully, dispute no quarter, one lastly channel. a that's an the order, unique as is business unique from call, the service very about performance or one in side. that highlight for talked a can you an The uniquely asset. improvement a in the conference asset, disruption it's business And you demonstrate profitable the And the only well. can just going improvement underlying to that, you a short but standpoint a

to on one now You in your And opposed playing about decoupling? a how going relationships we or that hurt And in the do responses. it whether comments is year growth where addressed with can the that questioners continue talk there kind out? over based about that next is dissipate of to Whether point for distribution? see growing channel channel? bit the us, you that past can as of should X independent But since previous that we're

John Chisholm

can set biggest do that. Well, they of caller, and more business year. model of to we operators to what Josh the our is quarter they a sense, the that that internal for to was the more XX capability that feel But I by your this directly, in part makes changed, E&P X point, mentioned uplift the years. full the But the as what of we've continue all we're well this second to internally, today months has to they first quarter, earlier chemistry honestly But activity of continuing they the that site. that mentioned will if way uncharted waters again, source support and to have earlier model do that a have talked through we that feel we're seeing the over channel of weathered storm believe to consumables first and A, about experience people the the hiring

David Sachs

propositions congratulations in on testing at the of the as this to their out in assets next East. improvement shine floated for brightly year to you going Hopefully, and Middle And offer that credit to and until win with the the the to Flotek the that. can next you management halo us well that your feet be allow trends on attract cost push first the in acceptable status on will and that customers. improvement Hopefully, meet that additional the line unique Congratulations to some forward. shareholders, there's chemistry going and a isn't the But call, described suggest test covenant today's sequential revenue point you and year. quo attention

Good So on being hopefully, and and there's CICT with further profitability to process. in luck vigilance drive and discipline renewed ECT. taken costs effort the a

John Chisholm

you thank you, assure about. comments. engaged questions. for for can what we're Thank fully you your We you your accomplish talked to Well,

Operator

are further at time. Chisholm, turn with I or Mr. remarks. will your continue to no you. presentation Please the there back this questions closing call

John Chisholm

Denver. perhaps to in in the thanks operator, you, near for person. you of that we the In Thank listened questions. Sure. for be our folks Thanks EnterCom in. future, look seeing at We'll some

Global be last we'll August, in week in The Seaport August, with week Johnson be third think at I Rice. Conference. we'll

to in ask address questions share and I that and think out further standpoint the But from on there Orleans, last either update everyone's model person. reorientation attention New road. business comments as continue of and the in folks in thanks, and through with here the can we September see move transparency us for the you a or folks and interest, we further again, we'll

Operator

gentlemen, disconnect conference your call you. lines. participation that for and thank today. and ask Have a conclude please Thank day. that Ladies you the does your for you We great

Flotek Industries (FTK) 8 Aug 182018 Q2 Earnings call transcript