FTK - Earnings call transcript Q1 2022 | Flotek Industries, Inc.

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Operator

Greetings, and welcome to Flotek Industries’ First Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow management’s prepared remarks. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Bernie Colson, Senior Vice President, Corporate Development and Sustainability for Flotek. you. Thank

begin. may You

Bernie Colson

good We and your morning, you, appreciate everyone. participation. Thank

Financial the Chairman, today prepared Operating business Officer Chief Nick Senior Bigney, are Compliance Innovation me provide and On Research Chief quarter. President Officer; James results of Vice and John Borton, General Chief Joining first and Ezell, today’s our Gibson, Executive call, remarks and will Silas, concerning Ryan and Michael for Chief Counsel Officer; Officer. President; we

your questions answer have. Following will that, you we

have is website. for and our forward-looking expectations results, is call We that be our first our events note comments statements. future announcement for webcast Please also any now earnings today’s available regarding released we available projections quarter XXXX website. on are on a being Today’s or which replay will our our on call make

number statements current call. review discuss and These filings metrics the risks refer releases John? press of the and to uncertainties, can control. our differ uncertainties from subject cause to Forward-looking of our listeners risks to are discussed We may factors results advise materially as are in beyond a with earnings risk now I'll earnings which over our it to our our John many management reconciliations SEC. to expectations. Also, this actual provided and on turn in release, please non-GAAP our Gibson.

John Gibson

first of good and results our discussion you morning XXXX. Thank quarter our you everyone thank joining of and for

him First you. leadership and me team leadership team let Bernie to and introduce Colson welcome the to

and recognized with of managers than our investor and asset fund to ESG energy lead the Delaware was lead Investments, focused excited a holding help he excited leader heard develop was manager, first investment has to Flotek energy have bright company. him helped energy going energy Flotek most strategy. Bernie and corporate the renewable institutional investment is believe transition. Flotek's here relations with as on corporate experience him more to firm's Bernie on Bernie big sector and experienced and sustainability just he's labelled banks, the exceptionally team I'm I thinker ESG development, decades extremely recently and team. in a extremely drive an I'm two in that You the speak. where strategies. He's portfolio joined a

agreement reduces water, air, industry. its that green a cover Flotek we fracturing completion our and truly a before call results, in agreement, of to Now expanded land quarterly North vertically-integrated solution having E&Ps people. deliver suite and for for emissions This full of chemistries XX-year me we is to closed today thrilled let and transformational contract with we're downhole the say chemistries, thereby hydraulic the nonexclusive delivers have ProFrac America. fleets the Through our portion that significant this comprehensive, now convene protecting

We're will Over excess the April which X. $X greater the our next off a completed for in of his ProFrac, million start, We're of strong this just full began on revenue we with XXXX. decade, discuss $XXX first in in create well of to partnership remarks. that Ryan anticipate Flotek, month very than more which detail in billion anticipated we revenues agreement including very backlog should excited in

positive fourth quarter achieve We are amortization the on before XXXX. notes, target excluding the of to end adjusted EBITDA, convertible

ProFrac comes changes initiation of our the With of with Directors. to Board our contract

stand our with Matt proxy in election will June X. concurrent General for the statement, see will Board XXXX Meeting on you Annual As the to

reducing to he as your of of and efficiency, for recently for has to ask note, adoption natural ProFrac will best that ProFrac champion directors. IPO, industry. Matt They've brought the X of our their X Board Board. it Until appoint strategic Board of Ted Directors and tremendous collaborator a the a should of total extremely is the complementary is sustainable its our director ProFrac with met. and shaping resources, note one the more to develop been that ownership. Hobby company of I additional electing the the transformation. in the Ted solutions contract, have our strategy, Concurrent Paul. for outstanding driving through reelection Both $XXX to We the Paul He and directors, cost with chemistry I'm nominations Brown offerings has been on guiding will our meeting. such nomination, board. of after miss our time, value for of not while to X As raising million. throughout personally key Paul this support Holding our and of grateful Ted directors. shared been Chairman E&Ps in will the me completed in the pioneering instrumental Corp., occur will vision with enable sustainably I've supportive him option I Board Any annual stand time to continue both Also

consolidated in reporting of quarter, by with basis is financial backward. now part ago, on we a nonexclusive different discussed In than business. the than and will we now X that call chemistry's earnings quarter's forward line As of company light our expanded report our on the on focused in looking the XX-year with closed, contract from this, technology beginning are I segment very rather Flotek is second a future rather the just closed, of the we ProFrac last weeks repeat as past scale and

after COO, by followed Mike today, Ezell will comments remarks. So who official remarks, you brief provide closing will as by my hear Ryan from Borton, my in his followed capacity

at I activity quarter of fleet about the call, beginning where year was frac As our the the last dropped January. on challenging concerned in indicated levels markets

recovered slowly March. off activity However, leveled in February in and

XXXX. be our our pandemic. As QX the X% end, revenue over improved a result, the turned also by X% the strongest adjusted improved since sequentially to month out In Mark quarterly before and EBITDA

Ryan. the that, like to with Ryan? to I'd Now call over turn

Ryan Ezell

Thank you, morning. John, and good

chemistry providing that we strong our start. before are We April, current concluded of XX ProFrac on extremely In partnership each first the we to lot provide X we report more total, to with support Let I'm quarterly of our with with conducting analysis and to providing of plans contract off the of fleets end the the by month ProFrac ProFrac the pleased profiling testing. In key team to the million and quarter. fraction the of month well recommendations is build to our reology bioassay flow fleets fleet, to number commentary. of chemistry supporting chemistry downhole In further me April XX first supplying increase evaluate since April, Since of are additional and to X prescriptive gained of we've testing, X-ray throughout major crude pounds fleets, a composition the bringing basins. across have and delivered total very two ended highlights relationship. start site cuttings, than water we our

field. In greenhouse capital digital a analyzers integrated our approach gas gas the ProFrac on part well addition, deploy designated protect to have as usage our reduce powerful evaluate as at as of this fleets also emissions customers' chemistry, the field Verax equipment use well our we to site. in to will be case believe plans to We

without highlighted is ability operational, last partnership we coming and once our capital I the have to fully investment. the still continuing agreement forward we utilization significant progress build nonexclusive. with contract and double quarter, manufacturing As is the levels to strong our years, We And on updating ProFrac future be ProFrac over the months in quarters. a look will the to capacity you

to we of the quarterly Chemistry performance looking and continue share market growing segment, activity our Now levels. make industry Technologies progress in at steady outpacing

fracturing the hydraulic the was a compared increased saw of at January, Despite market. revenue March to in activity year month unexpected January that, our we quarter. start Technologies since the XXXX. fleet the terms mentioned, flat dramatically sequentially, Chemistry decreased performing disruption John As And overall levels X% activity with the revenue in quarter overall, market best prior of our in of outperforming

In I'm showing shaped the as same to the quarter improved about versus be up thus significantly addition, with optimistic trend March of month positive MACE far. the second April

pleased service are as continued to at concentration. minimize to of deliver we E&P stack customer that I'm both well international we see diversify companies and on continuing customer our and organic As domestic commitment operators risk as expansion revenue portfolio our as look particularly with we growth,

differentiated optimization by them global operational typical and President we the Analytics. welcome as responsible of excited new developing of leader closing, that automation and and our Vice to adjusting oil market gas optimization very at a team. capital. business as recently, to Halsey deploy I our our XX% with aggressively poor summary, freight for and And to customers increasing our we said, Ron reduce the secure as about excited quarter experience transformation I'm now he delivery and to on to fact, lowering optimistic structured a This congestions. brings the Flotek rail our attributed straight model site we've year, simultaneously more last evaluate with and model market enabled chemistry alignment to in-basin technically proposition, us delivering we our base the solutions leveraging spurs. the of efficiencies Further, and over reducing off back value pursue our revenue than XXXX, rig was to in custom Ron revenue the welcome and global are through grown our are to of QX to I'm service like increases Ron before penetration, about by in provide concentration costs XXXX to margins. are elevating to our share, looking of ChampionX, history we pricing performance, improved ESG proven business able expand our minimize growth and helping to allocation and the costs the from suppliers material so to risk, across we're Artificial and chain continuing lines invested will future our trends, to improvement. prices preserve with focus product I'm process And supply served is maximize Data In market costs that return accordingly and top of of increasing in the And raw with his our growth. Ron would volume feeling suppliers, delays material business. and to with automization In role scale as where and expansion. our rising Lift These also our Flotek, we business margins. And leading at purchase for value and on we're while Most Vice to impact profit. their analyzer, industry-wide delivery our continue growth we spirit and as key can accelerated President due production volumes customers. In our risk. mission profitable of volumes that since of extensive global with And led revenue solutions customer transformation optimization when future, leverage achieve XX% he inflation and our

Now back I'll turn to highlights. Mike the call to key financial provide

Michael Borton

Ryan. Thank you,

As exchanging explain. Ryan supply with This would industry first. John an accounting like model some of ProFrac notes for agreement mentioned to agreement earlier, X a I convertible of and long-term comes implications, GAAP structure the supply important unique is which of the

First, account the there noncash of to will the or be life adjustments a convertible notes. to one-year mark-to-market the for quarterly the entries notes

applies back You That the million issued QX. added I cash may want of March noticed and have initial notes $XX the a adjustment that noncash was a emphasize the as of $X.X to this mark-to-market to flow. was statement adjustment XX. in million in adjustment to

based of additional will to project of notes $XX adjustments impossible to the be revenue those issued quarter, other magnitude contract its the amortization as similar our in close associated from in statements. revenue this GAAP date, share GAAP be That May The $XX value there be dictates that be on will expect and of each marked Again, contract earlier contract financials. that price is will our ProFrac million which second, original plus of noncash over be see reflected the as a with market notes can notes updated noncash item, GAAP value but as will You is expansion life and is the a fair is be to it million to variables; the today. ProFrac financial subtracted market of notes offset today, to closed the an but the XX. certain amortized

is we that to starting exact of the cannot in GAAP the with wanted second nobody items revenue guard quarter. predict off this we at the magnitude While ensure these time, taken offset

million the $X.X in for than to from moving QX of QX; $X.X quarter $X.X income significantly then on Now quarter, million QX revenue X% in lower and statement XXXX XXXX. In million and the the SG&A from $XX.X the QX X% up first XXXX. QX million was XXXX was of

As use legal fees outside with consultants. third-party lowering Flotek continues to corporate of expenses, reduced focus audit, including on and for

the of than million, $X.X over the for $X.X nearly which improved million first was quarter's Our quarter trend the last quarter adjusted of and loss EBITDA XXXX $X.X EBITDA of continues improving of a losses, first loss loss better million.

SBA. to included the applied on for soon agreement. move the associated by The to several program. we of million of forgive had back and balance the metrics, year-end. in in end issuance loan impacted February loan The losses, the Apache and million $X.X all sheet versus balance pipe has mentioned closing supply the million by the the quarter, PPP fees $XX.X capital of of $XX.X and QX let's late cash this we offset the from cash performance. pipe partially Now company expect favorably improved At with company and loans substantially the XXXX, ProFrac hear at was working of equivalents which previously for The the

As we of the goal Waller, and forward significantly improving capital monetization to XXXX Flotek facility of revenue. growing the assets, line continue leverage into $X.X is Texas noncore look our as our part April, while for XXXX, In million. sold working top to

in in addition, late with agreement Texas of close stages the executing the facility our coming In is quarters. anticipated Monahans, the

continue We dates. our in future help back his with will to very Sandler additional final call John to cash Piper growth the for generation relationship capital addressing At working I on point, remarks. this pass activities our

John Gibson

friend, a and as become and in SOX the past trust. relationship leadership footing. been much our controls to finance to close transition as accounting joined all outstanding of team I instrumental trusted I'm Internal you for We're promised the heard principles joined of and Flotek the fit-for-purpose company with at for to industry. to the his technology company that a Controller finance Mike, financial Board, by for Mike his as auditors to all our rebuilding the is he year announce us this, his time from our stand our a someone our He's excited challenges feel here functions time thanking our and and especially an much,. I'd just been Seham Mike as X admire. and that a new announcing departure a a CFO. success the who as Head Carson is as Interim for as foundation just of processes -- Audit he's been years. we and going last and stronger new ethic in Thank well company you just we wish has helping future. of build to our and as him to evolution do and over we today, back we responsible managed also year productive he all and And the place company needed has strengthening Borton, a build auditors. our for will very Seham When the He's transitions miss of historical the overcome he every for gain a successfully She our team. Mike a and contributions financial that addition over with effort work ago really and she building to to Committee. him to reporting adviser business. She he Audit, joined steady brighter a truly I for like stronger helping for his call when critical and his success. integrity would someone into unwavering accomplished to

the We fill this the organization to confident this role at critical in right person Saham time. is that are

to meantime, You look next new quarter, from forward In her. role. getting her to I help into and hear her will know welcome you the please me

just the this for Now our you support us ahead the it incredible thank much to of and so supporting interest We're we encourage your thoroughly and include let's meeting annual ProFrac you, to continued voting our future to Thanks with and what again, your shareholders for by into for in excited unlock want the business all lies and Flotek. helping and now. And questions represent of us participate secure contract. really reading opportunity of turn proxy. ProFrac, customers about your the

Operator

first Swergold Our instructions] from Firestorm with Capital. comes question [Operator Eric

Eric Swergold

welcome team. Congratulations on the closing My for the ProFrac. to first Ryan. Bernie Also question is

us For announcement? I more John, those give And of fleet revenue get maybe number the chemicals then terms in for a have division? easier into per question general who getting are us can C-suites month generalists, a post for any ProFrac whether to you it's conservative of per

Ryan Ezell

at the Texas, for the we revenues strong we market look a we quite versus and the run fleet question. the typically per of because on version and Eric, analytics Texas in. look Thanks, Texas the either based Northeast versus we've what see of they a you in revenue at When a generically South see the done cross-link it's et When hybrid generation basin East or operating or it, bit based we Yes. that really West slickwater typically a Texas, a system. East from cetera, for

So in significant to Texas per the chemistry from Permian is to could month upsell. Basin $XXX,XXX fleet you $XXX,XXX a general maybe month. see runs a anywhere in usage almost West $XXX,XXX without the value-add $XXX,XXX on

varies But looking see what the friction at on I this anywhere what package the that's of $XXX,XXX and at it. depending generic that South that side $X.X Williston to a Texas revenue gives in on you the, those call stuff way the like kind say, that I'll that the million water $XXX,XXX. looking for around for of on the in per bit industry and in for Northeast the most little polymer And we're fleet. at month the produced higher on the kind idea we of We're regions. reduction for Northeast northern you in of and/or type that so depending look an the in we're

the on So package generic systems. slickwater type

John Gibson

Thank Yes. you. you. And Got

question, have talk in everything our it profile, operate only opened service say them up in providing providers. Eric, the that our a environmental one. would to the to access as Second but to improvement contract, is sustainability, focus on our I and C-suite. think license and we ProFrac elevates C-suites intense do, And good sustainability with obviously about and social that this I the with to us And Having their solutions. we begin so we're getting particular, an enhances

think So open having to provider this it relationship even E&Ps. C-suites with I ProFrac other about service I being the does customers up think and for and the why sustainability. will really a industry. future there the than chemistry embracing again, green open It's is doors the is us more this the this to are about our that's leader so But are that's

Eric Swergold

guys. Thanks

Operator

Rice. next from Our Don question Johnson with comes Crist

Don Crist

missed I just existing of logistical Are pains place any touch And wanted kind how have there any right of throughout call, taking the now? that ProFrac are fleets? ramp-up network growing the the as seeing So you I is your you additional you to pains but there? ask add growing

Ryan Ezell

expanded to capability a is significant significantly, a trucking out we see to for our is be numbers. which ramp-up. at achieved question. in there. what we've got at those would we were trucking end would doubt that I contract say what for we I signed that planning no There would the XX That's initial ramp-up, we the And see We when fleets, already it, pains. April. the we tight the that growing look of there anything great We've didn't market consider already

adjustment wasn't on a for us aspect. big it that So

an the fleets to chemistry the the As and fleets. when of to for share the and XX collaborating expansion now We there's our with to the with trucking we that supplies We're you We're introduction in it's The is outlay, today, to key of start-up it, these this available literally in get signed already news in look buys we'll this the fleets of work. the us, rolling those look there. suppliers on into of process ramp-ups in forecasted weeks the And HX. of is the at do right? market. just taking the good coming ProFrac kind initial the and chemistries newly at

the typical don't now the been to had I type has biggest issues the mind, the in we what term -- so are But issues activity now. the it. with of in near market has right the And problem type we've other be that that's see than lot been I little my would trucking and some right global in in a huge just we're tight, a of have say, of expected any seeing

John Gibson

the with visit plant one to weeks here a on runs Marlow that Jason happen of was and I I the plant call I who the few just and White, best ago, yesterday, think I've has is heard years a been Flotek. And the or is Jason Jason with been I've us with that this quote from for I've XX better. been busiest anecdotes almost since is

enjoying So fantastic through -- team. it We've great up are it they're level we the and as And I activity. and got right loyalty moving of they're ramp there. with mean, up,

Don Crist

that appreciate color. I

John Gibson

Don, And exciting, it, busiest about think pretty was it seen market -- the he's cap. he's you seen billion it when $X a and that's ever them when

So I we've great and a road at look I got ahead. go, that

Don Crist

that XX fourth that when or fleets And that sometime going get do they're just of or you in full to Yes, think you'll the -- that? to out today? before XX Is quarter exactly. curiosity, running

Ryan Ezell

the those of we're that from been But looking about onboard the excited picked they the They've and us excited. It get to the ramp-ups will expecting those working there far, now we're come we'll have at when get that schedule fleet halfway fast newly now. able so there through it's because in you ProFrac's at we've believe pretty we're to see as they we're aspect. because more quarter acquired I FTSI as up them look versus -- and when to right and and in I'm about QX core don't fleet through pretty obviously onboarding acquired HX, almost right rate that still now.

John Gibson

it X-year each on fleets. the partial up that on I contract to we of X And would A the fleets. they're we fleet to closed. only XX contract trying in we at the to XX is And way time gotten fleets already equally aggressive until look that you X-year they'll month, had the XX first good had those XX-fleet how approximately that out be chemistry on that in original tell aggressively contract, with get rolling number think to

so And to way on get how a it conference going be fast there, would it ask too. great their them to calls is

here, you So cross-correlate Don. can

Don Crist

I best appreciate the of and there all color luck to you.

John Gibson

I think we It's We need I'm don't execute feel like control. feel of anymore. lucky blessed. need luck to I out much that our -- just within this page.

Operator

Our next question with Capital comes from Heim Noble Mike Markets.

Mike Heim

finally, are ask in you'll is pressures there served. of be, a more Or that about prices? -- adjust you goods the prevent on little prices facing issues accordingly. And appreciate comments some it that competitive raise is is jump saying raising XX% behind guess would bit wanted the supply anything I you've from of the in I prices. it I cost ProFrac a your year-over-year the been you're or doing that then cost agreement addresses your ability question to to simply in matter little the about bit a that? the my

Ryan Ezell

little I a main down the them bit break understand into categories I'll question. X the So where

were tight. competitive there's chemistry doubt world is So fracturing There's America North landscape is no first one say just the the different chemistry testing. on XX pretty part chemistry, that day. hydraulic a almost we work in in won technical the and site, land There provide the -- would in competitors were I the I we the have of I can the the phase would -- tendering also say,

much us now that et over inflationary as translate of some we And aspects. some what the inflationary would some of price volumes pricing we're the And tightness regard to consideration that through the pricing good into see that well. you being take accelerated the turn so starting of pumping your the the, of from held side catch the you I at increases on of it's push up aspects. the cetera. chemistry small news we're that's helping I because to say, us as on mechanical rates kind able pretty seen, a then And taken equipment. to into to you've off of out the And aspects suppliers, have side of there's the pricing of on But look business molecule through lot for starting us. point a We're with see that the is, if stave have, in drivers

And so and we're in capabilities margin hoping in it When expansion start happen higher there. I'm to I to leverage some our seeing terms our due at itself, go thing. agreement actually to investor ProFrac have I what move look confident some a you the at lower-end some items consider cost-plus of and volumes if at back of our HX calls, the of we be technology

And capability no then technologies. margin we're inflationary aspects the to have we matter those. on still to a are the maintain able So what value-add

then that to push stave what end do of our contract pricing do I of expansion, we be provide some ProFrac margin -- -- in and So to terms off this the leveraging really the will what to our with volume also utilize we're the excited to capabilities say aspect would out able user. inflation

Mike Heim

right And then makes feel confident still now. what we we're were EBITDA can quarter. positive you gross reach seeing John's But by comments going do that? so losses I to that fourth guess

Ryan Ezell

see which when work and for have high minimal you improvement reducers us, I and going of picking interaction direct like is than the the to the have what chemistry call E&P in the up to to incremental picking us, technologies, value-add come some through at friction we revenue relationships with operator move Well, up being be component would larger the and margin an to the fall-through say products of and of the we sold much terms our in ProFrac that a like other with start core I direct I cost companies. say, we're are of going would that look costs greater end with through additional, that a is to where would -- from going basically, structure we're volumes

John Gibson

And company right That's for we're where at at had Mike, to survival COVID. that the to boundary enough cash were way we changed. look through using that's operating is just survive, and a barely completely it another revenue

And scale approach that. And so now SG&A pretty the we've better grows. to from got pricing revenue scope as scale and provide excited And We're about the disciplined side. us scope our we're so the seeing fall-through suppliers. on spending that the about we're pretty and grows

that then All expansion. really up flow, free add cash predicting I'm margin to why we'll of and that's that. in have we'll after those sustainable profitability things confident get And a month to

Mike Heim

Okay.

you margin since in say started would contract business So April, actually the higher -- already? seeing that you're the we

John Gibson

answer steer margin say side, I'm forward. we I trying would those as much, -- but life to margins reporting we're The go the be always going too to on

business you'll And explain at chemicals the And selling expansion. them. performance. see great that discussed. becoming lot we it's will mean then about have I the is higher-margin look well's for customers Ryan -- to. a do have part we take And improve get us easier that you to a additional core after margin why we So there, the it's this business we're

operational performance. a opportunity and performance got lot production their we've so their improving And for of

the fries that like fleet their increasing you what operational their that and that do, with well well call it an customer, it's the going and And we're performance, can excellent upselling -- we environmental because each performance is that is documentation we'll example performance. we real have so and of improves per on how excellent of -- their with this would size sale

Mike Heim

eye close the Okay. June time. for your We'll quarter. keep a Thanks in

Mike Heim

much, Thank Mike. you very

Mike Heim

operator. go should and up, We probably wrap ahead it

Operator

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

John Gibson

of Matt out industry truly because committed where going, with excited impacts contract the Obviously, visionary the today. evidence we're report we're approval, the seeing efficiency to excited at he We're guys, of getting look going incredibly to ProFrac. can fully of it of months, like able end excited about we're distance. started. joining a the months, go building just one and feels a through a leader. reporting organic improved that beginning how And this of joining months, We're about approving. us is because in back business and housekeeping absolute were month. just the great is year to chance I'm great that's be partnership started, the journey of contract station, at you that This this we're gotten that's more concrete Thanks, good with QX, one what We're was right to you and industry going the us three now. just as everything impact and seal QX there. train feel of left so take about team to we've and to show can this to and be we're the this see be just We're seeing end is to of the It's getting we're Board I positive strong next this momentum. the gaining the Give real six QX, going I'm to for so having a quarter than how sort ready you're emissions. about how an good and the the nine end guys

So thank talk and and you get please soon. AGM to the and you read the vote there for and we'll out here proxy

Operator

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

disconnect You may your lines. now

Flotek Industries (FTK) 17 May 222022 Q1 Earnings call transcript