FTK - Earnings call transcript Q4 2023 | Flotek Industries, Inc.

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Operator

Welcome to the Flotek Industries Fourth Quarter and Year-End 2023 Earnings Conference Call. [Operator Instructions] Also note that this call is being recorded on Wednesday, March 13, 2024.

And I would like to turn the conference over to Mike Critelli, Director of Finance at Flotek. Please go ahead, sir.

Michael Critelli

Thank you, and good morning, everyone. in Call. Quarter participation XXXX Full your Conference Earnings appreciate Flotek's and Fourth Year We

on call Officer. me and Joining the Bond Executive Ezell, Clement, Officer; Chief Chief Financial today are Ryan

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

the will questions for you have. that, we call Following open up any

Flotek's yesterday afternoon. issued fourth release press was quarter and earnings full year XXXX

Investor be Relations will We of also reference we found posted on These call. presentation the an website. on can section our updated today's corporate

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

to many advise a review and actual control. factors filings with subject release beyond our the results risks of our in and of our We the listeners from risks materially are current are and can uncertainties, These SEC. number expectations. to to statements uncertainties cause earnings discussed which Forward-looking our risk differ

press refer this In earnings in call. the metrics as and discuss corporate reconciliations presentation provided please to management on the may addition, release non-GAAP

will CEO, to call the Ezell. Ryan With over I that, turn our

Ryan Ezell

Flotek good appreciate morning. results. you, we Thank and Mike, joining everyone's and interest us our quarter We operational and financial XXXX and in fourth for discuss as today full year

market value meaningful for advancements and of undeniable forefront that on a carry to gains maximize focus the profitability our creation technology, solutions, customers' key differentiated as execution Chemistry multidisciplinary return utilizing results With at our all forge our through our while common as on in proposition truly restore chain the team and generating shareholders. we that strengthened an share a both we was relentless liquidity platform. through corporate with of XXXX remain continue pleased extremely I'm value strategy our value Data a metrics, Analytics in innovation leadership enhanced and chemistry year which the in our financial our transformational investment

and company's With that quarter will XXXX our fourth adjusted tenth volume The profit, of in consecutive in a mind, nearly key of highlights metrics, our of up I'd all the like year gross discuss profit X year XXXX and as in adjusted growth XXXX moment. with in We Bond and gross quarter XXXX the the year-over-year to for executed in adjusted profitability detail including full key just total representing EBITDA, to touch on Slide we strong largest delivered was in the compared EBITDA products turn history. company best to decade. XX% a revenue improvement marking sold that

adoption external continued quarter as revenues XXXX the the grew up expanding a over year customer prescriptive of compared Chemistry management rapidly base Chemistry our during each business model. and XX% result from to our were of and customers

customized Our wells approach, competitor continues our adjacent engineering nano-Fluid with wells deliver to that all combined basins. proprietary in technologies, complex outperform

to has evolve retention growth business increase Data services These of revenue annualized since rate. in Data strategy supports Service which in a had revenue versus segment XXXX, subscription-based a to XX% a model. strong saw The XXXX. XXX% Our Analytics XXXX our have seen a as XX% subscription-based

to fluid with internationally. Saudi global new and a systems commercial We growth our launch share margin diverse entity and successful slickwater [ a the footprint in facilitate our established expansion of also expanded ] Arabia of Dhabi market Kingdom in Abu

pivotal extensive and joins and Senior sector Vice opportunities. capitalize of we recently team organic a President experience both as at Blakeway announced she also General senior time the as will member on inorganic We the organization look Amy be and an our as to She Counsel. our of asset growth newest as to the leadership addition brings

all incidents in without of a like time were achievements and current operations, to employees to these commitment us XXX to extending of throughout build results upon the thus of all safety to to our outstanding thank I'd I importantly, the for continue take with this in incident. streak days Most and their to and momentum expect field time achieving XXXX. recordable service lost recordable these accomplished over zero quality

overall differentiated Now pressure. face in onshore overall granularity. drilling the despite year this in natural and attributable this quarter And data year completion activity, at and gas continued our of quarter. external the much more the To decline was another our a slightly fact upstream grow sequentially. is been every to has experienced This they and and that in to on end, continues activity impact Flotek strategy chemistry near-term to looking revenues this execution pricing have up bit our that fourth were Chemistry down Revenue the has decrease technologies. XX% slowdown in as less around quarter the that market complementary business given been we

to related we a importantly, increase More our complex reservoir-centric in saw technology nano-Fluids. sales XX%

agreement economies purchase supply Chemistry ProFrac and stability. mitigate provide the the market scale of Flotek with to of to for long-term in the operations designed contained maintaining requirements installation volatility Furthermore, and the were some

We expect should revenues slowing headwinds in the that upstream completion growth offset sustained the of Chemistry reservoir-centric help environment. and international

the the commodity intensity create volatility economy The services of forms strong. supply. incremental global increase of be short expansion in macro decade requirements will needed sector. production investments barrel and a Despite Long-term the maintain energy-related and more demand for add to to XXXX. which the for On remains necessary both pricing, long continue is overall in cycles gas oil the expected demand with fundamentals all the to energy, for will substantial through the service for required within near-term and next level, expand further will

as both share business continued ahead in by the laser chemistry the company opportunities expansion Analytics revenue are grow remain management focused we market performance next-generation As XXXX, expects along with opportunities, JPX launch and the and significant our efforts improved reservoir unlocks capitalize on positioned XXXX. Data domestically on system internationally. look XX% market the of upstream prescriptive we measurement growth, to efficiency for The cost adoption as of gains to our to well

to to unique we and chain. our and for geothermal, increase demand of that deliver superior confident new Chemistry hydrogen. this agricultural, continue our customers' such believe the outlook, positions with are services and We solutions opportunities maximize Consistent advanced provide will that industrial, will as Data to market expanding our us value Solutions suite and solar in verticals

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

J. Clement

you and Ryan, all us morning. Thank you, this joining for thank

the outstanding were of on any Ryan's all our has proud by significant Flotek what is team over We returned comments to the I years. profitability, XXXX, know accomplished, Our and results, only been in last in measurement. XXXX echo results financial exceptional metrics. improvement delivering company almost not the key but entire I two

financial I'm a report XX-K position our build year execution has ago XXXX happy auditors financial confirm on has expect concern momentum in resolved. that XXXX. in in our to audit turnaround much we XXXX established asserted filing and been to going Flotek's improvement stronger position, Evidencing this the that that than a their will this doubt

addition, report year's disclosed we we to in our control have that expect internal In in last remediated weaknesses XXXX XX-K. that the were XX-K

results the yesterday. to a full year slides items through of and EBITDA accomplishments to profit website gross of X we for adjusted $XX improvements $XX and growth I referring fourth Slide our our of we financial by the million, quarter posted million were Let's million be highlights business. XXXX. in annual revenue delivered and will financial improving in strong run the $XX presentation across the the year-over-year. key Headline handful

years during X.X fourth of sequential As quarterly that another quarter. That in to adjusted represents improvement relates it the EBITDA, metric. we reported improvements

earlier, the More XXXX XXXX. adjusted importantly, positive, first for as time since mentioned full year EBITDA Ryan was

to income Turning statement. the

of As segments. both Chemistry XX% Full we have our year over shown Data on Analytics despite year. the during second North sustained the land Slide since growth with completion in XXXX revenues X, XXXX, increases XXXX XXXX and lower achieved activity from American our revenues grew half

increased Chemistry revenue during XXX%. to the from XX% external of external increased the customers from XXXX, comparing customers year. More Our is first though, of XXXX fourth impressively, quarter revenue quarter by the by

Analytics our with from In success and up segment addition JPX our strong growth almost XXXX XX% XXXX. associated revenues grew generated as are since we to business, XX% over the Chemistry Data growing

from we fourth the of compared in comparable supply million $XX reported as XXXX Fourth million efficiencies X. period. grew of business chain. to a for to cost $X Slide gross aspects the profit benefited to year. numerous deliver implemented the gross million quarter $X across loss improvements XXXX over of the Turning profit of profit all gross as year company We gross the a the Fourth increased quarter the quarter to continue to loss full last $X year throughout consecutive compared gross for million

million. $X from improvement of Adjusted metric a quarter Moving totaled that to sequential XX. XXXX EBITDA, Slide the as third XX%

back noted the quarter consecutive a that As streak to earlier, second is of of this XXXX. quarter the tenth improvement, goes

to fourth Fourth by year. was Moving million the revenue credit to that quarter of full $X.X bonus fourth of a full to XXX XXXX is $XX.X compared compared reversal points quarter SG&A million XXXX. percentage numbers quarter SG&A. basis for related accrual. down the a totaled $XX.X XXXX to It of million million the totaled SG&A to for last Full included year the of million a $X.X compared On noting year basis, XXXX. and year worth $X.X XXXX

respectively, 'XX, SG&A XXXX from quarter full and benefit credit, year the that XX% of fourth Excluding 'XX and X%, down the periods. were

XXXX we during net reported of in XXXX $X.X quarter XXXX We expect notes fair the in $XX.X of during net Moving in $XX the noncash compared fourth $XX for income of from million Net of Net earnings the to so bottom forward. matured million include convertible going loss year to million for of volatility million type fourth of not income a million These our quarter measurement XXXX. XXXX, our a notes. net of gain the a loss compared XXXX. line. the this income value do did to full $XX.X was of

under Touching sheet. we announced availability $XX In on that balance October, million. our the million credit was ABL increased $XX.X from to the

$X.X the million of drawn ABL. under As we year-end, had

Monday, million than had less we $X As strong. of

with when XXXX consistent planning results also we we're This issued year's our XXXX Lastly, May. is first quarter last to results. process quarter with guidance provide guidance first with in

that providing not result will formal in we're which another we of in While each time, growth strong adjusted quarter this expect EBITDA do XXXX, we expect in guidance year metric. at positive

a at with revenue drive further continues SG&A. focus performance every in will maintain repeatable on closing, on reducing In to opportunity, anticipate we sharp focus growth Flotek we XXXX, a profitability, and particularly strong cost

for the back to Ryan comments. turn now I'll call over closing

Ryan Ezell

Thanks, Bond.

to Turning XX. Slide

and excited XXXX that segments, are Chemistry We growth potential in about both today. our Analytics opportunity Data and represents have extremely tremendous a compelling investment we Flotek as believe we

made for for solutions. am in XXXX, in reporting and and partner future and collaborative stakeholders, the continue delivered you look as our all to growth the choice I'm profitability Our continued we XXXX data regarding the results proud execute of forward. of of of we going chemistry sustained I be support share We on and we to hope progress forward confident positioned our Flotek to that appreciate ability we the our progress. sustainable further and excitement

to questions. Operator, we ready take now are

Operator

your be And first Johnson Crist Rice. Instructions] will [Operator question Don from at

Donald Crist

how the those press release. you events? language a on to of as projected wanted you and of when kind kind ramp-up we a today? you that the can XX% of I highlighted that Gentlemen, in line But touch come know time those Obviously, those on projects, expect fruition a time put revenue? of and in line lot when all both pilot some could I give -- can are us to of JPX. to but when year-over-year, you've may presentation we

Ryan Ezell

Don, which online is, gating that sensor of to bringing now, I big end the is generation When application, of look we it the right this Ryan. expect is the at factor Yes, commercial at newer HX.

and be in come the XXXX looking in at and applications at XXXX in continue some HX these we'll ramp-up a revenue in beyond. of line out So to

potential $XXX-plus us and that measurements, a when of drive ] of lot some a the the Quad for it the application up of you and flare going look Quad that lot from of chain a unique of Driving things million also look markets. in those we opened at of the C gas B the [ market at on some upstream TAM when to are custody the opportunities terms EPA

Donald Crist

of that what car the taking step side one sensor assuming up the you with kind to you on do keep And demand? gets capabilities the potential of further, Okay. just here, have bumper manufacturing --

Ryan Ezell

that's us, great Yes, excited think question. most that's a And about. for I what we're

can moved to now move now year, manufacturing. capabilities that a -- in Our we up improvement moving velocity in last a we you volume will look the have than in traditionally probably a about be would month terms manufacturing in at XXx what if improved with of less

which front-load the that ahead capital got ] units, investments upfront and Service upfront. preordered. We we've for using model be and [ capital piece, made we'll ahead in and on some invested particularly these be to a go as Data us the will some So already stuff upstream the went those

really well as So the great confident excited as we're and this the company. analyzer performance be in the for improvement improvement that manufacturing will

Donald Crist

Okay.

move in comfortable what do kind you for just you But obviously, slickwater drilling as the given set that you opportunity you traditional they In me. on past, the more more that drilling and the with side, Just one of further towards there. the Saudi, their shale 'XX kind introduced of get shift they of kind have gas kind done of versus technology? think offers what through opportunity and

Ryan Ezell

But sales, always material presence But that overall chemistry we've business our also cycle markets diverse to we with it us, I'd having of had of important market. then what say did get and Abu not our call us, we for holistically to testing, XX as what component revenue. in our in a full investment the about Dhabi. which strategy in of represented building international approved into a the the took months was which So part is very a Aramco international

the at a When international the system the basis impact there, potentially conservative year-on-year. revenue, even will have look could size you our of it double on

we there do what still side will in the at it when will material on the what of I we'll look business, be international think to the So help significantly. it Saudi, you see activity,

Donald Crist

color. the back I'll appreciate queue. get I in

Operator

Next Water Research. Robertson at Jeff question will be from Tower

Jeffrey Robertson

with a Service talk on Data Ryan, realize the JPX, the the on can about you that margins uptake business? as could that you

And the to for get production measurement? owner [ with page you then decide producers secondly, is allocations, how that on on same ] do owner when groups the groups and you're land the JPX solution land best working

Ryan Ezell

there. on a couple there's of So things

Looking first specifically around profile fully the disclosed for margin margin profiles, what the we JPX is. around haven't

say period the to to that. I What sales a and a on us model Data over we about when does improvement XX% X-year is, a it on it the compared business, the type over as will give capital model Service return

So it probability bump us, revenue, overall building for the will only but our also recurring of not the segment.

thousands an that is on unique extensive there analysis type at the chain And custody of done When of this what work. application you do amount look because we of a side, on of are wells for we've that.

some with actually of take the And the the if of Those so you we're working particularly processing at targets. cetera, components trust, actually quite a few of have et the part royalties, custody. of chain that as primary people, the of the legal of of that, some some been handle

taking manage every work a months, What's X mistake, Railroad they'll this the at we getting every because, now, no data be this they different Land using XX EPA, also how once for quality and how is seconds. Commission, sample and composite unique you we bodies Bureau make when been the at measure they're us look to of Texas X around Management the governing

how royalties allocated So in significant it work. a payments will the make the the change are way and

allocations, So I is various think . will about be at impact of particularly, and a bit little gathering see lot this [indiscernible] think where with a the of royalty points on, goes I how first the be will be there do it the movement trust, we'll the and

J. Clement

real Yes. Jeff, I'll quick. just add something

an those their accurate two situation is we're purchasers, where the how sharing amount the be do like on do come said, into point and stakeholders instantaneous the that I gathering on the of or think and are purchasers XX, terms every evaluating two play BTU first interpret side. the measurement point for going then XX XX, sample quality they in would one versus to mineral how of reconcile on the between be think this continuous clearly is, paid data the whatever reconcile the the and all operators those owners they And to that value going conflict I Ryan aligned one ensuring are product. how days,

Jeffrey Robertson

a how more direction, is gatherer read has what BTU wouldn't -- their on more If in them terms midstream they process? they if content that a headed of the make have efficient accurate

Ryan Ezell

XXX%. XXX%.

that that better combine even You what it's capabilities are, from transmix our with aspect.

Jeffrey Robertson

while obviously any a place ProFrac of Chemistry, to had When transactional a kind a alliance chemistry, at of -- basin-centered of a you external the with the Ryan, from on maybe pressure any that you've for the just now. pumpers? a in take opportunity form business look strategic agreement to at and alliance you look do -- more

Ryan Ezell

point. good another That's

that our collaborative of customers. is with As overall around intimacy part strategy these

we've begun say and split would I So as XX-XX have diversify a revenue E&P between stack, we operators. our really to companies service

point, see transactional Chemistry -- when E&P build But return to gains we to call becomes what starting look long-term in we're we becoming at revenue performance important our starting do extremely realize because they're those investment are partnerships. your stickier much management relationships they and we the with And on because the chemistry. than operators the on what the is external the stream to

And go some being and space able E&P you particularly different reservoir of on at to about their a they of public are of if unlock with out the look chemistry out type barrels lot additional curves. the operators, talking a

and And dramatically that so play not sustainable improves green only but we an bringing performance. that component reservoir essential in technology, also a

less they operators. that longer-standing E&P a is, what with us and gives the me, so volatile to And opportunity for see great relationships

Jeffrey Robertson

provides in well terms -- ,as help your laterals, which put performance? that Chemistry terms lastly, kind demand, longer Flotek that of does companies do driving you in can think Chemistry does the drill that improve And Ryan, solutions performance, solutions -- of of

Ryan Ezell

laterals, part at it they wellbore actual well opportunity fluid frac. drill important extremely a [ at look huge unlocks when the they do, completion because overall design of do ] we the that these from longer even spacing, drilling look they the these Well, look they think we how even all of I cleaning them, actual before -- it become all at

further up so technologies that with installments proper And in [ the chemistry, we multiplication. the place, come ] corrosion the inhibition, our any involved to [ or match the control, chain get surfactant we the can need the clay]

not get I approach think a as a opportunity And to me, viable. you more so difficult becomes commoditized the it's situation, huge chemistry into

how do the and really at And an opportunity doing where chemical it to You look best opens is of really additional that. business customize that's have the in you Flotek solution this for I us. think

Operator

[Operator Instructions] question from at Firestorm will next be Swergold Eric Your Capital.

Eric Swergold

Congratulations just on away on more side? bit business point navigating ProFrac matter how gating growing a a job there Could ProFrac through get from this this talk the salespeople your is away really with at ProFrac. it in are front about of you've What you factors point? from little of you holding an difficult Chemical at back done your very a many how what you can many and admirable business Or are customers? time factors because

Ryan Ezell

Eric, the at look non-ProFrac-related in percentage revenue QX, XX%, sitting XX%. we a as I in one, think, if number the were we

we As And the XX%. quarter it year. at sitting we've growth Chemistry seen of in business the the that segment every exited year, see we've throughout

to growth. a QX is importantly, More QX XXX% almost

us, continuing terms we're so share And that of push market to for in gain.

to cycle seeing to are we I it's the starting see that. typically grow. the because complex And going ] that that to we're We're longer technologies. little that bit sales value-add of think [ sales think fluid continue lot grow. see actually I a And a continue is to

to that it the feel discontinuity we it what and all XXXX on multitude But in we well. that I -- to advantages with of there's the there. of think continue through way JPX I doesn't piece always is a create think XX% transactional necessarily then XXXX. that's that piece, as that expect significantly And grow I going don't contribute do will growth as

to see back of down frac And going you're is show basins. see you're impact right when to you in starting you to sustained that where chemistry look North customers are some long throughout at that the we're there we think a and it now, flat and of what really year there's pursuing that these in emergence the the X the America I on major fleet don't holding to much probably customers Tier see plans like now activity get it call land. right that's our

headwinds, really these this actually wind excited meet great really teams for up navigate we're opportunities about to the appropriately pick market some to opportunity good So and offer share.

Operator

Jeff from Robertson Tower Next question will Research. Water be at

Jeffrey Robertson

follow-up. into potential financial adjusted weakness the Flotek's position a that better with Just and material with does look discussions partners XXXX, throughout your the does opportunities eliminated the of -- and that better in you customers EBITDA liquidities, XX-K positive from as expectation of Bond, and you? further front commercial business

J. Clement

mean, to you're some talking and that Absolutely, going without I the anxiety. think in a doubt. language public concern folks you've I creates filings, your got

financial outlook suppliers this time going having concern, the be is say, So having behind the company than having But as items them us the I and more material will agree is more of the to definitely have benefit behind year our we would a last us. -- glad various with rebates certainly negotiate much both stable customers. the and that put auditors going important. We're and for concern

Operator

from [indiscernible] Richard [Operator ]. Your be will next [ Glenbrook at question Instructions]

Unknown Analyst

question, quick a really. Just

I your strong don't obviously, ], hear how the at as isn't projecting and [ same the XX% out EBITDA market. in sure is you're I strategy plus. mean, Given stock obviously optimism maybe it's I today, and time, appreciated about before down, being your really the it, playing

you're below stock if have you a or buyback. been at so And least wondered considering just modest book, consider I

J. Clement

company XX to path certainly feel it on turned like corner, the the to Richard. argue could No, last the least we the at say. profitability what you We for for get Thanks at XX stabilize been a the is that this look you months last months, we've doing and not we've I the at for mean, time. in question, as really with when regard. business

or point buying of items at to to back get cash terms probably of at that maturity plans other shareholders near don't have But in stock time, But something to to not the sit back in Certainly term. as as we we this cycle the today, shares. that buy here we company. to it to any hope relates return in

Operator

at sir. it appears Thank time, further you. this And we proceed, have Ezell, Mr. Please no questions.

Ryan Ezell

like the be during you discussion the would Annual next one-on-one Conference panel participating Flotek I that field California hosting on be remind participating in Ritz in an meetings Bond XXth at Dana X:XX will joined in to and Okay. March Point, Monday, Roth with will I'll the at in investors XX week. oil service be Carlton conference. p.m. Pacific Time by

seeing forward for us look We today. next and again to you conference the week, at thanks joining

Operator

and today. call sir. indeed Have conference gentlemen, disconnect does for please this that you, Thank again, you thank do we attending. conclude lines. ask at you your your time, a And Once good this day. Ladies for

Flotek Industries (FTK) 13 Mar 242023 Q4 Earnings call transcript