FTK - Earnings call 3 2023 | Flotek Industries, Inc.

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Operator

Good morning, and welcome. Flotek International Third Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note that this event is being recorded. I'd like to turn the conference over to Mr. Larry Busnardo, Investor Relations Representative. ahead. go Please

Larry Busnardo

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

Joining me today's on Executive the the concerning call today are results and Bond first prepared for Chief our will business Officer; Ryan Clement, Financial we Officer. On call, quarter. provide remarks and Ezell, Chief

of afternoon, the Investor Following announcement quarter third for up any website. which available you the call Flotek's yesterday on is we section that, open have. We questions Relations the of for will issued earnings XXXX our

We referencing This updated our will be also with presentation corporate an to filed an on X-K that we website posted will be this morning. call. today's also

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

of are projections. risk the and uncertainties, actually differ SEC. statements please listeners a in in and to Ezell. call. With this to turn call actual results our factors filings will and the Also, financial provided our many are materially release risks Ryan? our review to These with over advise risks control. to our from Ryan which number current of uncertainties be the the reconciliations can as our press on discussed cause discussed expectations to refer subject We -- earnings Forward-looking non-GAAP earnings and can may release metrics that, I beyond

Ryan Ezell

of improving fundamentals, significant continue strategy XXXX positive with we I'm adjusted we discuss executing and X third appreciate operational core interest quarter Flotek in quarter by to as business as as joining morning. our for in years. the us corporate We good and third results. progress first our today extremely and financial highlighted Larry, results EBITDA everyone's you, Thank quarter demonstrate our pleased our is in while

this segments unique strong maximize asset year meaningful financial all value we profitability and that and undeniable improvement performance. and an in our built operational established of business a year-over-year carry momentum customers' complementary upon Our the our results proposition reflect Flotek's metrics.

to impactful chain our a investment on our gaining return touch our our and platforms in systematically an for to to in chemistry both that and that discuss market solution value moment. I'd Slide generate impact customers' to expansion share highlights We differentiated technologies Bond leverage on while positively quarter data like and in shareholders. With just will to will third detail turn continue in X analytics margin mind,

reported with EBITDA of margin positive ninth third associated adjusted and achieved the the consecutive positive quarter EBITDA an quarter, we consecutive During of XX%. margin gross the third improvement. quarter We for adjusted

X In have XXXX. Transactional period annually. rapidly complex our growth business Chemistry first due XXX% each in addition, Management over model, expanding revenues gross growth up which XXXX the and is proprietary customer our quarter adjusted chemistry the nano-fluids months sequential and from of the base, XXX% profit same our million applications to Prescriptive $XX nearly through grown of continued and adoption exhibited of

site to applications else proven productivity enhanced been has chemistry provide while technologies reservoir-centric to approach utilizing when equal. multidisciplinary being our on Our well is all

market evolve a Our supports corporate our million first versus in business a which our The strategy office services, Data the at global in the first from that XX% to move, year was completed our XXXX annualized We the year, services the revenue subscription-based data-as-a-service is with million expanded margin Abu for providing XX% and had annual rate. Revenue cost upsized to have a to XX% million $XX $X XX% fourth while Xx with which was than not further quarter of of quarter. We expected a prior has through ProFrac a new quarter. in base increase Dhabi the entity retention $XX.X components the savings. liquidity footprint third months XX% facilitate a number Analytics $X our X We segment subscription-based subscription-based annualized expansion ABL addition by share would to improvements this of This is our as of international strengthened totaled in These successfully approximately during lowering year. the equate seen operational per our model. growth segment up to savings. in-country million greater we value-add in attributable October. increase strengthen

These with time. Most to the Finally, momentum technical the Operations; Senior Lines; on all Andrea Shane achieving internal and Senior landscape. Not bring of services quality of Redlinger positive choice upon to changes milestones and Vice Snoke, People addition like moves these the cost service impactful team X of year. chemistry the promotion to of as her and new for members of achieved we thank like and Berry, commitment a executive results. within his of experience, I'd Wise, of employees Vice employer amongst executive were the of results field their but to President promotion operational external compared roles. outstanding as I'd when team we of to of to segment. announced congratulate three time I President us the to team our throughout our importantly, remainder Operations of to have President in promotion on the data on build the safety Data reflect Vice lost this will Vice President promotion Tom only of his high-margin approximately of previous transition recordable in company's these emerged leadership Nathan the as expect of the operations. continue one million period per it all we overhead $X.X achieved and vastly company impressive save and hire short year. complete teams, more incidents in have Business an to Global These does to the Analytics leadership

every land This The to fleets the in the decline have and U.S. overall continued count in of down are XXXX. the this the been quarter has attributable this to of as directly additional some quarter market the the XXXX purchase beyond. requirements we chemistry Flotek and the required chemistry provide that our end, XX% the market third data for broader slowdown and expect the decrease economies market our provide execution also and despite completion onshore impact requirements necessary the of demand around volatility differentiated strategy I'd quarter slowdown. were granularity. short- business bit barrels were year, activity third quarter, to solar next clearly that add the overall maintaining contained Now Flotek long-term technologies. To of activity, from through looking here. less to investments And we another in and market in chemistry the this X% mitigated in and mitigate to a revenues more with operations will verticals, frac new supply. Consistent up scale down outlook, drilling oil that production hydrogen. grow to We they of such the rig geothermal, a at and Furthermore, much oilfield decade the believe year. and which and has to upstream service in an for and other And gas industrial, transactional XX% was advanced our down this given is incremental in total impact and been solutions supply color is demand and in like complementary continued with expected Revenue experienced slightly chemistry of with agreement and designed add sequentially. insulation our opportunities ProFrac, Long-term for be more data stability. On and further continue expand macro is the the level, agricultural, both for demand needed for maintain will to increase will long-cycle XXXX. has

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

J. Clement

all Thanks, quarter want great morning. I with what Ryan we're results. Ryan. that to It's our all you by pleased by echoing third be said start extremely in to this

we dividends results is during strategy delivering the corporate Our several impressive important and milestones quarter. paying as achieved

profitability morning's of first Flotek's business. revenue adjusted maximizing the this the is ninth reported since This solid time represented important shown to improvement. growth quarter milestone we've we segments also diversified across by from progress deck, cost board the for strong the quarter which significant an year-over-year quarter a of our by made We a positive consecutive As of X highlighted in the metrics. all the stream across results business drive Slide XXXX, on EBITDA the achievement continued third reporting improvements of reached that initiatives our reflects and

with liquidity an our entry we in strengthened October. which the able upsize we were August, in ABL into to Lastly,

XXXX. for over revenues shows years, Looking guidance at few the range the latest total statement, growth income including X Slide last our the in

second Third compared compared year. the ago quarter down but were revenues were X% the quarter of year to higher X% this quarter, to

pullback overall XX% the and the As Ryan up sequential market a chemistry positive first in the almost mentioned, attributable upstream decrease drilling of completion were quarter is Flotek's year. from revenues transactional note, this activity. On to

latest this In given versus achieve annual of we growth market achievement guidance, onshore midpoint our the year a will of certainly revenue would the addition, dynamics. which using XX% revenue XXXX, be tremendous

revenue, include meet supply of for additional we requirements by entitled to ProFrac. conclusion at to chemistry the I'd December relates through ProFrac. purchases requirements, the XXXX annual XXXX. do period. our on not agreement The to measurement and contractual briefly we Flotek's discuss during which expect profitability. not XX, period, be like minimum agreement chemistry it measurement third our If contains the recent As X, the purchases are do XXXX positively met quarter with payments revenues purchase June Based from payments, runs accordingly, impacts will that requirements which currently activities, the X-month shortfall expected And

For to February X-Ks that supply March been XX of the and regarding year. of filed review the and on we May have February made modifications encourage XX, more and I and X the amendments agreement date, this you to last year X specifics

Slide XX. at Looking

excludes of revenue we for $XX and the comparable to and our up to quarter guidance, XXXX of gross and shortfall compared $XX million $XXX,XXX increased loss adjusted cost chemistry profit -- million Adjusted Gross $X in to quarter to in agreement, XX% continued adjusted gross XXXX. in the XXXX gross full a versus midpoints third $XX costs, and year totaled gross profit profit reductions of to profit months of was during quarter million profit by payments profit the compared our the approximately Based first period updated now material X an improvement driven increase supply profit is freight. Adjusted anticipate transactional under through on the million last only year. ProFrac The gross million $X for comparable improvement the an noncash compared Third quarter. to margin the XX%, gross which gross increased gross the period comparable profit, of XXXX. certain of margin respectively. a gross expected

Slide Moving to XX.

Third quarter positive adjusted EBITDA million. $X.X a was

reduced XXXX $X million the this settled of legal G&A quarter chart, $X.X In million improvement of cost As previously our we fees. for consecutive began turn matter is beneficial extremely disclosed shown this and The on as expense SG&A, has this ninth to on last of a decline compared litigation this metric. focus employee totaled million this year, we the XXXX. begin year-over-year as so the compensation to third matter the to of third the nearly the lower of final Touching professional litigation and resolution in should October, of quarter improvement $X.X primarily costs. result be quarter year, was as well XX% that in been

borrowings availability were the borrowings of $X.X we million quarter the $X of which associated under Net to increase in cash of our in non-cash facility, loan, currently the under line, loss million. last addition $XX.X bottom for through a an available quarter the $X.X loss $XX August, $XX million XXXX. million of value outstanding $XX currently quarter in of of an the asset-based initial year total credit in provided rate, net of about reported are that the certain loss Approximately subject is third million convertible We on currently the pledging on the we to balance million able we million change the to announced of and the with million. net notes. Touching compared of $X of to the real income include did of have which million to hand sheet, in XX% October fair liquidity roughly to a completion assets. approaching comparable Going interest ABL estate $X.X third for

year relates XQ, have it As as we full to outlook on guidance follows. our our updated

to million estimate of is $XXX As to of million earlier $XXX has a to to a result margin XX%, now importantly, from of slowdown touched million X% of to total the $XXX total adjusted revenues activity, $XXX in million. previous But XX% really Ryan expected range to range gross upon to up the that increased which more compared previous are profit a been XX%. onshore

of I'll back now So profit over if guidance, improvement imply versus you comments. take for previous guidance. That the a it the my the remarks. midpoint XX% in would turn Ryan new to concludes the closing call gross

Ryan Ezell

every saw Thanks, a Bond. In year-over-year third the summary, impressive in for improve quarter financial positive of Flotek and virtually reporting as delivered adjusted we years. X metric first time EBITDA

the positioned their and rewarded efficiency production data there of value for enhancement. Flotek of is shareholders. is believe We for value cash have plays a assets is The have production are reporting track service positioned regarding our hope This chemistry oil we're appreciate we of to ready our from of field Flotek of within right and returns and we excitement proposition build our collaborative service consolidated, that profitability moved value customers' strength that the in share We have share industry and Customers before demonstrated rate peers. We in that profitability changed. as to as maximized of support partner and capitalize technology continuing design generation. reflected our price. free importance further delivering done, our more that our as value markets we are on a exploration record The choice focus operations. not to with the be and future us take differentiates its improvement all we our well continued to forefront flow seeing hydrocarbons. the and of questions. and market being the return this work current returns the that as more on we recovery of and for of for our stakeholders, customers improved opportunity fundamentally progress. Operator, to and is space significant well the you now but target look to Flotek forward This the what is differentiated is maximize to well their technologies

Operator

] Instructions] from Corey [Operator First [ be will question you. [indiscernible] Thank Johnson,

Unknown Attendee

themselves, and the Really of changed deploy My margin? another quarter. fee. a in impressive terms Congratulations about have the fleet. fleet fleet question in for and happened the to have the I great is gross question add and what's with results turnaround on them you great How you deployment both to deployments? numbers way

J. Clement

[ lot question. ] you a that? behind really able Hi, of mind feedback Cord, you We're Would not got your you. to repeating hear

Unknown Attendee

more deployment one and gross margin? Yes, start I'll you've the about Question the changed how to add fleet time. to

Ryan Ezell

Yes.

I how around asking gross are margins. comments around our has if you're deployed, being where understand of the impacted that. couple correctly, this So fleets A

percentage you seen impact really obviously, of is some And the the hope material big for a seen overall we're in slight product areas And is itself we our such kind for that we've at one a the efficient But that the space quite Texas to destination this as significant can freight so gas-rich when have and at Texas, we fleets cost in revenue down around gross white or that reality, means what and are impacted us the we've we've is change seen, little count our of revenue. revenue, that a the in fleet in mix actually change down. those other products is gone the we South us. look other the was when But that impact to followed et cetera. And deployment, locations. words ProFrac terms seen overall West question color Haynesville cost which in or we're of margins and we've look the And bit costs of pad total how changes basins more I we've seen of seeing in material where of are as of transition customers, to these as delivery that. pre contract, base. our adds percentage where improvement and a work moving

Operator

from question Gerry ROTH Capital. Next Instructions] [Operator from Sweeney

Gerard Sweeney

similar gross and actually Ryan on did Bond. a margins. morning, have question I Good

Corey -- -- of just margins, some and in that of ] driving management, think asked. dig was but the what some I [ of what's future to work going is I gross I want prescriptive in not the it but the drive understand also just to maybe location your where just you that is. a think prescription described

I'm not I just add the I'm new further. to a So little but can story, to if sure that. a Obviously, dig if curious maybe was we in just touch bit

Ryan Ezell

Yes.

commentary lot [ overall this we've that material been just quarter and to gross as automization go freight at a by So percentage our margin of operational continue the year. when to build driven that see look Corey. contribution to you logistical as ] has down improvement we So our to of on a done of there networks improvement, costs every

The second of as the up contract. operations, to where component in is types material are contribute of to our materials that percentage prior moving general us ProFrac revenue the were we a that our cost ramping we're that

on we have we see starting want to path the profitability to predicting see. as would our So those to there, margins strength been we're return to that

And extremely that we're best our see at our And those up the of that other sales back QX, are component, in almost on impact 'XX, in our grown had technologies which business have back prescriptive us over year-on-year. go of chemistry if XXX% are percentages those profitability they Those it the models XXXX probably represented you we increase years as component and is was revenue. XX% the what's most of to for important there quarter and about business transactional sales based big and nano-Fluids. we The the to continuing is complex transactional refer almost in excited every that quarter. more XXX% to with the has proprietary

evolve, So in that's pursuits as position drilled. you important. at it continue XX-month see of to you well to margin and terms and our think improve And look base. we're that's been and really in to see, we've that more every out in wanting a more I operators when place we're on. of become gross really look grow, good push to our are long-term And to continue This business. And more continuing XX- has E&P that to better sales revenues in those that helping performance margin gross why why

J. Clement

I'll little Bond. just a bit. it's add Gerry, Hi,

you of framework Ryan's Just talking a to dollars the give about.

transactional, So as in non-ProFrac business QX revenue. of over our which define million chemistry we $XX did just

the During year, this of that first quarter of $X.X was revenue. million

Gerard Sweeney

Got your little bit -- just were it. you you comfortable think again, if I to talking That's lines just or you're how helpful. this, rates could XX- many sales talking conversion sort But about maybe describing pipeline a you're XX-month even of newer. Can And those what Ryan, cycle. if with something current backlog and today would. or or or along you maybe entities with

Ryan Ezell

great Yes. question. That's a

XX% I in the of the terms by in pursuits, that but X diversification revenue play quite they of color, stack to was back over of refer think in to revenue. are revenue bit not XXXX, our strength say, the right only represented details, was of If a our also customers stack, our I of had provides now.

more to now our have go than you we customer If transaction a that chemistry represents the single base, on were X%. of don't

through million of our we're $XXX would pipeline, I is was at we've international I in in of a change significant then through end to that terms and of and almost came from identified fantastic. And year, if revenue opportunities starts say revenue diversification, And worth the which XX% that getting And our customers, of next domestic QX new QX and business. almost our in that over roll there. seen attributable who so look we've that got

are. we're as E&P helping moved the opportunities that position these And these a with what excited we're look so if some forefront have pressure as for into as see, relationship really in And well I companies, operators growing there. and pumping really our good we I at about of those again, the it, technologies

Operator

session. question-and-answer our concludes This Instructions] [Operator

for to Now conference closing the I'd Larry over like to back Busnardo remarks. turn Mr.

Larry Busnardo

a you morning the have Thanks for call. industry, if additional to other our on Thank reach We again, joining questions. today busy out again it's us Bond and to free a calls you within day. good feel have with so know please any

Operator

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

You may now disconnect.

Flotek Industries (FTK) 8 Nov 232023 Q3 Earnings call transcript