Earnings call transcript Q1 2023

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Operator

Greetings everyone, and welcome to the Flotek Industries First Quarter 2023 Earnings Conference Call. At this time, all participants will be in listen-only mode. Question and answer session will follow management's prepared remarks. [Operator Instructions] As a reminder, this conference is being recorded.

It's not my pleasure to turn the call over to Wes Harris, Investor Relations Representative for Flotek. you. Thank

begin. may You

Wes Harris

Jamie, morning to your We participation. and day everyone. good appreciate Good

and call and on Agadi, me participating Joining today the Financial Executive Ryan Chief Interim Officer are Azel, Clement, President Bond Officer. Chief V. Harsha

today's concerning business remarks and provide quarter. our the we first for On call, prepared will results

questions we any you that Following answer have. won't

XXXX, on our available released earnings for announcement is our the which We've first quarter of website.

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

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

Harsha Agadi

profitability to talented support capitalize to plan and to made quarter We new XXXX you, quarter for our to first to in discuss I employees, asap. Flotek marks comprehensive Thank XXXX results. point opportunities appreciate unwavering our a turning operational strides morning, drive the and of Wes, joining good the team the our everyone. significant of believe many on first interest significant everyone's us today with and executing financial Flotek has dedicated management in our continue

our to company's profitability. mix This costs, our Flotek customer our pricing, includes product right sustainable base to drive sizing enhancing the diversifying and improving

still few proud to accomplished just what profitability, have extremely a in more do months. team of am we Flotek work attain I to the has While

financial gross the headed details quarter I in provide our improvement why we're first operational The wanted and direction. to the time achieving of a will This gross fourth revenue Bond sequential and quarter base. margin expectations highlights in first million improvement a remarks, right and our from internal profit included their adjusted confident nearly in EBITDA Ryan While on discuss exceeded adjusted in prepared for the materially period. identical am I $X.X

leverage how is our operational efforts raw in drive further is volumes. clear of purchasing scale finally and in we efficiencies labor costs, improving as time of materials, to just representation to in taking freight our to It execute deploying on match hold economies opportunities efficiency

We also Similarly saw sequentially a actions our activities. the material reduction XX% efforts from our fourth on related operational revenue. and adjusted from important we achieved cost targeted evidenced period, EBITDA and efficiencies as of process growth reductions to during cost quarter improvement SG&A through improved thoughtful in in results deliberate by flat efficiencies

EBITDA during short, place, I quarter as targeted generating absolutely positive inflection initiatives XXXX. we more In additional with opportunities remain focused profit adjusted reduction cost and gross from an support point for view in revenue on first the

pivoted accretion we cost gain both revenue now focused As efforts continue to have our efficiencies, on fronts. to

generate investor First, base. it investment as industry This enhances proposition customer leading and both data on an turn in our investment undeniable carry technologies for chemistry analytics second will profitability. healthy value a return

eight continued revenue quarter to for $XXX Based five confidence year years, total we and time margin and on our execution, the first results are guidance XX%. initiating our improved gross first including successful XXXX $XXX million profit of guidance an its to in much plan and in full for adjusted in the of

of an of year. accomplishment. quite Using $XX annual and million, the we revenue XX% for would represents guidance, gross is revised our the midpoint of revenue generate nearly last midpoint XXXX an from a profit the improvement XX guidance million growth which of This will XXXX. from gross be The profit

the continued shareholders forward our we our always, As of support progress. and all of appreciate continued look stakeholders to apprised keeping

it operational will to results. Ryan turn With that, our discuss to Ryan? over I

Ryan Ezell

Thank and everyone. Harsha, morning you good

of operationally only chemistry sustainable and impact reducing cost differentiation This partner to competitive not the quarter to but for that also first assets. optimized XXXX The that momentum our demonstrates data Flotek technologically continuing business. performance overall for relates are itself improving environmental all our position, service choice as differentiated. establishing and of gain strategy, while being and are a advanced, efficient customers being our delivery of quality throughout dimensions is collaborative customer's of solutions at

highlights. right get Let's to our XXXX QX

has XX QX and said driving XXX% moment, increasingly provide an from quarter. XXX% year ProFrac achieved by from XXX% growth representing sequentially our with details of profit In Harsh earlier, supply than agreement almost growth as of positive customers. performance. a of increase more sustainable I'll primarily and we improved the of diverse non-ProFrac is year-ago and increase As from nearly a result We more revenue the what first strategic XXXX, of Flotek base AL quarter

revenue year-over-year analytics segment. the revenue XXX% XX% growth data realized and company's We in growth sequentially

revenue for representing quarter analytics XXXX $X.X data total, XX% million, of revenue all of First XXXX. total our

XXXX. this exceed We year first in expect revenue annual for the will of half revenue

of of its ProFrac achieving product the ProFrac and with of capture fourth XX Frac by well the XXXX, fleets quarter in result growth share stellar scope the of XX fleet number quarter market first We share end unique first of we company's versus water offerings. a of high as XX market expanded service the to expanded US sales Flotek XX% pipeline share of remains of strong the to work achieved active anticipated in XXXX fleets mark from a while in quarter approximately XXXX ago. and X% service additional of to March, of market the the average a positioned year

achieved non-ProFrac diverse and recordable Most incidents the lost a provides have were I never of field customers. of with of operations. growth repeatable significantly importantly, in about zero felt base ProFrac time steady our milestones While base we the revenue, just discussed better expanding

our key the last sustainable plan and report to on proud our enhancement. to comprehensive are several reduce key impacts. margins margin call, I'm to following of that plan which continuous our a we as improvement ahead Now, we saw approach cost utilizing we initiatives, outlined multidisciplinary parts of improve are

We strategy, $X scale. goods and combination driven garnered sales, a a revenue This a XXX improved basis was in in of point improvement contractual manufacturing as material percentage resulting economies savings. technology, by processes, sold of sourcing enhanced cost our of of of million

We also sequentially more XX%. than lowered freight cost by

program launched dedicated by a delivery dispatch. the similar the our completed sequentially our fleet, of the consolidated last mile saw for in optimized total XX% over termination digitization trucking company activity we of reduction We As a materials non-book and on level. overtime

existing first new and R&D for for to service monumental our space our flow our fielded sensor prototype analytics based our a step right for of to sublease segment the This the finally, in executed cell and office a proprietary VARIAX model. cost facility make going we analyzer a operational more data validation. of fit received also more And forward size change testing execution. manufacturing corporate to the transition and subscription we represents JP[ph] business the for We purpose three as

more for of golden upstream, growth, for open as within our in natural as monitoring. entry generation importantly, evolution the as but applications it well verticals midstream, new further the gas power gas our proven exciting and enhanced such infrastructure into The market accelerate the analytics data technologies will monitoring our growth will field transmission revenue

on the The versus do quality of sampling traditional chain cost expected natural production. this time custody, it the $XX methodology and deliver in savings. reduction transaction energy the Furthermore, initiatives gas by combination, are industry analyzer Varix considering content, in the to revolutionize at part total, this its least buyer enhances SG&A real which seller can And is when actions agreement in measured the at these of whether in and proprietary how million could practices. annualized looks of

seasonal December tight infrastructure And we that the remain as continues extended production. underlying the in be market into supply QX start of new are fundamentals and our to oil that strong due of of XXXX, gas disruptions and to underinvestment in despite the sources hydrocarbons view and confident normal

capital plays major and E&Ps returns the to services strategy on being choice of and remained discipline. have demand Additionally, discipline our of service focused customers. on to Industry's partner focused oilfield well collaborative capital for companies

maximize As total the reducing while solutions well production in our engineer footprint asset. of emissions the carbon overall

well mission technologies customer the to achieving report better on our and customers is data with I'm else value about to be that equal. base. performance Flotek's expanding analytics excited optimistic site producer continue I differentiated being Our our future and provide chemistry massively when all maximize to about

discipline. commitment the are and water estimated and we responsibility, minimizing speaking, market quality, our to protecting focused completion ultimate damage, while Simply share, growth, formation cost improving recovery of corporate every on maintaining

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

Bond Clement

thrilled behind Ryan team. the sustainable nearly inflection quarter. hard with a improved and the Ryan. testament results point our scenes the going the during everyone. by $X morning reach Good we're margins the to margin previous Thanks, exciting our positive in Like for million We the gross quarter, quarter. first the gross to Harshal, of It's from work on

a quarterly Looking of forgiveness. dollar associated income from as we of a our loan fair gain convertible value $XX.X four large benefited and quarter, non-cash PPP notes, associated at half well the income million a gain change as income statement the net our with reported the net during million with

be will is on contract As these represented gross tranche XX, earning revenues. final approximately re-measure, value quarter which converted amortization caused second fair swings margin, our the quarter $X.X so of X% total by the notes volatile May the one. costs, convertible our during adjust non-cash likely million a reminder, excludes last of the Subject and primarily adjusted to the the of assets

margins the we during Harsha Contributing modification revenue million the previously full adjusted expect improvement to X, of ProFrac with XX%, sequential positive throughout to noted that January materials now costs into $X.X Ryan earlier. the guiding to were went and move of year quarter, we effect announced margins see in eight along meaningful toward high as are gross we that contract related so freight the earlier, As margin year. outlined reduction to

cost to cost speaks leveraging that better frank in of despite absence growth is meaningful of note the success making to It's to able quarter, sequential our margin demonstrates negotiate show having margins to improvement pro the improvement our important in revenue pricing. in in during flat side operation. that progress team business of the reduction the the to pro the product the The we're revenue

XX% partially professional metric million marked offset credit than improved SG&A the was by to that Fourth quarter quarter sequentially adjusted quarter consecutive last to slightly higher as toward reductions. because march headcount of non-recurring continue this stock quarter $X.X improvement. related to another fees compensation approximately we positive of during year, seventh this turning an EBITDA, the expense

associated costs the we have XXXX. legal quarter professional lawsuit of with fees approximately First through included since $X.X million been working that

half relates of include fourth as one versus first the in the fourth SG&A to bonus reversal. the Finally, mind XXXX a it and quarter benefit a quarter million that the quarter, did of accrual keep

During These annualized compensation of $X.X quarter reductions in in saving million completed our year-end SG&A initiatives during accordingly, costs of cost we cutting conference of call, have have roughly aimed recorded that at first we seven included million XXXX. headcount $X and outlined costs. cuts been separation the

In move balances year-end comparability order sheet. flat around statement. stayed into the severance SG&A have Cash and Quickly of XX broken improve $XX a at out periods, million. separate between March on balance with line costs the we on separation the at to income

potential received we four non-binding As assess the We're our the conditions. term evaluating lenders. terms sheets each and it relates have various from to to of process, proposals ABL

they In of million $XX and supported combinations various inventory. potential $XX offer credit receivables and between general, by

as our it being customer roughly relationship is current balance. with ABL two our makes largest receivables providers assessed by close thirds Our up of potential

this through We this are updates as will working process provide issue and progresses.

file XX-Q to week. this plan later We our

that disclosed control and internal in that short resolving we've be I believe remediation controls we Our order. will continues. significant steps of effective weaknesses in enhancing these processes ultimately note internal would our previously strengthening in taken issues

we as October we're NYC's targeted contemplating compliance requirement, this the toward have few the organically over As the options regaining with it stock issue. minimum price do to next cure compliance XXth to until months, relates

already disclosed, we previously approval a to for six reverse split As if one have shareholder up necessary. for

a I out, positive As achieved close we to that satisfied in with gross are qX, but alone. we'll, we are margin have not pleased

see adjusted by reported as continue push to to expect positive our rise continue and will to guidance, margins with EBITDA would We evidenced we positive gross each quarter. toward

back it closing turn to comments. that, With for his I'll Harsha

Harsha Agadi

outlook clear see Bond. you from on a for guidance business. are is Thank time so team providing reiterate, can results you for comments we of predictability company. providing management call to first years. the the the Also, I why our in and our the indicator of growing guidance our improved significantly hope positive in five have confidence the we we financial in are today's provided Again,

my made in have positive profit by comments, quarter margin. the we quarter As during gross materially I a a declaring and EBITDA said opening substantial progress improved first adjusted

have we of and still our efforts to long-term that volatilities said industry. that, can the ahead work sustainable us Having gas and of build business inherent mitigate the oil weather a in

with of our beyond truly appreciate backdrop growing business in ProFrac relationship ProFrac. remain relationship our direct what long-term the business our with hand, encouraged that we we our and I With have firmly diversification by

successful I for that for for our place, employees to well This to business very $XXX is our than and Flotek in reflected robust continues a fate offerings. future. having with based sales successful believe analytics team. drive our in ensure operations, Flotek is management a in million I subscription data pipeline our of demand profitability we growing more efforts thank as as in itself and its shareholders long-term position our customers, Combined

we that, Operator? call up will With open for questions. the

Operator

gentlemen Our from first go Don Rice. today instructions] and ahead question answer your from at Johnson begin session. question. time the with Please this will question [Operator Ladies and Crist comes

Don Crist

positive and start wanted fleets the gentlemen, supplied. operating coming term quarter to Morning with being ProFrac a first congratulations long the five job. good in years. I Been on margin

of is been that You up half of space ramp back a it does as requirements, the would've and showing of seems schedules, which little I the in that imagined know utilization know, the, how year? in little up their a bit than slower white in, we the bit move contract you impacts, overall function like but given has a into the progress

Harsha Agadi

Harsha. Don, go have Ryan, question. is your First. ahead. Ryan Very respond this impressed please I'm with going to

Ryan Ezell

morning, Hey, Don. good

actuality refer great in the fleets just drive the a know, contract question contract. think, this of volumes look to terms fleets, in at, we Now, we often of, use is of the I in it you and we and to

So as to, and will we're feel mark high in water we required reach the evolve I what contractual a March, mentioned, we into to got XXXX of our way like volumes. continuing

though, believe you've been QX think to some bit. a white of natural little did the seasonal on space, seen see and of disruption, the, caused bit that, moving up in and do some, there's gas a that and I scheduling couple in we I go a around, impacts number fleets the down a, that's that

the towards, June low June in, are the term timeframe coming the be to rolling now, do strength we will So the schedule stabilize. applications see of twenties year. the starts May the right averages into on late you we of in activities see And of in recurring lot the back but as of and longer as half that a know,

Don Crist

Ryan. Appreciate, Yeah. Thank you

Harsha Agadi

I appreciate.

By I in they offset the Ryan day, space, the very and and think is have year. laid team. non-ProFrac Don, business to when of now week, thing the to and one out lot of the there become of They after have white more a white identified diligent going possible credit space. to any schedule between the and a end his by

is to and there Ryan and reduce are space. of a it madness team amount method really So to on white the the

Don Crist

can next I give color that handle looks on G&A kind guidance right going question, you You quarter, the in, How, able in first as you've below know, Yeah, and that down do business on first now is in I million you for forward. even out moving million level? half progressing? quarter. in you have appreciate My the, that, lawyer side, know, you're year, and, you the to a shows expense activity fact really like on it it progressed that the that that if roughly the of the Bond offices the better know, given the you strip size a and, $X G&A you're done than that was more you you're, and see do over how through quarter we quarter get think

Bond Clement

the headcount credit basis, comp previously definitely stock we took in keep especially we also, was mind, experiencing have that lot for. pretty the a big of been from effectively we had yes, did on a a recurring we, first Don, big shares Oh, There but a reductions. credit quarter that in

a is first as lot think the back in you hit but of we outside forward, of we noise know, there of call certainly we what So our numbers. kind add quarter, fees, move we can, we those professional can

Don Crist

you the in what think of on is of kind the side, but more prototype the one where for ask three active the I'll new it's it's, companies? in Ryan, that, field before working some are you the obviously JP has and don't you but, testing I'll in. Okay. on come do I and those know, timeline transmission know the, possibly

Ryan Ezell

hooked unit of as pipeline. today as, in is the itself up field a the, the So in and

Now accuracy the and pleased calibrations into is we of library and testing our where gate production represents later a week it we're at testing, look we're are look at samples, very over we've at data end validation items been and we we're in recording completion the now, its and XX,XXX and measurements stage moving of we'll on times. process and hydrocarbon kind ties the this right in how how we half components should year, expecting the of probably of units monumental Signing the receiving of start this towards into the which next

Operator

Eric Please from with from comes ahead go Capital. question. question Firestorm next Our Swergold your

Eric Swergold

on through costs that a the out what's cost guys. to these full for of halfway morning taken these given some see impact roughly QX Nice renewed quarter the Thanks. cost urgency the were side Good sense reductions? of of

Bond Clement

gross margin line or the above talking Are you Eric? below?

headquarters, this is is this corporate. is, at This

Eric Swergold

gotcha. Oh,

Bond Clement

like, costs. of high with The the last involved of quarter reduction we reversal. the year noise Don, lot had bonus told Yeah, stock I the I a accrual like a legal in comp there first had was quarter fourth mean,

that as we through We during haven't accrued bonus And will that from XXXX, talked XQ, fully XQ on office move space, we be. from, the the, will previously which to have, a we retention bonus year. new office out be effectively last where yeah, the reversed about starts is settled our

We've know, year, a us dollars bit between I a that through. a two we're cost save half those we to come you but total, seen obviously at. a in candidates think, going costs difference There's around options, of looking a the somewhere and move's got the million two haven't

I trend down SG&A reductions So you throughout see with and continue think year other all the the complete talked will that to you about. headcount now know, we things

Eric Swergold

I, Okay. Yeah, then… And

Harsha Agadi

Eric, may coming than handle an are another quickly lower add on realized team for where margins two us have if the I out, word a to have EBITDA. adjusted your has margins once or to as we gross gross be you a have SG&A

And make not therefore, we very right important, the because will our so an do see going gross to mathematically how that's and everything sure word that sizing to as you're improvement. margins goes, and SG&A quarter make you each possible is is does exceed money,

stand slowly revenue if adjusted, is starting outline the The that only cost but increase are there is but that reasonably line. there, going to well or disappearing. but you that, Predictability are that might as the as is surprises cost see but to in line we're thing the we that out, won't confident a here one-time

Eric Swergold

ago? this margin back historic going X, of question to X to take What's get for Okay. my Ryan. to its structure company And it then is years next X,

Ryan Ezell

question I'll, starting product a complex feel talked a, volume as When transition about lot like margins product to add on advanced like a allow it's our where already if look unique the a cetera, we fluids, were our ago. I value me, years on of apart technologies, at et as, see I, bit. we're margins nano that our Eric, basis the and few bit approaching themselves a complex we to for we're like little increasing and we break I, that know, you a to because Yeah, I'll that's starting you'll sales,

to terms suite The the wasn't chemistry difference et also cetera. to at site, location past, case look of in delivering FRS we full is, is service engineering a services in the whereas that we have necessarily on location, going that

different saw And as bit carry so profile a those what little margin we the than past.

continue product year selling And, a, the margins, years logistics, it But to nano trying years can complex what that's to service bit in orange on a on and where we you a of different that we the it half comparison, on little ago. of is product starting to kind delivery did an lean tell fluids It's of and the apple a, on that's get are the we we're up how it, few and we're latter on and to approach ago. confident to what it's five there a we now just the, but are goal hard. in looks I completely that than were is,

Harsha Agadi

that is business, The Yeah. look business, you've is got when got combined businesses, where where subscription based into began. began, a you when and you Ryan, say Eric I couple shifting mix now The at then eventually model. and years. Is a of statement ProAct non-ProFrac stronger back of our talking another got which we I'm going you is the we the be analytics, data a gross fair margins to going than

Ryan Ezell

correct. That's

Eric Swergold

might. more I Okay. two And then questions if

spoken of are higher split think Is a can price reverse to decreases share split. I, First you shareholders favor that of fears the the most simply of in of, that hesitancy cured your organically? price I've having you the questions share a spiraling. on about reverse because get

Harsha Agadi

respond, how would I Eric. here's Well, here,

internal have bankers. by We had certain an the board for assessment investment

question, if It will clear and accordingly. doubt. that better We of are time stock investment no pretty than a have the evaluating price my placed. to we beginning from $X, No greater me is you it you're take action

watch We're we very, now examining we optionality. split. that, to the movement, What the organic So carefully. are having created very closing but not have on we're is it door going this said reverse

as to liquidity three, going One, on is price. continues to performance increase. split our sheet our the liquidity drive stock reverse balance Two,

here, so to idea. open I going the several We're fronts we're not think it. think moving on to I against we're be

Eric Swergold

ownership, management basically Okay. my, to the, that between I shareholders with coming respect to question the speak quarter ended. the reported know last increasing insider my ownership? And last from some frustration and on for window when next of Can then window you been and no there's behalf when is there insider quarter you was

Harsha Agadi

normally within second middle Yes, of when a is days, But you the right quarter, speaking, close open. your to major couple in finish the window ABL our know, event. a Eric. Flotek. also which of We're announcing In, inside is should very you the negotiation, bond permanent CEO for

the So we announcements major have two that deliberating. board is

delay So because bit, but a quick the tad just open to us window intention really sufficient get give is we may that really, to time. it'll

And e not don't way. a decisions have own s rules delay at earnings am and things per call. point, happen obviously that buy window open we could we had opens, I these tipping but stock said as that major that Ideally I but our cannot until all the and nice, neat yes, have my C we frustrated could

that, patient. said be We're having So just there. almost

Sounds good. Thanks much. very

Operator

for we'll gentlemen, with be like management question and I'd session. closing over concluding ladies today's remarks. turn the And back to that to and any floor answer

Harsha Agadi

Thank you much. very

closing closely. in definitely Flotek the pleasure following. the team think working I the me let have I with of had very say

daily company. favorable some board all much member, as but a continuous will thing CEO, very culturally very decisions is One that have in is believe at we sync in improvement. major as out in First to the Flotek that we interim come now

on the starting us repeated the shareholders Thank employees after best to well all you, thanks Thank as all is than are basis. a that has the you customers. as non-ProFrac going better forward. mantra day we And previous for of everybody this. going be the And wishes. day to through Thanks the with supporting ProFrac Every again,

Operator

concluding we'll call joining. conference Ladies presentation. for We and today's and that you With gentlemen. thank be

disconnect lines. may You your not

Flotek Industries (FTK) 9 May 232023 Q1 Earnings call transcript