FTK - Earnings call transcript Q4 2018 | Flotek Industries, Inc.

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Operator

Greetings, and welcome to the Flotek Industries Fourth Quarter and Full Year 2018 Earnings Conference Call. All this time, all participants are in a listen-only mode. A question-and-answer session will follow managements prepared remarks. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Danielle Allen, Senior Vice President, Global Communications & Technology Commercialization for Flotek. Madam. you, Thank

begin. You may

Danielle Allen

Chief and With good Flotek's appreciate you, Elizabeth everyone. President morning, on today's participation. Wilkinson, and me Office Chisholm, Chief your Officer. call and Thank Executive We Financial is Chairman, John

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

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

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

you prepared answer questions have. may we will our after remarks, Finally, any

John. to it with So turn that, I'll over

John Chisholm

and to decouple XXXX the to then a moved demand year dynamic today's self undeniably first paradigm in industry. evolution for This given additional continued in the call. recent fourth the XXXX high-level model to events Operator's ongoing XXXX a with discuss us our Flotek in We driving Danielle. and a review begin completion I'll for economics challenging sourcing for for heavily both shift Thanks diesel, transparency the applications. as proppant and private today independence the pricing was environment clearly everyone from over well applications is this quarter is detail. process. business of our momentum more in deepened invested exciting improved more than expertise technical the consumables backdrop accelerating majors results joining on and their gaining with understanding began and a of accumulated and This operators why is from directly. to ENPs operators design portfolio of chemistry in knowledge recognition and base, apart further basin our ranging significantly in sets competitors. basis, us large in-house our our expanding to today and source unique technical enhance decade optimize to proprietary expand to a products have Most are efforts of of we our capabilities. system In fluid chemistries we've designs region-by-region which logistics fluid completion appreciate

optimal directly docs value accelerates as would to our channels our work XX% to or majority of we This have proprietary transition As of to note and the fluid well less impacted uptick management approach full is our to as our service as development systems at sure partnership into increased designs we site. in reservoir-centric of through chemistry systems. to to our chemistries well per an chemistry platform site pull-through applications environment. near-term of to this XXXX fluid that compared provider allows of turn, directly profile seize dynamic model our the achieve us and I business In our continue delivery our with our a seller importantly, has the PCM has margin was clients prescriptive offerings. effectiveness full own of approach, To which by our holistic XXXX our our PCM FOB revenue sought of in that see our full revenue XXXX operating we and from been in an increasingly such in traditional fluid strong well PCM fragmented our clients the in majority platform revenue than of be as fact the service systems evidenced client. via the opportunity value and domestic added a the market direct

and strategic increased of in see changes efficiencies half aspects implementing the we to a the operations of result expect year are However, first logistics half XXXX. we of our of other in begin second to our the during as

business significant $XX to report do, and undertook year we to work still levels. While our but model clearly more collective adjusting into XXXX structure. that currently transitioning spending by million our pleased full efforts XXXX, the G&A have for innovation research year during cost I'm full XX% reduced XXXX, on from and We we or

to cost to company's success. evolving business long-term and scrutinized, relation structure our and costs the been ensure our continue be have continue All performance. to executive will adjust our in We compensation meet financial closely to including

initiatives and see corporate enhancement our board weeks, out to following XXXX welcomed we compared my statement was XXXX. the XXXX compensation total directors. three As our for independent Last of in proxy you personal our strategic governance. coming new to was in the directors departure long-standing XX% as year will in that the come of Complementing our two lower will cost-cutting

our Board Committee also each chairperson. XXXX changed in new now Board of Committees and leadership the a has We

the to on focus executive enhanced financial restructured The Directors we the at closely strengths team an in will work of further environment we CFO of enhanced and of Importantly, of continue December. and together leadership Elizabeth end Team as core leveraging our as discipline. including our Executive addition Board the

Elizabeth her XXXX financials a attention Turning operation release fourth discontinued periods. for CICT will our in comments present segment of quarter as the the shortly, year-end our prepared in all press discuss as

transaction testament beginning to the and we at is completed from likely week you've of Florida chemical our which the sale absolute As quality speed last moved seen, of an of the people. end the was company to

Given at that financial some a backdrop take for operational let's highlights QX. look and

for our in ECT As previously fourth CNF quarter, disclosed we revenue quarter and the to the the quarter, guidance for the to an which due order East did not Middle fourth quarter. reflected expected in recur down recent million fourth be third most $XX approximate in

However, continued in the for the quarterly domestic broader encouraging, perspective, operation. slowdown our our the of fourth quarter the revenue achieved more first the average revenues revenues grew quarter, MidCon half Even XXXX international X% XX% activity despite strength primarily on third our than industry during fourth higher quarter, in from the year. were

time due diligence sale activities negotiations considerable and the surrounding During of on the Florida Chemical. also fourth the a quarter of we spent amount

high-performance With solutions the gas has and to and itself as upstream oil now transaction a the the of closing last play provider Flotek of pure leading industry. week, chemistry established

and to there the ADM explore are benefits the industries. one technologies closely oil to next-generation While many agricultural for of jointly opportunity work key and and the is with chemistry transaction, is develop which gas

development Our volume-based focus include our oils. complement and is initial that portfolio could current high-value chemistries sustainable on technology of and surfactants

executing in formation flexibility as associated transaction working held in comprised including all be cash alternative of debt our proceeds related are to address approximately question-and-answer of Committee, board realized it to establishing management. shareholders. how Nirenberg which We alternatives. significant the board meetings best share full The $XX.X our they our net the have organic call take increase started of the to committee to long-term off of financial committee These identified for options adjustments. as to growth of growth uses of the also about company members result as sale strategic and In investments from light financial to asked decision-making our million in the the portion the of million shareholders, assessing during could focused metrics cover business proceeds interest Elizabeth including David our to escrow in of deploy buybacks, evaluating accrued on evaluating the of financial other is the exploring this selecting as FCC. to adjustments, to the well also committee, us what necessary recent the and is from advisor. and the to members methodologies the $XXX a I'll temporarily significantly transaction. recommendations activities. best increased shareholder After is thoroughly the a front key and the funding transaction in the more capital announced making to importance In The turn we With a transaction. and outstanding the serve time of of I've is result specific Chairman paying any of post-closing We capital determine include of opportunity the additional and making balance fees and announcements for and detail. context, closing projects, of executive that, interest, committee, will value any has committee's this returning discuss The benchmark were the having City capital of that framework pleased our evaluating has on announce a previously the strategies, and to previously available over engaged results the questions committee Board as that

Elizabeth Wilkinson

Thanks John.

the the a tables CICT for all in discontinued mentioned, our segment our John financial operation of as present As release press operations periods.

as operations, which today discussion research supporting energy includes will and our center our our As as on such our and for focus corporate business my well I functions. results continuing innovation quarterly

the line activity broad conditions. onshore compared fourth the to were price top in and in significant results third quarter, the impacted for decrease and Given slowdown our by quarter, overall the industry industry WTI US completions as average

However we our primarily business, continued MidCon in was strength domestic by saw operations. revenue a increase in as a for John which driven mentioned, X%

revenue $X.X of decreased and bonus impact of chemical to XXXX quarter-over-quarter QX million due of $X.X operating sold. due the XXXX expenses from Corporate cost on million $X.X broader the QX for a X% freight to for reversal a quarter as G&A fourth increased higher primarily accrual. for expenses efforts million Our XXXX a to the mix cutting percentage of of

G&A third $XX.X the full Research $XX for for $X.X $XX.X year XX% For million of quarter. million. XXXX XXXX the from XXXX year full corporate or slightly the innovation was to down of costs and million from total $X.X fell million million QX

were full expenses decrease R&I million million year XXXX. the in $XX.X level XX% $XX.X the a from XXXX For of

other business $X.X the with investment expense recorded continued income commercialization. and statement of be to of Moving to miscellaneous our million, not the determined longer write-off core associated primarily certain to no achieve we assets warranting down long-term

NOLs. to result the asset, of also against our For year-end our sale quarter actually we taken allows a previously valuation statements. fourth million. $XX.X our a us of issued before tax reported carried XXXX the was financial the primarily or so closing of balance Florida of operating reverse forward Chemical deferred This net of allowance we tax to of the Doing losses majority related benefit

XXXX Following on earnings anticipated our XXXX offset diluted our quarter have expect from million beyond. combined to XXXX. of totaling net of left to $XXX than or gain of use per per NOLs offset million fourth of of and future to diluted Chemical more operations available third million share a the was the sale NOLs, $X.X we over a little loss $XX compared Florida result income net tax $X.XX QX $X.XX estimated and in our share for to million for quarter of The $X.X continuing or as

credit of December our balance facility. cash net million borrowings million was the $XX.X debt of million our as of $XX.X sheet to and $X on including Turning XX,

December be and closing Finally, XXXX $X the Florida million temporarily expect save conjunction remaining totaling facility, post-closing our be $XXX.X in working subject of transaction totaled proceeds date. paydown including debt of we and including sale million. expense position annual proceeds the $XXX.X XX interest that facility, the credit last as million credit as balance our the These escrow of of to approximately assets Chemical, Net of of net in facility fees revolver will balance following adjustment In with capital sale was that working cash paid which outstanding million we of our to our week for received $XXX off amounts adjustment. credit net and $XX.X and will terminated capital held of year-end the customary from nearly held Flotek levels. by million

for held balance with way the we Moving periods. longer capital if working facility lower of continuing expect forward end assets high-end $XX of we up held Chemical, million from capital, approximately meaningfully exclude December carry but we operations Chemical. By million as it be of exclude actually working amount including reflected and inventory would would anticipate illustration sale to If range Florida is assets date. receivable, million net then typically This the for you $XX carry terpene citrus include when we but sale retained less you of in roughly at accounts working credit carried our level we working payment the we XX capital. and capital December than XX, we which that of the with of of XX, of Florida is were forward, at the combined going we far sold when international

incremental sustainable since mentioned of January. made out have As back XXXX, John Since further and drive pleased I pending we of to that announcement Florida opportunities savings. of while then, in announce additional our cost-cutting of the progress have we to will in a the am cost that in important business now cost number sale continued identified Chemical result we

corporate quarterly targeting slightly and $X expense million innovation G&A of research innovation we are $X a As and than level quarterly. million less of result

our achieve a in at us and cost cost operating reaching are In January. back positive these the out annually path us taking by initiatives rate total and are on our structure operational to at $X.X of levels target savings of efficiency targeting double-digit half mentioned adjusted improved levels quarterly improvements, the logistics million we XXXX of reduction and QX to EBITDA the incremental margins would in full our is move call with we XXXX levels cost operating million to activity cost to on targeted put these year-end. this which expect headcount and $XX approximately overhead savings conference in activity QX XXXX. latter run lower We Supplementing centered

product quarter we're of to due delay January in trending activity our we QX. currently for specifically to see I margin and first the line that budget of top of at slow quarter Looking likely in up expecting more for the also XXXX, improvement. proprietary results industry February to the off sales the that, consistent as from down slight seeing first by visibility and start. note That value-added broader slightly XXXX got operators, a quarter capital QX said, despite with the are overall limited our XXXX, product setting backdrop be would fourth we are

turn not back are And improvement efficiencies overall as continue additional operational greater we subsequent quarters. will John his closing now However to that over I implement margin we have to will expecting impact John? it for comments.

John Chisholm

Elizabeth. much, very you Thank

year, While we've since we continued prices beginning been improve the of pleased expect volatility. of periods the oil

returns across sales managing barrel efficiency such to chemistries, our base fluid specifically, geoscientist and base and our increasing understanding holistic that to multiple to now growing of both improving wells technical their across expertise In closely we basins evolve the team are chemistry our identify develop to driving service child been upon thousands steady rates, industry's into and true proposition our for by leveraging of over our bring feedback performance, chemistries to Core a performance and our technical to at through capital are and flooding loop ever our water in a the than on more continuous class benefit As process customized activity enhanced in deep the basins. reservoirs. remaining and production build per responded clients of to ever is knowledge designs engineers, lower in the experience for table In in are wide and as business Operators focused and in our production development to our disciplines of to the bringing business and clients, More further which paramount on closing best ranging sales programs environment. to chemist reservoir BOE solutions of we a needs. we apply our their play the is deep of must in around cycle in long-term variety portfolio now in broad while we efficiency. continue facing the improved More ongoing of profitable clients own strong and our levels programs the are of offerings. long-term and meet in bear cycle have and we effectiveness from to applied more a price experts performance evaluate Relevant our in we'll relationships chemistry to critical can our across which cases customized for we cross-section value-added in our and pursuit leveraging a pursuit to approach, and WTI have to technologies of integrating product looks well diminishing designs returns the This is technical commodity ensuring position. limits With value as of streamline a reservoir $XX designs. cost to our anticipated the work of technical performance. efficiency powerful a and completions role centers with driving some aggressive than our drumbeat normal reached completion fluid mechanical are both completion higher economic variables The are as in our expand per exceeded new broad financial this well focused short, with them business our best solutions. unwaveringly In efforts innovative of foundation, our chemistry produced. continue stakeholders. custom volatility,

it open back questions, up turn Nancy. now will to Operator, for we you that, with we'll So

Operator

Please first ahead. The [Operator George question from Rice. Johnson go Venturatos Instructions] comes from Mr.

George Venturatos

as had you unwrapping on sale. first I to on off congrats line wanted the think I start John, David and just on Chemical said Florida well. up the you that

net items to a paydown, update of date nearly or timing the there any of got that $X post on secondarily, is cash and sort be about efficiency just you've on of capital strategic look larger logistical per versus, side? get at million the organic Just new aware contracted sort then line given should couple And of in debt $XX is share terms acquisition you in set of decision-making and we opportunities? as look we now opportunities, product opportunity then key some your you know I do that million or to expanded talked previously that and how $XX wanted weigh

John Chisholm

chime capital for heads Flotek a with be bit relief financial of why leadership size First but we the -- capital very with but which to line David X David set is as said, and and recognize to between a reason Elizabeth primarily in to and itself, sand decision have that unusual from company on really would and a by up we the we've then like share asked let effort side, a as situation that we to to type that the Elizabeth not is ask can collaborative she chime the everybody, strategic fully allow this in in Board. effort the of the is certainly committee I'll it's progress well. it in a involved cash being unusual to in

Elizabeth Wilkinson

company and I take approach we with to definitely the decision-making, measured full of a forth. through would to agree, evaluation timing so about disciplined and regard intend and and its to gamut conditions the opportunities very a going of

number the opportunities many we so some the regards we that have There of organic alternatives, I on we potential to would queue potential and was a wouldn't they million have company other require the but bit see There mentioned lot high this projects, pretty that As our $XX capital capital honestly opportunities coming opportunities that other in conclusions. are just some some light, we as probably growth there plan to that. capital are out had expenditures evaluate growth that $XX are I the want side. million it that to to and forth overemphasize think areas but we a along with certainly are as

John Chisholm

but outcome come me you to, one well would what to making part very thing, on background this made never interject decisions didn’t be a heaven his of Board as give just always the but let probably was partner sakes for in want if of [indiscernible] a at knew of summer, they big do when asked the were amount we'll George for his And different a we investments. routine we career this last were of them we you like Capital but David capital, know follow-up hundreds this

to really committee you it. and way in we evolve certainly your as David fortunate So this in this your participation want assessment even we how chime to to together feel on put and

David Nierenberg

Elizabeth you're and I morning, [indiscernible]. John hope good you, recovering Thank and George. from

that just been more million of a million previously mentioned possible said, to that $XX As XX that rather had was than number really Elizabeth commitment. example

person, wasn’t all me [indiscernible] and looking We at John process old leaving Capital. at let before the business. get to one an at partner about I before possibility firm I Capital. process Consulting, said, a talk [indiscernible] little in 'XX correct [indiscernible] our are thing in just joining and was just was I am such I in investment I there 'XX the into

the by of highly co-leaders? me. with Elizabeth George the committee to So a we're of Committee was am I'm talk was Director two already process Florida net it's to because and the of Outside are of operationally timing. because Board think we that and of heard will course That of to and senior port we independent. reassessment, you because the are members the we management board the committee strategy. the the about the and new Chair took three Why as that independent both determine an working give of the ability proceeds doing sale? thorough and a I the initiative sense and by co-led happen some professional. execute with team. likely to us Once The create and whom but I the are question Well, this populated charged requires I of the financial committee. do was management mission, Chemical which the and your both committee as Independent what the knew is company's of about strategy The Committee's what what board together two is right the that is doing let's operators We're reconsideration members to with

have uses of they Columbia benchmark developed and value possible extensive company with they benefit a government plan George both I takes work of before Law of questions, The of and action. key and is in might other. how really being liberation completed Committee extensive cash use to metrics is are to guess strategy also the the assess of it We School. what then committee's all the morning us Center answered detailed Millstein which my must experience might this in work until and has be and in determining stakeholders everybody the experience I my be the turnaround already the how and is waiting to fact want right not to used and that the against listening emphasize to process is one at

our don't deliberation being and cash need when we and we and choose if our said we about to possible cost and skepticism degree where of even at efforts are Elizabeth get business not will which we understanding you've about of while it as from will professional information breakeven what we pervasiveness do understanding a depth consider the flow heard as Elizabeth under John and the company instance for single to with fast committed as we capital model compete new reduction in evolving reflect company equipment. very we business to For selective which the base better just the of right and can expenditure,

thinking cost We own. will shrewd alternative money as possible, just for about be ways very our the to spending well capital drive about the as company

and are can customer Allen us is excellent and efficacy. customer on R&I her decision that several In work doing improve allocation to targeting, which addition and projects to relevant and help capital to focused product produce key leadership on costs is team Silas' segmentation James that market and Danielle under

complete work, and want leave work to comment we its pursued and specifically our say good already before I finishes until that it's strategies is the almost pursued will with do will operationally impossible happening financial. what stuff committee even be strategies So the be what to

are the company The right process, and a way earning pressure get emphasize regardless, the to Flotek arrive but to call we of for past. test, our We of process urgency process possible. at the built did the are cube to in the underwater. the rush or right the we to are assume as to that We We the cash stakeholders, share I the [ph] therefore large the we want to others to artificially right other like in if to not family are sense where answer. committed on word the shareholder This have volume liberation, genuinely as flay funds and not we do answer, of this answer rapidly the will rise. is

outcome stakeholders of this So we for the want to possible right reach the right answer with company. right process the driving all

John Chisholm

George David, follow-up. Thanks

George Venturatos

across update that that's and just and that for David to make needed the appreciate understand the I couple thanks a as just board patience decision. Yeah well that

quarter, I guess the the on of international is have side, but East sight in traction third of I in and did to I then line not visibility I domestically the to in that you any sequentially, the in we at magnitude? orders we're maybe out half operationally, there to that larger quick lower you similar looking slightly speak contribution about understand ones, versus going future or know talk recognize John guidance, least a first as XQ into the maybe a mention internationally Middle timeline. certainly did can just know any and So couple one had topline your the that XQ

John Chisholm

able percentage first I narrative The there capital which many quarter the of didn’t although as couple talked at of in the increasing of was four and of a Yes Middle the is companies added show now about experience ago, actually them this so, just I -- that spend assuage there is think to talked for Middle ago. value completions over kind years as actually we that this That East last we East. contracts year, about think is us this that. cost-cutting down want people some it slightly to in our chemistries brand-new late are on of value last conference leave the for we years revenue, a value a out the hydraulically of surprised to added and that really of are majority the are three fractured. days relentless I can just other the happen of clients the

So fracturing felt that. on I can greatest the over there, and there's look which the We usage kind but like last is predictors. have environment a why do in we going you're know we're number area the not the environment international only think difficult for Arabia now best We other I've the of accept is chemistry said of in predictability is as people folks new world's Saudi us. the of an we not the very where one into countries and always others, years couple Oman new that going back the

the the so talked everybody of volatility weeks even this what the is larger they and on are also that what me we set, their think X public East see I in of companies helps it out of is were than be to say the to looks to was to at So things will when expect we continue rest the order, bigger that a they and supply vision volatility X I the and we the that mistake way It's think the of conference, to grow think rest be could continue out meaningfully side new There many Middle say size it. pricing, for that's in is in that continue about couple X going year the level at and a but that it be be was cases weeks like a throughout year lumpy. normal play you. would best leave the excess with to companies hopefully that X pumping the much there'd visibility are build I for significant to for we to of are us. a companies of now calendar certain the to there the think to order were the business different another through I George

through and So think a we that with through we change quarter I as folks see for the and quarter, it we at continue as right in fair we'll enough. it leave that share the see to we'll second move now build

George Venturatos

mentioned get to you but example. on few, me were relative I'll one that we corporate I for Elizabeth just want just G&A the don't but side, quarterly, re-queue, you John variance items and for where and through to that and of a us miss just then cost, this run the Appreciate last know key that there talked about quarter can target kind I

John Chisholm

I'll Elizabeth. Sure to that turn over

Elizabeth Wilkinson

here different Yeah we've the bit little so of able in a able think cost, of about a number about. find mean where there's we and bring cost related different IT think picture is obviously significant to areas contract headcount bring that where to I and a I there we'll to part addition some been be that

Operator

The ahead next Michael Seaport Urban question comes Global. please. from Go with

Michael Urban

did that and provide hear second profitability efficiency of of if I that you're you drive think margin a or so guidance slightly little improvement here about targeting little can the misheard may color. half, have modest margin some to margins down there's the the down talk some the that to the revenues overall I I the stick being because right spent is a money than for say bit, more underlying improvement that the Wanted with it,

John Chisholm

of added call in mix showing we more we metrics should our value Sure, quarter slightly us. due between product to a product believe chemistries The are gross margin is and overall internal the to product margin what want first distinction increase margin. the

So clarity increase so margin discounting they're actually. but Mike? We're Elizabeth that We those will cost that that quarter, slightly that And the efficient be and confusion second that the overall Does we an from component them want will we it in. better I'll is the through the didn't not targeting gross wanted call more sounds quarter. standpoint out. she reason give purchased margin to the are any should to like in well believe call that being we're operational we think of third through a you wants improve flat chime area that's and

Elizabeth Wilkinson

to will reductions. impacted comparable cost severance be the for And also right headcount example by

Michael Urban

would out And presently though. that you call

John Chisholm

Sure.

Michael Urban

there other spend investment would the operating guess are have incremental cost to committee you that drive to you the there. I margin, things much how guess incur I excluding to in do investments then severance margin make you And to the putting drive excluding would and order to the not and cost from that have have is

Elizabeth Wilkinson

logistics. could of It that be worthwhile so be we've that contemplated would the some contract related things terminations to that to some prove

John Chisholm

have margin didn't, A, that ordering committed cases year, people, and can the so to half better to removing the that, think you we that of the will we was additional about need and improve the a to more getting last does to drivers can of looked first and this a that down from in the as a fleet whole about elected is bit at everybody your in it think them be not the talk decision, Mike. drivers color evolved talking on at and I drivers we've logistics to use then this you process Elizabeth what either particular of parties probably an and maybe you so you've having many have you on look of cover handle Achilles' to little at you point less I made get an heel and thing time the internal or or as Flotek committed a call mile in opportunity as third And other that This can of that couple drivers of do that of only costs XX% new cost contract way once for logistics think we we margins as also at this of she's drivers is, around and trying was the and the third-party by flex the on be model component closely from help? handle take part so going so people that we're activity much will committed we advantage move drivers through business we talking or assurance the very are we're the not reasons. this utilization but somewhere that of

Michael Urban

associated Yeah you contract in have that be do you outsourced I you'll and model, of drivers in that's you the to guess the that driving moving is what margin what the will with those kind have helpful think issue improvement as and did that and probability? do in drive dedicated was the QX

John Chisholm

of the identified as we margins will the called higher Yes so slightly down a what is that just of because for on differential in that's you out there's one things and than in have that's and the situation order two itself, repeat margins margin QX, product come then you? of in premium just CNF you itself a if QX meaningful margin a higher-margin that the value, those does doesn't high that answer chemistries, when

Operator

David from comes Sachs Go ahead question next Hocky please. Capital. from The

David Sachs

Good morning.

hopefully allocation in I lead thank and David for think a for of that the and company conclusion robust shareholders to the and First involvement will capital. his for process appropriate

QX bridge of be on modestly talk end get the indicating year what to understand guide ballpark revenue couple operation, number? modestly to in post you quarter through XX% year breakeven sequentially higher it by questions if was will X down oil, and than to of today? the I trying be So should EBITDA to can to of kind the about the make goal you're of as first the Just improving general the business direction just the And that of the the topline get the of then sure the see your business model the a we $XX higher? business

John Chisholm

David. really that. a for thanks Sure so him more unique the visible of he our plays is do we why this for on the directors, role all thanks is participate to to we which one acknowledging like He perhaps call, of but acknowledging involvement asked

to the as mentioned are in this as everybody probably want is for I is and industry. don't difficult it's this with just but been something say visibility George As ever people I that very uncomfortable with,

mentioned of conference quarter what like. the As pumping They to of and about largest the schedule. CFO third eight talked about not look a on of six would companies week talk a start to XXXX the calendar week I one pumping at is fourth their even

metrics slightly you complete we it last move more that being context we on believe in of completion of the is revenue guidance will backdrop is that's the we our majority why on direction gaining the that internal But dealing is revenue period to to follow, as directly evolve for we process can continue with then the I'll of reason felt up be we call trend but we where more the mind client along up, the and or the will we others industry year and are to the would are may believe Elizabeth give on done which is Elizabeth that the with in, revenue PCM environment to more So it like. the of to of business keeping to backdrop give continue continuing consumables the is the movement time. will look activity in the don't part increase an the even continue with some many will becoming we're year shared turn which per flat outwardly we in a of to of this saying completion the PCM. over that's way and sourcing what

David Sachs

determine breakeven? does I to we're am you if based achieve the it said mean structure cost just the to going What where trying is topline? base on EBITDA

Elizabeth Wilkinson

and a cost-cutting conditions where what trying us any to EBITDA on at for order market business about company current produce EBITDA a be and what So to was the today be avoid and focused the under backdrop on to cost looking positive here's that and magnitude the we're the of it that's our increasing structure we're under improving and revenues, can that the what market weak prevailing it need to conditions for our that's is as it condition but into of what… turn our presenting is does innuendos driver more we're prevailing

David Sachs

$XXX revenue $XXX work million need you profit. revenue at to million we better and So can million are cost be to of $XXX budgeting positive to model we base and EBITDA coming drive of the million the $XXX should close to extent experience revenue, we show to

Elizabeth Wilkinson

that prevailing and don't in make is adjusted just positive positive to degree I generally us to want EBITDA of deep specifics but say get a conditions EBITDA. our the that go the to positive just goal high detail to get condition, I cuts to enough into will to that

David Sachs

cost you $XX the today that had would earlier. that production, identified you And you additional $X.X what $XX.X in identified would million cash cost estimate the that mentioned be the you

Elizabeth Wilkinson

cost. cash all Essentially It's headcount. cash It's essentially cost. all

David Sachs

me the will cost there what's termination, be protect trying that achieve there might be? the severance, burn one-time to to just to Let lease what might rephrase that, cash understand be

Elizabeth Wilkinson

is going little as severance year. The The and said $XX in the in is that current a it's basis we be of to things. an scheme bit very on cost-cutting there million the severance in thousands, is is over less than of annualized small hundreds the the

David Sachs

the both but $XX single million cost to to achieve cost digits, single is digit million savings. Okay. achieve $XX million to in

Elizabeth Wilkinson

Not even.

David Sachs

that. would And projects, Thank capital growth even. improved Flotek. then your you what spending these you Not estimate and the excluding for new normalized

Elizabeth Wilkinson

range Including that maintenance organic may the projects for type growth to $X sort thinking of we're you type in million million be CapEx. $X of

David Sachs

to started beyond you Flotek are there Middle using milestones if you reorder along upon with and that you're would success other for traction they now before seeing well field, the your applied It's had since it's thanks? there and been press additional in typical client's pick even tremendous is currently way used of just product the that they performance, this that you your on you seeing accounts, And last us mentioning the question, mentioned penetrating we for they needed the dollar, that pattern in had since and anything client anticipate product. can expand update possibly is this Chemistry this there and can release if just the longer your ability, East year last efficacy their with own terms tested that determination the that

John Chisholm

David. Those for series questions of those

see follow who of want We to allow don't it. get want the the activity As we discussion progression ahead client they our of talk where of talk to about performance clients things. to as about most they the

past the well may or anyone shareholders. in have weather serve ourselves didn't think I we and that

path we'll stay be the at may we out are we whatever frustrating turn and this as in call, months want next but environment. the protect selected frustrating, point of time only to on to it's for to you the on in that think they just client I any line it questioning. some with let fashion Thank as provide some our also So and could integrity very of where competitive protection do six from but the that well be of we've type relationships, not

Operator

Go [Operator ahead Scher LMJ Instructions] The Capital. next question Scott from comes please. from

Scott Scher

appreciate. on Thanks team to you congratulations well guys, as David I the on Thank for and and John being [indiscernible] fantastic. call the

inventory. a of follow-up, have then to on $XX forma question business and you we be do X-K new the and million and the is thank day I had for going to accounts pro what likely be So we What showed turns you? inventory are of accounts DSO in a think the do it other the Elizabeth receivable think receivable, I million receivable accounts out the and the this put inventory, $XX chemical showed

Elizabeth Wilkinson

for turns, range going the So the a inventory higher of overall at at typically would that end little be as working we we're bit capital our mentioned earlier, to think we I expect. moment

year. international of of be like I think just go are this -- of part the international this had to lower longer receivables I'm going Sales down I'm have specific it's there. anticipated it in that So sure tend of outstanding you company. of still I I not a the the give we see do I because than coming number percentage think little to hoping to that for number that lower amount X can you, for sort the the lower but we statistic earlier going to X a

Scott Scher

of were XX-day we are managing managing or DSO is to. But that kind through we

Elizabeth Wilkinson

don't to manage. certainly I plan

about are to be get we down So working absolutely. that to

Scott Scher

in have that to have company balance long And the is really in a debt that goodwill million assets? things time $XX understand. in the a decade like I'm lots sheet, first staring is I'm the it current sheet gone, gone, had this for has -- something this has balance cleanest other curious you is gone, a of what's just time of clean

the what's day balance the pro the other other current of assets, forma there? sheet So in and $XX.X million

Elizabeth Wilkinson

assets looking have the you're don't that number are Other that is what you me. current if at? I of from --

Scott Scher

at in the AR, cash X-K income out other our XX means XX, cash, forma was is it balance receivable of become in that a kind the inventory, pro and $XX.X. because and which two adjusted of pro two asset shows I'm then what staring fold days was there a it's assets line Chemical X-K current to ago, of current September want sheet Florida know shortly. the forma item put XX XXX for sale tax just I that

Elizabeth Wilkinson

don't I me. to Right, that in I off just it top and at just am of me look take I of my happy to and I have the I'll offline don't sorry, pro forma head just have front not coming have but it's that, to

Scott Scher

I is and current are conveniently was assets now going accounts the $XXX payable million. are ultimate Where the $XX million

So million are of process. have claims and million $XX basically that inventories net million of which are $XXX cash, $XX these clean is current $XXX which we asset, they good million build of were we presume good, and are

where million of net assets course you $XXX I is current million. $XXX and in on have of no trading that stock and have know you the So debt and am company, evaluations going the

from cheap process, months all come be at for stock why not is we're you let's spoken announcement buying you be over three back for forward but So wait I next David now, the due respect have Dave to will two, buying with to if the the with would know all say stock going stock $X, and at back back $X.XX. million all to due and XX this I buy a you not you wait some to $XX and John we do out while buyback, want process, days to will you respect to

for So understand million. can't entire all we I as that to have the I would love we that why scenarios, process, to under $XXX almost need imagine a shareholder wait would

John Chisholm

observation other to that's you one we've folks, that Scott think chime do in a from I No want question? heard on fair David that

Unidentified Company Participants

have One that great about share their this of thing David the and on I is impatient. Scott call

consequences their and as I are appreciate people moderate can. I Other urgency about There want from a look as rapidly talk about contrast, who Sometimes a to benefit of who David longer-term benefit the they know dividend. along even those to we short other term one stakeholders. sense potentially time or to consequences repurchase. and absolutely suggestions a this term time from that Scott other but we move for me are to to people time of of don't their for process us everybody, powerful make mid special longer time, people or the the all by talk

to So the determine figure is there a pursuit maintenance as it the rapidly is growth proper out we as what to to along of are as is as is judgmental strategy integrated through consider. the move and possible those two dodge as as for that trying to what the can. of bullet and process an strategy well for through we needed about we've not we repurchase are quickly it may going approach we here needed ongoing and thing mix can process any only the hearing to trying Not been we but holistic and that so

Scott Scher

John credit I model amount it. One complicated, completely of a little and indirect doing downturn this more may you recognizing to and for last a and job guys an have within direct done years, unbelievable the from industry over model a so question pivot two obviously if more it business I understand guess an it's I to

XX% she math a we half $XXX years very it talented, $XXX our Let's million I annualizing in just about if to of consuming our the get a $XX Even we let's on that would it's isn't you're $XXX million credit probably corporate company, EBITDA G&A public million EBITDA. unless say G&A simple imagine the is $XX down by lot business am putting EBITDA two million or being margin, a just hypothetically three million be of corporate of doing annualized $XX and Elizabeth million.

the standpoint So and you process EBITDA comfortable come the let's Dave levels of EBITDA in haven't public with what on back you you that of that? and a in of we're that the can from of can comment we're the to just what within spend seen your with I doubt, an margin. the do I'm level I'm willing we am you things and get At presume see corporate to you can benefit strategic giving a doubt you arguably just we will consuming revenue EBITDA, you business years company? giving from being can level up the comment G&A the we the Can some math, feel sure comment benefit

John Chisholm

our the today Those directed tell towards how come they're commentary and the options on to is return you for of exactly be question, think up I on view up I being much to question leading here I are in don't being that that this committee better with the what's of Davis haven't questions B, Flotek yourself, your strategic all with forward-looking just can't are and people have so public A, is analyzed visited you table buybacks. certainly him shareholders off the a not not that the with but Lee in a represent want but and private. this future best offered all question Scott share I anticipating regularly EBITDA that other regarding again that Flotek company. preempt

million, chime you to in, at I those look If greater dollars, David whole this to it want a welcome the others than spectrum if are but by the time shared processed you couple quarter, but every is takes committee. of that and just sure, being of amount look options of assure at it's the you're that you

Unidentified Company Participants

Florida Thank in in the place to and and the Had October company of that quarter first have September, XXth XXth probably right the the last the the have the year, agreement about you, busting make with committee. of on to or not collapse this around the of of probably company of about would what PNC sale and loan this price covenants David a be. been August John management its and given comfortable mandates Chemical oil amendment loan John, not executed absolutely the is would

rest circumstance outcome. a necessary a might it of could stakeholders you rather to like appreciate parole that outcome the a So that simply David in beneficial been a in of the like to company than bad provide have situation even sell

have Fortunately hove, with Florida and the of net financial Chemical we question. strength enter ask and the and the now necessary proceeds to sale opportunity we

several that company illustration happen. We're long-term to know them were for not maximize that it public on assume of the answers let's perhaps be You over something an is even independent those very are the happened the We questions but we the don't term, to down value the company, medium working thing perhaps happen stakeholders should be road, not sake the years the quite something do the right to all might for that pondering thing perhaps yet. If best to just very it now. company. could that be should a

structure cost possible. cost First to SG&A, mile sure board, as the make of goods, get of as that all, not across but right we to size final low our just also that down

I possible bleeder it put So on owner that be subsequent taking can a scared about not if way. any would

reliable, channel something team. recurring revenue that continuing quality to customers strengthen which the and is of and working the a also management the of segmentation to segmentation the build of Secondly, we're model, on

things we're are of where compelled we situation doing those busting of that are are we to not covenant. do substantially because in fortunately All a the anything because the

grow on So want up. things those give value what we're long-term optionality more it focusing be and when even we short-term and will that will about we to both build us

John Chisholm

silo thanks done is it City and on long-standing questioning with of the times brought doing and remembered even Yeah the up everybody entire want from not and thank They've deeply wrap compliments to a that hundreds roadside one that sure involved turning prepared team Scott, make is of City. own one you our of a was if whole of analysis. we benefits to this us for around the our the this that. Elizabeth remarks real we of environment benefits that's line just in I appreciate relationship in business that and that model

Operator

Management. Asset comes question Lake from ahead Mitrani Sylvan Alan from please. next Go The

Alan Mitrani

environment. in the those and you. there as I cost impatient a reporting as also as guys appreciate from and and too all Hi. I from even the a just also though been David I cuts shareholder echo haven't clean comments Scott long on and Thank all appreciate David echo, I focus

and You I your like an divisions gross the went seems and had nine remained give points months where that's multiple it's XX.X% XX, what XX, XK, been on had from nine XX parse down the the in day X,XXX difficult it from to that month the margin through other it the data couple your been through filed XXs basis example. the was business XXth.

Can your for reporting gross So division. in you gross was for release what division can't quarter? margin it tell press today. you this find your stopped margin in I me the your remaining the

John Chisholm

or higher and segment more of Alan margin enter said away it in than people terms appreciate the we flow, we stay a type the to moved period presented more increasing to want gross environment happened if actually cares in reason pace margin to focus that into represented the we in away guys might and are to and that have chemical also gross past if theirs now. was of So on the margin the the previous just what model hopeful we're created where certainly does they operating us business cash everybody back have focus as not than competitors range no is of operating I calling focus have the anyone income think people will understand absolutely we they where from and an why have of margins That the it in distributors It gross that. a into we segment to you number. the our target moved want and margin and to out otherwise this hopefully the talking about of being that a were about to at was from only pumping 'XX I'm in our to became with gross EBITDA, to company good margin want from main moved or and operating to want we realizing

Alan Mitrani

now margin, your that mean it's your gross report it you normal the division I I left, would want report to bigger in great. product, you or think division company, a one Q one shareholders business I giving but but be understand standard. we're to appreciate SEC, you K or I to really division, now whether press us margin actually can't the your according a it, the one of have have release the gross would hide it you Sell of that you be if

Elizabeth Wilkinson

-- grouped looking SG&A breakout segment so that now at to mean out. our single you is to segment is the with a what together had -- SG&A the with segment new of cost maybe So operating you're structure part in comes in certain when expenses is added G&A, and revenues different now K we segment the reporting in of operating have SG&A where a amount our segments, you it line our will you're see added but ECT segment I expense of

Alan Mitrani

money -- can't you got mean and look you balance to with sheet and the across recognizing had you your is give your seemingly be but and waste to of if want have to of allocated a divisions this that think as don't hostile you shareholders that and where the with from different was cost unclear, of lot but and that you the you it making management you cost and I it the so the on now have, without was want is clearly being line And that I you credit this, employees you have you that sell is the in company, none appreciate quicker your shot a to of even part it. can having in fact number cuts the hide one your none truth but bottom and see be be already the cost, company business, year what of that's your you if the of have last cuts cost fine, running are I would you want than for and to left the the company that, because trouble I report made shareholders and multiple size got company,

CapEx we $X $X to said was on So sooner, One million that better, level question other you said quicker, it. the you Elizabeth? would million appreciate

Elizabeth Wilkinson

Yes.

Alan Mitrani

add up range it very never previous you're your high? building wide why the so That's center, at when number but when in to is CapEx previous when numbers a R&D the I those -- except I oftentimes look years, came close

Elizabeth Wilkinson

I pretty may they're that we to expected, do, not we're well $X additional be may not going looking at some that but capital not think may or It there mandatory. be, million is projects are

need going level. just to look really what's of sort lower the benefits we those So of at more and than to if determine that's there's

Alan Mitrani

a couple so as us you're the how cost we cut? question, it calendar specifically maybe as you what metrics are Is throughout could getting to too, we're can this stabilizing 'XX compensation executives it relates Can up last then it pay give just paid how chime for be on doing see And revenues year on? one can to that and that a we attention going doing? David in to and lastly, the

David Nierenberg

to speak to John. me that like you Would

John Chisholm

Sure.

David Nierenberg

Committee, the I year Boards a middle our job. am joined a Adams doing of member of relatively is it in terrific new the I excellent the Chair Committee Michelle and

weeks and that using from to therefore is the As that to then are saying they committee of contractors a and minutes operators Alan, and visibility only them. have has them eight the quarterly reassessing things you quarter every of been ago updating may and changing objective one objective doing six setting few actually heard annual

are that be there setting very those CDNA which goals discussion and what proxy we to specific I the now comp new won't best it be believe because the new it from a think committee the new a on for friendly come time will live at this it call our would new time appropriate long that I in be new is find will more about that not when will in. stakeholder out by a the product and approach numbers forth be be

Operator

would for back I turn like closing conference remarks. concludes question-and-answer session. the This John to to our Chisholm over

John Chisholm

on to we say Nancy just everyone joining again thanks again Thanks today's for call. and us want thanks --

the These our a people and result are transitioned position I our talk transformative great we think the have in. everyone's our company company that currently support offerings times interest dialing again. had and soon. in. number and our a day we but of questions proactively sheet we today. of future company for have in thanks to clearly product believe We is shareholders in our as industry nearly received the record I'd balance the service everyone unique all success you a appreciate like of We'll to and we localized

Operator

concluded. you now The for presentation. conference today's has attending Thank

You disconnect. may now

Flotek Industries (FTK) 7 Mar 192018 Q4 Earnings call transcript