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0000928054FALSE00009280542024-03-122024-03-12

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

March 12, 2024
Date of Report (Date of earliest event reported)

Flotek Industries, Inc.
(Exact name of registrant as specified in its charter)

Delaware 001-13270 90-0023731
(State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)
5775 N. Sam Houston Parkway W., Suite 400 Houston, TX, 77086
(Address of principal executive office and zip code)

(713) 849-9911
(Registrant’s telephone number, including area code)

(Not applicable)
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of Exchange on which registered
Common Stock, $0.0001 par value FTK NYSE

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐






Item 2.02
Results of Operations and Financial Condition
On March 12, 2024, Flotek Industries, Inc. (the “Company”) issued a press release providing its financial results for the quarter and full year ended December 31, 2023 and announcing that it will hold a conference call to discuss its operating results. The press release is furnished herewith as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information furnished pursuant to Item 2.02 of this Current Report on Form 8-K and in Exhibit 99.1 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not subject to the liabilities of that section and is not deemed incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.


Item 7.01
Regulation FD Disclosure


On March 12, 2024, the Company provided on its website a presentation containing information relating to its current operations and financial results. A copy of the presentation is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

The information furnished pursuant to Item 7.01 of this Current Report on 8-K and in Exhibit 99.2 shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act, is not subject to the liabilities of that section and is not deemed incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.


Item 9.01
Financial Statements and Exhibits.

d) Exhibits.
Exhibit Number
Description
99.1
99.2




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FLOTEK INDUSTRIES, INC.
Date: March 12, 2024
/s/ Bond Clement
Name: Bond Clement
Title: Chief Financial Officer

EX-99.1 2 ex991.htm EX-99.1 Document


Exhibit 99.1
newlogo.jpg                                        
Flotek Reports Fourth Quarter and Full-Year 2023 Results Highlighted by Growth in All Profitability Metrics Including a $31 Million Improvement in Annual Gross Profit
HOUSTON, March 12, 2024 - Flotek Industries, Inc. (“Flotek” or the “Company”) (NYSE: FTK) today announced operational and financial results for the fourth quarter and full-year ended December 31, 2023, highlighted by significant improvement in all profitability metrics, including net income, gross profit and adjusted gross profit(1). For the first time since 2017, the Company generated full-year positive adjusted EBITDA(1).
Financial Summary (in thousands)

Three months ended December 31, Twelve months ended December 31,
2023 2022 2023 2022
Total Revenues $ 42,188  $ 48,217  $ 188,058  $ 136,092 
Gross Profit (Loss) $ 9,430  $ (2,074) $ 24,263  $ (6,700)
Adjusted Gross Profit (Loss) (1)
$ 10,661  $ (522) $ 28,666  $ (1,884)
Net Income (Loss) $ 2,105  $ (19,026) $ 24,713  $ (42,305)
Adjusted EBITDA (1)
$ 3,953  $ (5,079) $ 1,488  $ (26,169)
(1)A non-GAAP financial measure. See the “Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings” section in this release for more information, including reconciliations to the most comparable GAAP measures.
Full-Year 2023 Highlights
•Reported net income of $24.7 million, a $67.0 million year-over-year improvement, compared to a net loss of $42.3 million for 2022.
•Delivered year-over-year improvements in gross profit, adjusted gross profit(1) and adjusted EBITDA(1) of $31.0 million, $30.6 million and $27.7 million, respectively, marking the first year of positive adjusted EBITDA(1) since 2017.
•Full year revenue of $188.1 million increased 38% compared to 2022 revenue of $136.1 million. Chemistry revenue from external customers increased 21% over 2022 revenue despite the backdrop of a slowing upstream completion environment.
•Generated strong growth in data analytics segment as JP3 revenues grew 47% to $8.1 million over 2022 revenues of $5.5 million.
•Strengthened liquidity through an up to $13.8 million Asset Based Loan (“ABL”).
•Solidified the senior leadership team through the appointment of Dr. Ryan Ezell as Chief Executive Officer and the previous executive announcements.
•Material weakness and going concern issues identified in connection with the 2022 audit are expected to be resolved.
(1)A non-GAAP financial measure. See the “Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings” section in this release for more information, including reconciliations to the most comparable GAAP measures.


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Management Commentary
Chief Executive Officer Dr. Ryan Ezell commented, “2023 was a transformative year as we restored profitability and delivered significant improvement in all key financial metrics, strengthened our leadership team with the addition of several key members, enhanced our liquidity through an ABL, and positioned Flotek to be the collaborative partner of choice for sustainable chemistry and data solutions that maximize our customers’ value.
This impressive list of achievements reflects stellar execution throughout our entire organization and speaks to tremendous growth opportunities as we leverage our unique approach to chemistry as a common value creation platform to drive market share gains through our differentiated solutions. We are excited about the next generation of our JP3 Verax Near InfraRed measurement system, which will scale our Data Analytics segment more quickly and is expected to deliver associated revenue growth of greater than 50% in 2024. We also anticipate sustained growth in reservoir centric and international chemistry revenues as we expand our global footprint.”
Fourth Quarter and Full-Year 2023 Financial Results
•Revenue: Flotek reported total revenues of $42.2 million for the fourth quarter 2023, which was a decrease of $6.0 million, or 13%, compared to total revenues of $48.2 million for the fourth quarter 2022. The decline in revenue as compared to the fourth quarter 2022 was the result of lower North American land completion activity during the fourth quarter 2023 partially offset by a 28% increase in chemistry revenues from external customers during the fourth quarter 2023 as compared to the 2022 period. Flotek reported total revenues of $188.1 million for the full-year 2023, which was an increase of $52.0 million, or 38%, compared to total revenues of $136.1 million for the full-year 2022. The Company's fourth quarter and full-year 2023 revenues included amounts attributable to the minimum chemistry purchase requirements contained in the ProFrac supply agreement.
•Gross Profit (Loss): The Company generated gross profit of $9.4 million during the fourth quarter 2023 as compared to a gross loss of $2.1 million for the fourth quarter 2022. The improvement in fourth quarter 2023 gross profit was the result of successful initiatives throughout 2023 to drive cost improvements with respect to freight, logistics and materials, the increase in chemistry revenues from external customers as well as revenue attributable to the minimum chemistry purchase requirements contained in the ProFrac supply agreement.
The Company generated gross profit of $24.3 million for the full-year 2023 compared to a gross loss of $6.7 million for the full-year 2022. The improvement in full-year 2023 gross profit was the result of the 38% increase in revenues combined with numerous cost improvements implemented during 2023.
•Adjusted Gross Profit (Non-GAAP)(1): Flotek generated adjusted gross profit(1) of $10.7 million during the fourth quarter 2023 compared to adjusted gross loss(1) of $0.5 million for the fourth quarter 2022. Adjusted gross profit(1) for the full-year 2023 increased to $28.7 million compared to a loss of $1.9 million for the full-year 2022. Adjusted gross profit(1) excludes non-cash items, primarily amortization of contract assets.
•Selling, General and Administrative (“SG&A”) Expense: SG&A expense totaled $6.6 million for the fourth quarter 2023 compared to $6.2 million for the fourth quarter 2022.

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SG&A during the fourth quarter 2022 included a $1.9 million credit related to the reversal of a bonus accrual. SG&A expense totaled $27.9 million for full year 2023 compared to $27.1 million for full-year 2022.
•Net Income (Loss) and EPS: Flotek reported net income of $2.1 million, or $0.07 per diluted share, for the fourth quarter 2023. This compares to a net loss of $19.0 million, or ($1.51) per diluted share, for the fourth quarter 2022. Net income for the full-year 2023 was $24.7 million, or ($0.10) per diluted share, compared to a net loss of $42.3 million, or ($3.41) per diluted share, for the comparable period of 2022. Net income (loss) for the fourth quarter 2022 and full-year 2023 and 2022 included non-cash gains (losses) on the fair value measurement of convertible notes payable totaling ($8.9) million, $30.0 million, and $0.1 million, respectively.
•Adjusted EBITDA (Non-GAAP)(1): Adjusted EBITDA(1) was $4.0 million in the fourth quarter 2023 as compared to negative $5.1 million in the fourth quarter 2022. Adjusted EBITDA(1) was $1.5 million for full-year 2023 compared to negative $26.2 million for the full-year 2022.
(1)See the “Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings” section in this release for more information, including reconciliations to the most comparable GAAP measures.
Data Analytics Update
Flotek continues to test the next generation version of its proprietary JP3 Verax Near InfraRed measurement system (“JP3”). JP3 represents the foundational technology behind the Company’s Data Analytics business, which supports customers through real-time data, monitoring, and visualization across the energy value chain. The new JP3 analyzer is currently undergoing extensive field-trial testing with customer deployment expected by mid-2024. The new unit’s engineering advances will facilitate scale and accelerated pace of production along with a reduction in manufacturing costs allowing access to markets that are currently unavailable.
The Company’s plans for 2024 include maintaining JP3’s strong presence in the midstream market, as well as pursuing new opportunities to accelerate penetration into the upstream market. Flotek is currently working with landowner groups to improve production allocations on lease sites and custody transfer locations through JP3’s accurate, real-time measurements. This application represents a significant market opportunity in replacing traditional allocation measurement technologies. In addition, the Company is participating in a flare monitoring pilot program with a large upstream operator to demonstrate the use of JP3’s technical solution in connection with compliance with recently enacted EPA regulations. With over 55,000 existing flares in the United States expected to be subject to monitoring regulations by 2028, this application could present a material multi-year opportunity for JP3 to expand its footprint into the upstream space.
Balance Sheet and Liquidity
As of March 11, 2024, the Company’s cash and cash equivalents totaled $5.3 million. Borrowings outstanding under the Company’s Asset Based Loan at March 11, 2024 totaled approximately $0.5 million as compared to $7.5 million at December 31, 2023.



3



2024 Guidance
Flotek plans to issue 2024 guidance in conjunction with the release of its first quarter 2024 financial and operating results, consistent with last year’s timing.
Upcoming Investor Event
Flotek will participate in the 36th Annual Roth Conference to be held at the Ritz Carlton in Laguna Niguel, California, March 17-19, 2024. Flotek Chief Executive Officer, Ryan Ezell, will participate in an industry panel discussion on March 18 at 1:00 p.m. PT and will be joined by Chief Financial Officer, Bond Clement, in hosting one-on-one meetings with investors during the event. An updated corporate presentation that will be used in discussions at the conference will be posted to the Investor Relations section of Flotek’s corporate website at www.flotekind.com prior to the start of the conference.
Conference Call Details
Flotek will host a conference call on March 13, 2024, at 9:00 a.m. CT (10:00 a.m. ET) to discuss its fourth quarter and full year 2023 results. Participants may access the call through Flotek’s website at www.flotekind.com under “News” within the Investor Relations section or by telephone toll free at 1-800-836-8184 (international toll: 1-646-357-8785) approximately five minutes prior to the start of the call. Following the conclusion of the conference call, a recording of the call will be available on the Company’s website.
An updated corporate presentation that will be referenced on the call will be posted to the Investor Relations section of Flotek’s website at www.flotekind.com prior to the start of the earnings conference call.
About Flotek Industries, Inc.
Flotek Industries, Inc. is an advanced technology-driven, green chemical and data analytics company providing unique and innovative completion solutions that have a proven, positive impact on sustainability and reducing the overall environmental impact of energy on air, land, water and people. Flotek has an intellectual property portfolio of over 170 patents and a global presence in more than 59 countries throughout North America, Latin America, the Middle East and North Africa. Flotek has established collaborative partnerships focused on sustainable and optimized chemistry and data solutions which improve well performance and allow its customers to generate higher returns on invested capital.
Flotek is based in Houston, Texas and its common shares are traded on the New York Stock Exchange under the ticker symbol “FTK”. For additional information, please visit www.flotekind.com.
Forward-Looking Statements
Certain statements set forth in this press release constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Flotek Industries, Inc.’s business, financial condition, results of operations and prospects. Words such as will, continue, expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this press release.

4



Although forward-looking statements in this press release reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Further information about the risks and uncertainties that may impact the company are set forth in the Company’s most recent filing with the Securities and Exchange Commission on Form 10-K (including, without limitation, in the “Risk Factors” section thereof), and in the Company’s other SEC filings and publicly available documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this press release.

Investor contact:
Bond Clement
Chief Financial Officer
E: ir@flotekind.com
P: (713) 726-5322

5




FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

December 31, 2023 December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents $ 5,851  $ 12,290 
Restricted cash 102  100 
Accounts receivable, net of allowance for credit losses of $745 and $623 at December 31, 2023 and December 31, 2022, respectively 13,687  19,136 
Accounts receivable, related party, net of allowance for credit losses of $0 at December 31, 2023 and December 31, 2022, respectively 34,569  22,683 
Inventories, net 12,838  15,720 
Other current assets 3,564  3,032 
Current contract asset 5,836  7,113 
Total current assets 76,447  80,074 
Long-term contract assets 68,820  72,576 
Property and equipment, net 5,129  4,826 
Operating lease right-of-use assets 5,030  5,900 
Deferred tax assets, net 300  404 
Other long-term assets 1,787  1,030 
TOTAL ASSETS $ 157,513  $ 164,810 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 31,705  $ 33,375 
Accrued liabilities 5,890  8,984 
Income taxes payable 45  97 
Interest payable —  130 
Current portion of operating lease liabilities 2,449  3,328 
Current portion of finance lease liabilities 22  36 
Asset-based loan 7,492  — 
Current portion of long-term debt 179  2,052 
Convertible notes payable —  19,799 
Contract Consideration Convertible Notes Payable —  83,570 
Total current liabilities 47,782  151,371 
Deferred revenue, long-term 35  44 
Long-term operating lease liabilities 7,676  8,044 
Long-term finance lease liabilities —  19 
Long-term debt 60  2,736 
TOTAL LIABILITIES 55,553  162,214 
Stockholders’ equity:
Preferred stock, $0.0001 par value, 100,000 shares authorized; no shares issued and outstanding —  — 
Common stock, $0.0001 par value, 240,000,000 shares authorized; 30,772,837 shares issued and 29,664,130 shares outstanding at December 31, 2023; 13,985,986 shares issued and 12,964,732 shares outstanding at December 31, 2022
Additional paid-in capital 463,140  388,184 
Accumulated other comprehensive income 127  181 
Accumulated deficit (326,806) (351,519)
Treasury stock, at cost; 1,108,707 and 1,021,255 shares at December 31, 2023 and December 31, 2022, respectively
(34,504) (34,251)
Total stockholders’ equity 101,960  2,596 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 157,513  $ 164,810 

6



FLOTEK INDUSTRIES, INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
  Three Months Ended December 31, Twelve Months Ended December 31,
  2023 2022 2023 2022
Revenue:
Revenue from external customers $ 19,239  $ 15,940  $ 66,518  $ 54,344 
Revenue from related party 22,949  32,277  121,540  81,748 
Total revenues 42,188  48,217  188,058  136,092 
Cost of goods sold 32,758  50,291  163,795  142,792 
Gross profit (loss) 9,430  (2,074) 24,263  (6,700)
Operating costs and expenses:
Selling, general, and administrative 6,570  6,166  27,873  27,124 
Depreciation 204  180  734  734 
Research and development 255  922  2,486  4,438 
Severance costs (19) (387) (46) — 
Gain on sale of property and equipment —  (1,000) (38) (2,916)
Gain on lease termination —  —  —  (584)
(Gain) loss in fair value of Contract Consideration Convertible Notes Payable —  8,941  (29,969) (75)
Total operating costs and expenses 7,010  14,822  1,040  28,721 
Income (loss) from operations 2,420  (16,896) 23,223  (35,421)
Other income (expense):
Paycheck protection plan loan forgiveness —  —  4,522  — 
Interest expense (320) (2,465) (2,857) (7,051)
Other expense, net 56  212  (26) 145 
Total other income (expense), net (264) (2,253) 1,639  (6,906)
Income (loss) before income taxes 2,156  (19,149) 24,862  (42,327)
Income tax (expense) benefit (51) 123  (149) 22 
Net income (loss) $ 2,105  $ (19,026) $ 24,713  $ (42,305)
Income (loss) per common share:
Basic $ 0.07  $ (1.51) $ 1.00  $ (3.41)
Diluted $ 0.07  $ (1.51) $ (0.10) $ (3.41)
Weighted average common shares:
Weighted average common shares used in computing basic income (loss) per common share 29,396  12,567  24,830  12,404 
Weighted average common shares used in computing diluted income (loss) per common share 30,496  12,567  28,377  12,404 

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FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

  Twelve Months Ended December 31,
  2023 2022
Cash flows from operating activities:
Net income (loss) $ 24,713  $ (42,305)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Change in fair value of contingent consideration (527) (25)
Change in fair value of Contract Consideration Convertible Notes Payable (29,969) (75)
Amortization of convertible note issuance costs 83  1,002 
Payment-in-kind interest expense 2,284  5,956 
Amortization of contract assets 5,033  3,371 
Depreciation and amortization 734  734 
Amortization of asset-based loan origination costs 121  — 
Provision for credit losses, net of recoveries 138  203 
Provision for excess and obsolete inventory 959  1,734 
Gain on sale of property and equipment (38) (2,916)
Gain on lease termination —  (584)
Non-cash lease expense 3,014  226 
Stock compensation expense (254) 3,325 
Deferred income tax (benefit) expense 104  (125)
Paycheck protection plan loan forgiveness (4,522) — 
Changes in current assets and liabilities:
Accounts receivable 5,311  (7,342)
Accounts receivable, related party (11,886) (21,383)
Inventories 1,938  (7,917)
Income taxes receivable —  14 
Other assets (836) (285)
Contract assets, net —  (3,600)
Accounts payable (1,670) 25,760 
Accrued liabilities (2,575) (34)
Operating lease liabilities (3,391) (507)
Income taxes payable (53) 93 
Interest payable (8) 48 
Net cash used in operating activities (11,297) (44,632)











8



FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(continued)

Twelve Months Ended December 31,
2023 2022
Cash flows from investing activities:
Capital expenditures (1,081) (421)
Proceeds from sale of assets 67  5,752 
Net cash (used in) provided by investing activities (1,014) 5,331 
Cash flows from financing activities:
Payment for forfeited stock options (617) — 
Payments on long term debt (149) — 
Proceeds from asset-based loan 68,716  — 
Payments on asset-based loan (61,224) — 
Payment for origination costs of asset-based loan (574) — 
Proceeds from issuance of convertible notes —  21,150 
Payment of issuance costs of convertible notes —  (1,084)
Proceeds from issuance of warrants —  19,500 
Payment of issuance costs of stock warrants —  (1,170)
Payments to tax authorities for shares withheld from employees (268) (224)
Proceeds from issuance of stock 77  133 
Payments for finance leases (33) (38)
Net cash provided by financing activities 5,928  38,267 
Effect of changes in exchange rates on cash and cash equivalents (54) 100 
Net change in cash and cash equivalents and restricted cash (6,437) (934)
Cash and cash equivalents at the beginning of period 12,290  11,534 
Restricted cash at the beginning of period 100  1,790 
Cash and cash equivalents and restricted cash at beginning of period 12,390  13,324 
Cash and cash equivalents at end of period 5,851  12,290 
Restricted cash at the end of period 102  100 
Cash and cash equivalents and restricted cash at end of period $ 5,953  $ 12,390 

9



FLOTEK INDUSTRIES, INC.
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings
(in thousands)

  Three Months Ended December 31, Twelve Months Ended December 31,
  2023 2022 2023 2022
Gross profit (loss) $ 9,430  $ (2,074) $ 24,263  $ (6,700)
Stock compensation expense 85  (132) 459 
Severance and retirement —  29 
Contingent liability revaluation (143) 81  (527) (53)
Sanitizer inventory write down —  —  —  1,036 
Amortization of contract assets 1,368  1,386  5,033  3,371 
Adjusted Gross profit (loss) (Non-GAAP) (1)
$ 10,661  $ (522) $ 28,666  $ (1,884)
Net income (loss) $ 2,105  $ (19,026) $ 24,713  $ (42,305)
Interest expense 320  2,465  2,857  7,051 
Income tax expense 51  (123) 149  (22)
Depreciation and amortization 204  180  734  734 
EBITDA (Non-GAAP) (1)
$ 2,680  $ (16,504) $ 28,453  $ (34,542)
Stock compensation expense 307  1,062  (268) 3,325 
Severance and retirement 10  —  (17) 387 
Contingent liability revaluation (143) 81  (527) (25)
Sanitizer inventory write down —  —  —  1,036 
Gain on disposal of assets —  (1,000) (38) (2,916)
Gain on lease termination —  —  —  (584)
PPP loan forgiveness —  —  (4,522) — 
Contract Consideration Convertible Notes Payable revaluation adjustment —  8,941  (29,969) (75)
Amortization of contract assets 1,368  1,386  5,033  3,371 
Non-Recurring professional fees (269) 955  3,343  3,854 
Adjusted EBITDA (Non-GAAP) (1)
$ 3,953  $ (5,079) $ 1,488  $ (26,169)

(1) Management believes that adjusted gross profit, EBITDA and adjusted EBITDA for the three and twelve months ended December 31, 2023 and 2022, are useful to investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods. Management views the income and expenses noted above to be outside of the Company’s normal operating results. Management analyzes operating results without the impact of the above items as an indicator of performance, to identify underlying trends in the business and cash flow from continuing operations, and to establish financial and operational goals, excluding certain non-cash or non-recurring items.

10
EX-99.2 3 ex992-fy2023earningspres.htm EX-99.2 ex992-fy2023earningspres
Corporate Update March 2024


 
Forward-Looking Statements Certain statements set forth in this presentation constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Flotek Industries, Inc.’s business, financial condition, results of operations and prospects. Words such as will, continue, expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this presentation. Although forward-looking statements in this presentation reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Further information about the risks and uncertainties that may impact the Company are set forth in the Company’s most recent filing with the Securities and Exchange Commission on Form 10-K (including, without limitation, in the "Risk Factors" section thereof), and in the Company’s other SEC filings and publicly available documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this presentation. // 2


 
Compelling Investment Opportunity // 3 Market leading Oil & Gas prescriptive chemistry solutions • Sustained growth in US and international O&G completion chemistry • Industry leading technology improving BOE uplift by +26% • Long-term contracted chemistry volumes mitigates impact of industry volatility Market disrupting real-time measurement technology • Data analytics segment expected to grow associated revenues over 50% in 2024 • Release of next generation analyzer provides scale and new market opportunities Leadership team with deep industry expertise to execute rapid growth strategy RETURN TO PROFITABILITY UNDERSCORES TURNAROUND EXECUTION


 
Company Overview // 4 Headquarters Field Office FTK Global Presence Founded: 1985 Employees: 143 Corporate Headquarters: Houston Countries with Clients: 59 Patents: >170 Debt (12.31.23) ($mm): $7.5 FY 2023 Gross Profit Margin: 13%


 
A Purpose-Driven Company // 5 Our completion solutions have a positive impact on sustainability and reducing the overall environmental impact of energy on air, land, water and people Who We Are An advanced technology-driven, green chemical and data analytics company providing unique and innovative completion solutions Our Vision We strive to be the collaborative partner of choice for solutions that reduce the environmental impact of energy on air, water, land and people Value Proposition We collaborate and deliver sustainable, optimized chemistry and data solutions that maximize our customers’ value


 
Our Strategic Priorities // 6 Industry-Leading Innovation Track record of delivering fit-for-purpose optimized chemistry and data solutions Expand Global Footprint Sustainable growth in international chemistry revenues and data analytics Environmental Leadership Focus on reducing impact of energy on air, land, water, and people Sustainable Revenue Growth 10-year contracted chemistry volumes with significant market expansion opportunities Enhanced Profitability Generated a $27.7 million improvement in Adjusted EBITDA** year over year Strong Balance Sheet Minimal debt and strengthened liquidity with ABL* facility * Asset Based Loan ** Adjusted EBITDA is a non-GAAP measure. See the Appendix in this presentation for a reconciliation to the nearest GAAP measure.


 
2023 Highlights: Improvement in Performance // 7 • Adjusted EBITDA is a non-GAAP measure. See the Appendix in this presentation for a reconciliation to the nearest GAAP measure. ** Asset Based Loan Poised to deliver sustained growth and further market share gains through chemistry and emerging data analytics upstream market TRANSFORMATIVE YEAR WITH SIGNIFICANT GROWTH IN ALL PROFITABILITY METRICS • Delivered year-over-year growth: • Revenue: $52.0 million • Gross profit: $31.0 million • Adj. EBITDA*: $27.7 million • Full year adj. EBITDA* was positive for the first time since 2017 • Revenues associated with external customers grew each quarter • Data analytics revenues grew 47% compared to 2022 • Strengthened liquidity through an up to $13.8 million ABL** • Material weakness and going concern issues identified in connection with the 2022 audit are expected to be resolved


 
$81.6 $120.9 $40.0 $49.0 $59.0 $4.3 $5.5 $8.1 $- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 $200.0 2021 2022 2023 ProFrac Chem.* External Chem. Data Analytics Strong Revenue Performance // 8 Annual Segmented Revenue ($MM) External Chemistry Revenue ($MM) * ProFrac Chem. reflects ‘Chemistry Only’ revenues $9.2 $15.5 $16.3 $18.0 $- $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 $20.0 Q1 Q2 Q3 Q4 2023 TRANSFORMATIVE YEAR WITH SIGNIFICANT GROWTH IN ALL PROFITABILITY METRICS


 
Delivering Rapid Improvement in Gross Profit // 9 Quarterly Consolidated Gross Profit (Loss) (000’s) ($2,500) $0 $2,500 $5,000 $7,500 $10,000 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 • 4Q 2023 gross profit was positive for the fourth consecutive quarter • Delivered a $31.0 million increase in 2023 gross profit compared to 2022 • Long- term contracted chemistry volumes protects against lower frac fleet activity • Delivered efficiencies across all aspects of business supply chain TRANSFORMATIVE YEAR WITH SIGNIFICANT GROWTH IN ALL PROFITABILITY METRICS


 
Strong Financial Momentum Continues // 10 Quarterly Adjusted EBITDA*/Revenue * Adjusted EBITDA is a non-GAAP metric. See the Appendix in this presentation for a reconciliation to nearest GAAP measure -80% -70% -60% -50% -40% -30% -20% -10% 0% 10% 20% 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 • 2023 adj. EBITDA* increased $27.7 million over 2022 • 4Q 2023 was the tenth consecutive quarter of improvement • 2023 was the first full year of positive adj. EBITDA since 2017 TRANSFORMATIVE YEAR WITH SIGNIFICANT GROWTH IN ALL PROFITABILITY METRICS


 
• Global presence in 59 countries • Establishing collaborative partnerships with E&P operators and oil field service providers • Extensive experience with proven solutions in over 20,000 completed wells worldwide • Fit-for-purpose optimized chemistry and data solutions allow customers to maximize the value of their business • High margin data analytics segment driving revenue growth and increased profitability • Increasing market share across both segments Complementary Segments Drive Growth // 11 Sustainable chemistry solutions to maximize customer’s value chain while minimizing their environmental impact Transforming business through real-time data, monitoring and visualization across the energy value chain utilizing proprietary technologies Chemistry Technologies Data Analytics CHEMISTRY AS A COMMON VALUE CREATION PLATFORM


 
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 0 5 10 15 20 C um ul a tiv e Pr od uc tio n (B O E) Months Permian Basin Average Cumulative BOE Flotek PCM Non-Flotek 25 +26% Uplift Chemistry Technologies: Competitive Advantage // 12 • Prescriptive Chemistry Management (PCM)TM • Proprietary energy chemistry solutions • Dedicated chemistry management team • Customized solutions to each well’s geology • AI enabled and digital twinning analytics of over 20,000 wells • CnFTM is our proprietary reservoir technology utilized by PCM services • Leveraging over 170 active patents to design the best chemistry for each well • Strong well performance with 75,000 BOE uplift versus competition * Data derived from 2019-2023 Enverus Prism Platform (1,878 wells) ** Similar Results from all basins, example is highlighting the most productive basin in the U.S. (Permian) $- $3.0 $6.0 $9.0 $12.0 $15.0 $18.0 2022 2023 CnFTM Revenue Performance 75 MBOE} * DELIVERING THE BEST UPLIFT PERFORMANCE IN INDUSTRY 75% growth Re ve nu es ($ in M M ) $9.3 $16.3


 
Chemistry Technologies: New Markets // 13 DIVERSIFIES CUSTOMER BASE AND PROVIDES FUTURE GROWTH OPPORTUNITIES Industrial Geothermal Agricultural Solar Hydrogen As smart systems develop, so will the demand for green chemistry solutions Positioned to capitalize on proprietary patents, technology advancements and collaborative partnerships with customers


 
Data Analytics: “Measure More” Strategy // 14 Introduction of the new generation JP3 Analyzer • Unlocks an estimated $700 million oil & gas upstream TAM* • 12x improvement in manufacturing/delivery time • Provides a 60% Data as a Service sales opportunity Expansion of product portfolio • Flare gas, H2, N2, CO2, H2S, Diesel and Jet Fuel hotspots • Raman analyzer unlocks the downstream, carbon capture markets that require hydrogen (H2) • New Two-channel Verax upgrades revenue opportunity on single point measurement and allows for validation Pictured above: The proprietary Gen3 prototype spectrometer installed on an Eagleford wellsite DIVERSIFYING REAL-TIME DATA MONITORING ACROSS CHEMISTRY LANDSCAPE * Total Addressable Market


 
Data Analytics: Industry Applications Upstream • Realtime product measurement improves accuracy of payments to royalty owners and operators • Continuous BTU monitoring to facilitate field gas utilization in powering rigs and frac fleets • Flare monitoring and methane detection Midstream • Gas processing plant control and optimization • Pipeline batch detection to optimize pipeline transmix processes • Vapor pressure controls to achieve product specifications • Emerging market in carbon capture Downstream • Realtime measurement to optimize distillation tower efficiency • Crude feedstock blending • Chemical property and quality measurement in pipelines and terminals • Refined product specification measurement to optimize mix of products UTILIZING TECHNOLOGIES FOR EXPANSION INTO NEW MARKETS // 15


 
Complimentary Segments: Outlook // 16 Chemistry • Prescriptive chemistry management (PCM)TM and unique patented products unlocks maximum production uplift • Pursuing strategic opportunities within production and pipeline chemistry markets leveraging real-time measurement analytics • Contracted long-term volume agreements establish economy of scale and market pricing power Data Analytics • New JP3 analyzer will open a $700 million O&G upstream TAM* • “Measure More” strategy to improve product offering and market application of our units • Further integration of data analytics and chemistry segments will provide an autonomous solution to customers * Total Addressable Market THE NEXT PHASE OF TRANSFORMATION


 
Summary: Compelling Investment Opportunity // 17 Market leading Oil & Gas prescriptive chemistry solutions • Sustained growth in US and international O&G completion chemistry • Industry leading technology improving BOE uplift by +26% • Long-term contracted chemistry volumes mitigates impact of industry volatility Market disrupting real-time measurement technology • Data analytics segment expected to grow associated revenues over 50% in 2024 • Release of next generation analyzer provides scale and new market opportunities Leadership team with deep industry expertise to execute rapid growth strategy RETURN TO PROFITABILITY UNDERSCORES TURNAROUND EXECUTION


 
Appendix


 
Recent Financials Unaudited Condensed Consolidated Statement of Operations (in thousands, except share data) // 19


 
Unaudited Condensed Consolidated Balance Sheets (in thousands, except share data) // 20 December 31, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 5,851 $ 12,290 Restricted cash 102 100 Accounts receivable, net of allowance for credit losses of $745 and $623 at December 31, 2023 and December 31, 2022, respectively 13,687 19,136 Accounts receivable, related party, net of allowance for credit losses of $0 at December 31, 2023 and December 31, 2022, respectively 34,569 22,683 Inventories, net 12,838 15,720 Other current assets 3,564 3,032 Current contract asset 5,836 7,113 Total current assets 76,447 80,074 Long-term contract assets 68,820 72,576 Property and equipment, net 5,129 4,826 Operating lease right-of-use assets 5,030 5,900 Deferred tax assets, net 300 404 Other long-term assets 1,787 1,030 TOTAL ASSETS $ 157,513 $ 164,810 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 31,705 $ 33,375 Accrued liabilities 5,890 8,984 Income taxes payable 45 97 Interest payable — 130 Current portion of operating lease liabilities 2,449 3,328 Current portion of finance lease liabilities 22 36 Asset-based loan 7,492 — Current portion of long-term debt 179 2,052 Convertible notes payable — 19,799 Contract Consideration Convertible Notes Payable — 83,570 Total current liabilities 47,782 151,371 Deferred revenue, long-term 35 44 Long-term operating lease liabilities 7,676 8,044 Long-term finance lease liabilities — 19 Long-term debt 60 2,736 TOTAL LIABILITIES 55,553 162,214 Stockholders’ equity: Preferred stock, $0.0001 par value, 100,000 shares authorized; no shares issued and outstanding — — Common stock, $0.0001 par value, 240,000,000 shares authorized; 30,772,837 shares issued and 29,664,130 shares outstanding at December 31, 2023; 13,985,986 shares issued and 12,964,732 shares outstanding at December 31, 2022 3 1 Additional paid-in capital 463,140 388,184 Accumulated other comprehensive income 127 181 Accumulated deficit (326,806) (351,519) Treasury stock, at cost; 1,108,707 and 1,021,255 shares at December 31, 2023 and December 31, 2022, respectively (34,504) (34,251) Total stockholders’ equity 101,960 2,596 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 157,513 $ 164,810


 
Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) // 21


 
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings (in thousands)(1) // 22 (1) Management believes that adjusted gross profit, EBITDA, and adjusted EBITDA for the three and twelve months ended December 31, 2023 and 2022, are useful to investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods. Management views the income and expenses noted above to be outside of the Company’s normal operating results. Management analyses operating results without the impact of the above items as an indicator of performance, to identify underlying trends in the business and cash flow from continuing operations, and to establish financial and operational goals, excluding certain non-cash or non-recurring items. (1)


 
• JP3 field gas monitoring system allows frac fleets and drilling rigs to safely run on field gas displacing more expensive and higher carbon footprint diesel • Provides meaningful cost savings compared to gas chromatograph • A three-pad customer case study July - August 2023: • Achieved 70% field gas substitution rate • Eliminated 1.2 mm gallons of diesel usage • Realized 100% uptime Data Analytics: Upstream Field Gas Usage // 23 Delivered 70% Reduction in Diesel and CNG usage Frac Trailer Mounted System


 
Upstream Custody Transfer challenges: • Readings only taken every 3 to 6 weeks with gas chromatography (gc) • Revenue degradation on inconsistent readings impacted by temperature, timing, and conditions • Requires onsite personnel JP3 technology changes the market: • Accurate readings every 5 seconds • Stakeholders paid on more consistent hydrocarbon quality readings • A more valuable hydrocarbon stream • Autonomous measurement Data Analytics: Upstream Market Disruptor // 24 From 3 weeks to 5 Seconds! Local System Mobile App and SCADA Reporting Real-Time Wellsite Readings


 
Investor Contact Bond Clement Chief Financial Officer ir@flotekind.com (713) 726-5322