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0000928054FALSE00009280542024-08-062024-08-06

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

August 5, 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 1.01
 Entry into a Material Definitive Agreement
On August 14, 2023, Flotek Industries, Inc. (the “Company”) entered into a Revolving Loan and Security Agreement (the “Loan Agreement”) with Flotek Chemistry, LLC and JP3 Measurement, LLC, wholly owned subsidiaries of the Company (collectively with the Company, the “Borrowers”), and Amerisource Funding, Inc. (“Amerisource”), as lender. The Loan Agreement was subsequently amended effective October 5, 2023 by that certain First Amendment to the Loan Agreement (the “First Amendment”). Effective August 5, 2024, the Company entered into that certain Second Amendment to The Loan Agreement (the “Second Amendment”).

Among other matters, the Second Amendment amends the Loan Agreement as follows: (i) the total commitment of the loan is increased to $20,000,000, (ii) the stated maturity date is extended for an additional 12 months, (iii) the applicable margin is decreased by 0.50%, and (iv) various modifications are made to the borrowing base and criteria for eligible receivables and eligible pledged real estate. The foregoing description of the Second Amendment does not purport to be complete and is qualified in its entirety by reference to the complete text of the Second Amendment, which is filed herewith as Exhibit 10.1 and incorporated by reference herein.


Item 2.02
Results of Operations and Financial Condition
On August 6, 2024, the Company issued a press release providing its financial results for the quarter ended June 30, 2024 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 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information provided under Item 1.01 of this Current Report on Form 8-K regarding each of the transactions described therein is also responsive to Item 2.03 of this Current Report on Form 8-K and is hereby incorporated by reference into this Item 2.03.


Item 7.01
Regulation FD Disclosure
On August 6, 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 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
10.1
99.1
99.2
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)



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: August 6, 2024
/s/ Bond Clement
Name: Bond Clement
Title: Chief Financial Officer

EX-10.1 2 exhibit10-1_secondxamend.htm EX-10.1 exhibit10-1_secondxamend
Exhibit 10.1


 
































EX-99.1 3 ex991-q22024.htm EX-99.1 Document
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Exhibit 99.1
                                        
Flotek Announces Increased 2024 Guidance and Continued Profitability Growth in Connection with Second Quarter 2024 Results

HOUSTON, August 6, 2024 - Flotek Industries, Inc. (“Flotek” or the “Company”) (NYSE: FTK) today announced operational and financial results for the quarter ended June 30, 2024, highlighted by significant improvement in profitability metrics as compared to the second quarter of 2023. Due to the strong business performance in the first half of the year, the Company increased its 2024 profitability guidance.
Financial Summary (in thousands, except ‘per share’ amounts)
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Total Revenues $ 46,152  $ 50,594  $ 86,526  $ 98,602 
Gross Profit $ 9,170  $ 3,904  $ 17,991  $ 5,785 
Adjusted Gross Profit (1)
$ 10,654  $ 5,092  $ 20,729  $ 7,740 
Net Income (Loss) $ 1,974  $ (21) $ 3,536  $ 21,322 
Diluted Income (Loss) Per Share $ 0.06  $ (0.11) $ 0.12  $ (0.23)
Adjusted EBITDA (1)
$ 4,439  $ (2,003) $ 8,464  $ (5,854)
Second Quarter 2024 and Recent Highlights
•Generated total revenue of $46.2 million, a 14% increase from the first quarter of 2024, driven by a 40% sequential increase in chemistry revenues from external customers and a 22% sequential increase in Data Analytics revenue.
•Increased gross profit margin and adjusted gross profit margin(1) to 20% and 23%, respectively, as compared to 8% and 10% respectively, during the second quarter 2023.
•Reported net income of $2.0 million compared to a net loss of $21 thousand for the second quarter of 2023 and delivered a year-over-year increase in adjusted EBITDA(1) of $6.4 million.
•Amended Asset Based Loan agreement increases loan commitment by 45% to $20 million and reduces interest rate.
•Received approval from the Environmental Protection Agency (EPA) of the JP3 analyzer system for use in flare emission monitoring, facilitating access to a new upstream market application with an estimated annual total addressable market of $220 million.
2024 Guidance: Stronger Profitability Expectations
As a result of the Company’s strong operational performance during the first half of 2024 and the outlook for the balance of the year, the Company is raising its 2024 profitability guidance. Flotek now expects adjusted EBITDA(2) to be in a range of between $14 million and $18 million, a 23% increase to the midpoint of the range when compared to the prior guidance range of between $10 million and $16 million.
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Asset Based Loan Amendment: Increased Credit Capacity with Lower Interest Rate
On August 5, 2024, the Company entered into an amendment to its Asset Based Loan agreement. In connection with the amendment, the loan commitment increased by 45% from $13.8 million to $20 million, the applicable interest rate spread decreased by 0.50% and the term of the loan was extended by one year to August 2026. These enhancements to the loan agreement further validate the Company’s continuing operational and financial improvements.
Data Analytics: Access to New Upstream Flare Market
On July 16, 2024, Flotek announced that the EPA designated the JP3 system as an approved measurement technology with respect to recently enacted flare regulations. This state-of-the-art optical instrument, designed for the precise measurement of net heating values (NHV) in flare gases, is the first to be approved as an alternative method under the new NSPS OOOOb regulations, supporting cleaner and more efficient operations across the oil and gas industry.
With over 55,000 existing flares in the United States expected to be subject to some level of monitoring regulation by 2028, this approval is expected to position JP3 to significantly expand its footprint into this new upstream market space.
Management Commentary
Chief Executive Officer Dr. Ryan Ezell commented, “Despite a backdrop of slower North American activity in our industry, our ability to grow revenue 14% this quarter speaks to the execution of our strategy and the continued progress we are making in gaining market share. Second quarter revenue from external customers increased significantly following the seasonality we experienced in the first quarter. Our Data Analytics segment increased revenue 22% from the first quarter 2024 as we saw a sequential improvement in analyzer sales. Most importantly, we received notification from the EPA that our JP3 analyzer was an approved technology for flare gas monitoring, which we believe will be a catalyst for revenue growth later this year and into 2025.
Based on our performance through mid-year, I am excited to share that we are raising the mid-point of our adjusted EBITDA(2) guidance for 2024 to $16 million, which would represent more than a 900% improvement from 2023. This is a testament to Flotek’s differentiated technology solutions in a competitive market as the industry navigates through this current natural gas price environment. Lastly, our success in significantly increasing our ABL credit capacity at a lower interest rate will provide incremental liquidity to support our continued growth.”
Second Quarter 2024 Financial Results
•Revenue: Flotek reported total revenues of $46.2 million for the second quarter of 2024, which was an increase of $5.8 million, or 14% compared to total revenues in the first quarter of 2024. Quarterly revenue growth was driven by a 40% sequential increase in chemistry revenue from external customers, highlighting the Company’s continued market share improvement when considering the decline of 23 active frac fleets from the end of the first quarter of 2024(3). Revenue from the Data Analytics segment totaled $2
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million during the second quarter of 2024, as compared to $1.7 million during the first quarter of 2024.
Total revenues for the second quarter of 2024 were down $4.4 million, or 9%, compared to total revenues of $50.6 million for the second quarter 2023. The decline in total revenue compared to the second quarter of 2023 was primarily due to reduced related party activity as a result of lower natural gas prices. Chemistry revenues from external customers during the second quarter 2024 were 6% higher than the second quarter 2023.
•Gross Profit: The Company generated gross profit of $9.2 million during the second quarter 2024 as compared to gross profit of $3.9 million for the second quarter 2023. The improvement was the result of increased revenue attributable to the estimated annual minimum chemistry purchase requirement in the ProFrac supply agreement. The measurement period during 2023 for minimum chemistry purchase requirements was June 1 through December 31, 2023 compared to January 1 through December 31, 2024 during 2024.
•Adjusted Gross Profit (Non-GAAP)(1): Flotek generated adjusted gross profit of $10.7 million during the second quarter 2024 compared to adjusted gross profit of $5.1 million for the second quarter 2023. Adjusted gross profit excludes non-cash items, primarily amortization of contract assets.
•Selling, General and Administrative (“SG&A”) Expense: SG&A expense totaled $6.3 million for the second quarter 2024 compared to $8.4 million for the second quarter 2023. The improvement was the result of lower personnel costs and professional fees during the 2024 period.
•Severance Costs: Flotek recorded a $2.3 million credit to severance costs in the second quarter of 2023 in connection with the settlement of certain litigation.
•Net Income and EPS: Flotek reported net income of $2.0 million, or $0.06 per diluted share, for the second quarter 2024. This compares to a net loss of $21 thousand, or $(0.11) per diluted share, for the second quarter 2023.
•Adjusted EBITDA (Non-GAAP)(1): Adjusted EBITDA was $4.4 million in the second quarter 2024 as compared to negative $2.0 million in the second quarter 2023. Adjusted EBITDA improved by 10% from the first quarter of 2024, marking seven consecutive quarters of improvement.
(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.
(2)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. We are unable to reconcile this forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measure without unreasonable efforts, as we are unable to predict with a reasonable degree of certainty the impact of certain items that would be expected to impact the GAAP financial measure, including, among other items, the future amortization of our contract assets, certain stock-based compensation costs and the impact of the revaluation of certain liabilities, which is based upon our future stock price. These items do not impact the non-GAAP financial measure.
(3)As reported by The American Oil and Gas Reporter weekly Frac Spread Counts on March 29, 2024 and June 28, 2024.
Conference Call Details
Flotek will host a conference call on August 7, 2024, at 9:00 a.m. CT (10:00 a.m. ET) to discuss its second quarter 2024 results.
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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) or use the following link to access the audience view of the webcast at https://app.webinar.net/zpvrjZ72oQw 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.
Upcoming Investor Event
Members of the Company’s management are scheduled to participate in EnerCom Denver – The Energy Investment Conference to be held in Denver, Colorado, August 18-21, 2024. Ryan Ezell, Chief Executive Officer of Flotek, will present on August 19, 2024, at 9:15 a.m. MT and will be joined by Bond Clement, Chief Financial Officer, in hosting meetings with investors throughout the conference. A live webcast of the presentation will be available on the conference website at www.enercomdenver.com. Presentation slides will be posted on the Investor Relations section of Flotek’s corporate website at www.flotekind.com prior to the start of the presentation.
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. 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.
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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:
Mike Critelli
Director of Finance
E: ir@flotekind.com
P: (713) 726-5322
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FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

June 30, 2024 December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents $ 4,777  $ 5,851 
Restricted cash 101  102 
Accounts receivable, net of allowance for credit losses of $410 and $745 at June 30, 2024 and December 31, 2023, respectively
13,316  13,687 
Accounts receivable, related party, net of allowance for credit losses of $0 at each June 30, 2024 and December 31, 2023, respectively
40,049  34,569 
Inventories, net 12,142  12,838 
Other current assets 2,834  3,564 
Current contract asset 5,786  5,836 
Total current assets 79,005  76,447 
Long-term contract assets 66,121  68,820 
Property and equipment, net 4,987  5,129 
Operating lease right-of-use assets 4,184  5,030 
Deferred tax assets, net 84  300 
Other long-term assets 1,659  1,787 
TOTAL ASSETS $ 156,040  $ 157,513 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 31,755  $ 31,705 
Accrued liabilities 3,026  5,890 
Income taxes payable 35  45 
Current portion of operating lease liabilities 1,866  2,449 
Current portion of finance lease liabilities 22 
Asset-based loan 5,798  7,492 
Current portion of long-term debt 149  179 
Total current liabilities 42,632  47,782 
Deferred revenue, long-term 35  35 
Long-term operating lease liabilities 7,139  7,676 
Long-term debt —  60 
TOTAL LIABILITIES 49,806  55,553 
Commitments and contingencies
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; 30,866,597 shares issued and 29,759,154 shares outstanding at June 30, 2024; 30,772,837 shares issued and 29,664,130 shares outstanding at December 31, 2023
Additional paid-in capital 463,844  463,140 
Accumulated other comprehensive income 185  127 
Accumulated deficit (323,270) (326,806)
Treasury stock, at cost; 1,107,442 and 1,108,707 shares at June 30, 2024 and December 31, 2023, respectively
(34,528) (34,504)
Total stockholders’ equity 106,234  101,960 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 156,040  $ 157,513 
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FLOTEK INDUSTRIES, INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)

  Three Months Ended June 30, Six Months Ended June 30,
  2024 2023 2024 2023
Revenue:
Revenue from external customers $ 18,191  $ 17,820  $ 31,371  $ 29,472 
Revenue from related party 27,961  32,774  55,155  69,130 
Total revenues 46,152  50,594  86,526  98,602 
Cost of goods sold 36,982  46,690  68,535  92,817 
Gross profit 9,170  3,904  17,991  5,785 
Operating costs and expenses:
Selling, general, and administrative 6,259  8,351  12,342  14,803 
Depreciation 222  174  442  349 
Research and development 481  860  888  1,474 
Severance costs 20  (2,279) 23  (56)
Gain on sale of property and equipment (34) —  (34) — 
Gain in fair value of Contract Consideration Convertible Notes Payable —  (3,874) —  (29,969)
Total operating costs and expenses 6,948  3,232  13,661  (13,399)
Income from operations 2,222  672  4,330  19,184 
Other income (expense):
Paycheck protection plan loan forgiveness —  —  —  4,522 
Interest expense (308) (705) (586) (2,377)
Other income, net 75  19  49 
Total other income (expense) (233) (686) (537) 2,154 
Income (loss) before income taxes 1,989  (14) 3,793  21,338 
Income tax expense (15) (7) (257) (16)
Net income (loss) $ 1,974  $ (21) $ 3,536  $ 21,322 
Income (loss) per common share:
Basic $ 0.07  $ —  $ 0.12  $ 1.06 
Diluted $ 0.06  $ (0.11) $ 0.12  $ (0.23)
Weighted average common shares:
Weighted average common shares used in computing basic income (loss) per common share 29,449  23,906  29,440  20,207 
Weighted average common shares used in computing diluted income (loss) per common share 30,668  28,250  30,512  27,361 
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FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

  Six Months Ended June 30,
  2024 2023
Cash flows from operating activities:
Net income $ 3,536  $ 21,322 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Change in fair value of contingent consideration (27) (324)
Change in fair value of Contract Consideration Convertible Notes Payable —  (29,969)
Amortization of convertible note issuance costs —  83 
Payment-in-kind interest expense —  2,284 
Amortization of contract assets 2,749  2,390 
Depreciation 442  349 
Amortization of asset-based loan origination costs 170  — 
Provision for credit losses, net of recoveries 79  63 
Provision for excess and obsolete inventory 433  497 
Gain on sale of property and equipment (34) — 
Non-cash lease expense 1,236  1,621 
Stock compensation expense 642  (836)
Deferred income tax expense 216  — 
Paycheck protection plan loan forgiveness —  (4,522)
Changes in current assets and liabilities:
Accounts receivable 292  2,218 
Accounts receivable, related party (5,480) (350)
Inventories 192  (3,158)
Other assets 688  (6)
Accounts payable 50  11,574 
Accrued liabilities (2,837) (3,491)
Operating lease liabilities (1,510) (1,886)
Income taxes payable (10) (85)
Interest payable —  (8)
Net cash provided by (used in) operating activities 827  (2,234)










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

Six Months Ended June 30,
2024 2023
Cash flows from investing activities:
Capital expenditures (229) (292)
Proceeds from sale of assets 34  — 
Net cash used in investing activities (195) (292)
Cash flows from financing activities:
Payment for forfeited stock options —  (617)
Payments on long term debt (90) (60)
Proceeds from asset-based loan 83,300  — 
Payments on asset-based loan (84,994) — 
Payments to tax authorities for shares withheld from employees (24) (229)
Proceeds from issuance of stock 62  33 
Payments for finance leases (19) (15)
Net cash used in financing activities (1,765) (888)
Effect of changes in exchange rates on cash and cash equivalents 58  (34)
Net change in cash and cash equivalents and restricted cash (1,075) (3,448)
Cash and cash equivalents at the beginning of period 5,851  12,290 
Restricted cash at the beginning of period 102  100 
Cash and cash equivalents and restricted cash at beginning of period 5,953  12,390 
Cash and cash equivalents at end of period 4,777  8,841 
Restricted cash at the end of period 101  101 
Cash and cash equivalents and restricted cash at end of period $ 4,878  $ 8,942 
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FLOTEK INDUSTRIES, INC.
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings
(in thousands)

  Three Months Ended June 30, Six Months Ended June 30,
  2024 2023 2024 2023
Gross profit $ 9,170  $ 3,904  $ 17,991  $ 5,785 
Stock compensation expense (137)
Severance and retirement —  11  26 
Contingent liability revaluation (1) 35  (27) (324)
Amortization of contract assets 1,482  1,140  2,749  2,390 
Adjusted Gross profit (Non-GAAP) (1)
$ 10,654  $ 5,092  $ 20,729  $ 7,740 
Net income (loss) $ 1,974  $ (21) $ 3,536  $ 21,322 
Interest expense 308  705  586  2,377 
Income tax expense 15  257  16 
Depreciation and amortization 222  173  442  349 
EBITDA (Non-GAAP) (1)
$ 2,519  $ 864  $ 4,821  $ 24,064 
Stock compensation expense 331  274  643  (838)
Severance and retirement 20  (2,268) 32  (30)
Contingent liability revaluation —  35  (27) (324)
Gain on disposal of assets (34) —  (34) — 
PPP loan forgiveness —  —  —  (4,522)
Contract Consideration Convertible Notes Payable revaluation adjustment —  (3,874) —  (29,969)
Amortization of contract assets 1,482  1,140  2,749  2,390 
Non-Recurring professional fees 121  1,826  280  3,375 
Adjusted EBITDA (Non-GAAP) (1)
$ 4,439  $ (2,003) $ 8,464  $ (5,854)

(1) Management believes that adjusted gross profit, EBITDA and adjusted EBITDA for the three and six months ended June 30, 2024 and 2023, 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.
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EX-99.2 4 ex992-q22024earningspres.htm EX-99.2 ex992-q22024earningspres
2nd Quarter 2024 Earnings Presentation August 7, 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. This presentation includes certain non-GAAP measures. Please refer to the reconciliations provided in the earnings press release and the appendix in this presentation for the most comparable GAAP measure. // 2


 
// 3 7 Consecutive Quarters of Improved Adj. EBITDA* Strong Balance Sheet with Low Debt Data Analytics Technology with High ROI Long-term ‘Take or Pay’ Contract Insulates Risk Tangible Environmental, Health, &, Safety Impacts Flotek Industries UNLOCKING CHEMISTRY IN ENERGY Value Creation through Chemistry & Data * Adjusted EBITDA is a non-GAAP measure. See the Appendix in this presentation for a reconciliation to the most comparable GAAP measure


 
Complementary Segments Drive Growth // 4 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 Founded: 1985 Employees: 143 Headquarters: Houston Countries with Clients: 59 Patents: >170 2Q 2024 Results: – Gross Profit Margin: 20% – Net Income ($MM): $2.0 – Adj. EBITDA* ($MM): $4.4 – Adj. EBITDA Margin: 10% – Debt to Adj. EBITDA*(TTM**) 0.4x * Adjusted EBITDA is a non-GAAP measure. See the Appendix in this presentation for a reconciliation to the most comparable GAAP measure ** Trailing Twelve Months


 
2Q 2024 Highlights // 5 Poised to deliver sustained growth and further market share gains through chemistry and emerging data analytics upstream market • Delivered year-over-year growth: • Gross profit: $5.3 million • Net income: $2.0 million • Adj. EBITDA*: $6.4 million • Achieved sequential revenue growth of 14% • Increased FY24 adj. EBITDA** guidance between $14MM and $18MM • Realized gross profit margin and adj. gross profit margin* of 20% and 23%, respectively • Received EPA Approval on Data Analytics Flare measurement application opening a new upstream $220MM annual market; >50% subscription-based revenue service • Amended Asset Based Loan agreement increases loan commitment 45% to $20MM with a 0.5 % decrease in interest spread Improved profitability with lower industry fleet counts * Adjusted gross profit and adjusted EBITDA are non-GAAP measures. See the Appendix in this presentation for a reconciliation to the most comparable GAAP measure ** We are unable to reconcile this forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measure without unreasonable efforts, as we are unable to predict with a reasonable degree of certainty the impact of certain items that would be expected to impact the GAAP financial measure; including, among other items, the future amortization of our contract assets, certain stock-based compensation costs and the impact of the revaluation of certain liabilities, which is based upon our future stock price. These items do not impact the non-GAAP financial measure


 
Revenue Growth in a Contracting Market // 6 • Flotek external chemistry revenue grew by 40% from 1Q24 • Flotek’s proprietary CnF Revenue rose 89% in 1H 2024 vs 1H 2023 • Flotek external chemistry revenues in the Permian Basin grew by 186% from 1Q24 and 68% from 2Q23 EXTERNAL CHEMISTRY CONTINUES TO GAIN MARKET SHARE AND OUTPERFORM 2023 $21.4 $24.7 $28.1 274 274 254 245 250 255 260 265 270 275 280 285 290 $15.0 $17.0 $19.0 $21.0 $23.0 $25.0 $27.0 $29.0 1H22 1H23 1H24 N o rt h A m er ic a A ve ra ge F ra c Fl ee ts R ev en u e ( in $ M M ’s ) External Chemistry Sales External Chemistry US Frac Fleets


 
Financial Momentum Continues // 7 Quarterly Adjusted EBITDA* Growth * Adjusted EBITDA is a non-GAAP measure. See the Appendix in this presentation for a reconciliation to the most comparable GAAP measure ** Adjusted EBITDA is a non-GAAP metric. We are unable to reconcile this forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measure without unreasonable efforts, as we are unable to predict with a reasonable degree of certainty the impact of certain items that would be expected to impact the GAAP financial measure ; including, among other items, the future amortization of our contract assets, certain stock-based compensation costs and the impact of the revaluation of certain liabilities, which is based upon our future stock price. These items do not impact the non-GAAP financial measure -$10.0 -$8.0 -$6.0 -$4.0 -$2.0 $0.0 $2.0 $4.0 $6.0 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 A d j. EB IT D A ($ M M ’s ) • 2Q 2024 adj. EBITDA* increased $6.4 million over 2Q 2023 • 2Q 2024 was the 7th consecutive quarter of adj. EBITDA improvement • Mid-point of increased 2024 guidance implies ~1000% increase in annual adj. EBITDA** TREND OF PROFITABILITY IMPROVEMENT REACHES 7 CONSECUTIVE QUARTERS


 
Chemistry Technologies: Competitive Advantage // 8 • Prescriptive Chemistry Management (PCM)TM • Proprietary energy chemistry solutions • Experienced chemistry energy team • Customized solutions to each well’s geology • Data on over 20,000 wells to enable advanced AI driven analytics for maximized customer return • 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) $3.7 $5.5 $10.1 $- $3.0 $6.0 $9.0 $12.0 1H22 1H23 1H24 CnFTM Revenue Performance 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 0 5 10 15 20 C u m u la ti v e P ro d u c ti o n ( B O E ) Months Permian Basin ** Average Cumulative BOE Flotek PCM Non-Flotek 25 +26% Uplift 75k BOE * DELIVERING THE BEST UPLIFT PERFORMANCE IN INDUSTRY 173% Growth R e v e n u e s ($ i n M M )


 
Data Analytics: “Measure More” Strategy // 9 Received EPA Approval on Flaring Measurement Application • Expected to unlock an estimated $220 million oil & gas upstream TAM* annually • Full service autonomous: sampling, reporting, and power • Since EPA approval, we have received orders on >50 flare sites for 2H24 Other Strategy Updates • Field gas BTU monitoring for power generation continues to see market applications: Compressors, Frac, Drilling • Gen3 spectrometer expected to complete development in August 2024: reducing costs and improving supply chain • Flare gas, H2, N2, CO2, H2S, Diesel and Jet Fuel hotspots • Raman analyzer unlocks the downstream and carbon capture markets that require hydrogen (H2) INITIAL PENETRATION INTO SIGNIFICANT UPSTREAM APPLICATIONS * Total Addressable Market Pictured above: The proprietary VeraCal mobile flaring cart on location


 
Investor Contact: Mike Critelli Director of Finance & Investor Relations ir@flotekind.com Come Join Us: August 19th - 21st 2024 at EnerCom Speaker: Ryan Ezell The Westin in Denver, CO September 4th - 5th 2024 at Gateway Conference Speaker: Ryan Ezell Four-Seasons San Francisco, CA September 23rd-24th at SPE Annual Technical Conference Expo Ernest N. Morial Convention Center New Orleans, LA // 10


 
Appendix


 
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 // 12


 
• 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 // 13 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 // 14 From 3 weeks to 5 Seconds! Local System Mobile App and SCADA Reporting Real-Time Wellsite Readings


 
Recent Financials Unaudited Condensed Consolidated Statement of Operations (in thousands, except share data) // 15 Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue: Revenue from external customers $ 18,191 $ 17,820 $ 31,371 $ 29,472 Revenue from related party 27,961 32,774 55,155 69,130 Total revenues 46,152 50,594 86,526 98,602 Cost of goods sold 36,982 46,690 68,535 92,817 Gross profit 9,170 3,904 17,991 5,785 Operating costs and expenses: Selling, general, and administrative 6,259 8,351 12,342 14,803 Depreciation 222 174 442 349 Research and development 481 860 888 1,474 Severance costs 20 (2,279) 23 (56) Gain on sale of property and equipment (34) — (34) — Gain in fair value of Contract Consideration Convertible Notes Payable — (3,874) — (29,969) Total operating costs and expenses 6,948 3,232 13,661 (13,399) Income from operations 2,222 672 4,330 19,184 Other income (expense): Paycheck protection plan loan forgiveness — — — 4,522 Interest expense (308) (705) (586) (2,377) Other income, net 75 19 49 9 Total other income (expense) (233) (686) (537) 2,154 Income (loss) before income taxes 1,989 (14) 3,793 21,338 Income tax expense (15) (7) (257) (16) Net income (loss) $ 1,974 $ (21) $ 3,536 $ 21,322 Income (loss) per common share: Basic $ 0.07 $ — $ 0.12 $ 1.06 Diluted $ 0.06 $ (0.11) $ 0.12 $ (0.23) Weighted average common shares: Weighted average common shares used in computing basic income (loss) per common share 29,449 23,906 29,440 20,207 Weighted average common shares used in computing diluted income (loss) per common share 30,668 28,250 30,512 27,361


 
// 16 Recent Financials Unaudited Condensed Consolidated Balance Sheets (in thousands, except share data) June 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 4,777 $ 5,851 Restricted cash 101 102 Accounts receivable, net of allowance for credit losses of $410 and $745 at June 30, 2024 and December 31, 2023, respectively 13,316 13,687 Accounts receivable, related party, net of allowance for credit losses of $0 at each June 30, 2024 and December 31, 2023, respectively 40,049 34,569 Inventories, net 12,142 12,838 Other current assets 2,834 3,564 Current contract asset 5,786 5,836 Total current assets 79,005 76,447 Long-term contract assets 66,121 68,820 Property and equipment, net 4,987 5,129 Operating lease right-of-use assets 4,184 5,030 Deferred tax assets, net 84 300 Other long-term assets 1,659 1,787 TOTAL ASSETS $ 156,040 $ 157,513 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 31,755 $ 31,705 Accrued liabilities 3,026 5,890 Income taxes payable 35 45 Current portion of operating lease liabilities 1,866 2,449 Current portion of finance lease liabilities 3 22 Asset-based loan 5,798 7,492 Current portion of long-term debt 149 179 Total current liabilities 42,632 47,782 Deferred revenue, long-term 35 35 Long-term operating lease liabilities 7,139 7,676 Long-term debt — 60 TOTAL LIABILITIES 49,806 55,553 Commitments and contingencies 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; 30,866,597 shares issued and 29,759,154 shares outstanding at June 30, 2024; 30,772,837 shares issued and 29,664,130 shares outstanding at December 31, 2023 3 3 Additional paid-in capital 463,844 463,140 Accumulated other comprehensive income 185 127 Accumulated deficit (323,270) (326,806) Treasury stock, at cost; 1,107,442 and 1,108,707 shares at June 30, 2024 and December 31, 2023, respectively (34,528) (34,504) Total stockholders’ equity 106,234 101,960 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 156,040 $ 157,513


 
// 17 Recent Financials Unaudited Condensed Consolidated Statements of Cash Flows (in thousands)


 
// 18 (1) Management believes that adjusted gross profit, EBITDA and adjusted EBITDA for the periods presented above, 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. Recent Financials Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings (in thousands)(1)