HOUSTON, May 7, 2024
/PRNewswire/ -- Flotek Industries, Inc. ("Flotek" or the "Company")
(NYSE: FTK) today announced operational and financial results for
the quarter ended March 31, 2024,
highlighted by significant improvement in profitability metrics as
compared to the first quarter of 2023.
Financial Summary (in thousands, except per share
amounts)
|
|
Three months ended
March 31,
|
|
|
|
|
2024
|
|
2023
|
|
%
Change
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
$
40,374
|
|
$
48,007
|
|
(16) %
|
|
Gross Profit
|
|
$
8,821
|
|
$
1,880
|
|
369 %
|
|
Adjusted Gross Profit
(1)
|
|
$
10,075
|
|
$
2,647
|
|
281 %
|
|
Net Income
|
|
$
1,562
|
|
$
21,343
|
|
(93) %
|
|
Diluted Income (Loss)
Per Share
|
|
$
0.05
|
|
$
(0.12)
|
|
n/a
|
|
Adjusted EBITDA
(1)
|
|
$
4,026
|
|
$
(3,851)
|
|
n/a
|
First Quarter 2024 Highlights
- Reported net income of $1.6
million compared to net income of $21.3 million for the first quarter of 2023. Net
income for the first quarter of 2023 benefited from $30.6 million in non-cash gains. Excluding these
non-cash gains, first quarter 2024 net income improved by
$10.8 million.
- Delivered significant year-over-year improvements in gross
profit, adjusted gross profit(1) and adjusted
EBITDA(1) of $6.9 million,
$7.4 million and $7.9 million, respectively.
- Realized gross profit margin and adjusted gross profit
margin(1) of 22% and 25%, respectively.
- Achieved the 3rd consecutive quarter of net income and 11th
consecutive quarter of improvement in adjusted EBITDA(1)
as a percentage of revenue.
- Reduced borrowings outstanding under the Asset Based Loan by
58% (or $4.4 million) compared to
year-end 2023.
Full Year 2024 Profitability Outlook
As a result of the numerous cost reductions and efficiency gains
implemented throughout 2023, the Company expects a substantial
increase in margins compared to 2023. In 2023, our gross margin was
13% and our net income was $24.7
million. Flotek expects 2024 adjusted gross profit
margin(2) to range between 18% and 22%, as compared to
2023 adjusted gross profit margin(1) of 15%. The Company
expects 2024 adjusted EBITDA(2) to range between
$10 million and $16 million as compared to $1.5 million in 2023(1).
Management Commentary
Chief Executive Officer Dr. Ryan
Ezell commented, "Our first quarter results continue the
positive financial and operational trends that began during
2022. We achieved our third consecutive quarter of net
income. Adjusted EBITDA(1) during the quarter exceeded
the entire year of 2023. Using the mid-point of our guidance, we
expect a nearly 800% increase in annual adjusted
EBITDA(2) versus 2023(1).
During the quarter we realized 19% sequential growth in our
ProFrac related revenue while our data analytics segment revenues
increased 18% from the fourth quarter of 2023. While our first
quarter external chemistry customer sales realized 27% year over
year growth, they declined sequentially, which is consistent with
the first quarter in each of the last three years. We expect these
revenues will show a substantial increase during the second quarter
and we anticipate annual growth in external chemistry customer
sales for 2024.
Our numerous financial improvements continue to validate the
initiatives executed over the past 18 months aimed at building a
resilient business that can sustain profitability through the
volatility inherent in our industry."
First Quarter 2024 Financial Results
- Revenue: Flotek reported total revenues of $40.4 million for the first quarter 2024, which
was a decrease of $7.6 million, or
16%, compared to total revenues of $48.0
million for the first quarter 2023. The decline in revenue
compared to the first quarter 2023 was the result of lower related
party activity that was partially offset by a 13% increase in
revenue from external customers.
Revenue from external chemistry customers during the first quarter
2024 declined by approximately $6.0
million as compared to the fourth quarter 2023 due primarily
to normal seasonal declines. The Company anticipates external
chemistry customer revenues to increase significantly in the second
quarter 2024.
Revenue associated with the Company's data analytics segment
increased to $1.7 million, an 18%
improvement as compared to the fourth quarter 2023. Revenues from
data analytics totaled $2.5 million
during the first quarter 2023.
- Gross Profit: The Company generated gross profit of
$8.8 million during the first quarter
2024 as compared to gross profit of $1.9
million for the first quarter 2023. The improvement in first
quarter 2024 gross profit was the result of successful initiatives
to drive cost improvements with respect to freight, logistics and
materials, and revenue attributable to the estimated annual minimum
chemistry purchase requirements contained in the ProFrac supply
agreement. The measurement period during 2023 for annual minimum
chemistry purchase requirements was June 1,
2023 through December 31,
2023.
- Adjusted Gross Profit (Non-GAAP)(1):
Flotek generated adjusted gross profit of $10.1 million during the first quarter 2024
compared to adjusted gross profit of $2.6
million for the first 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 $6.1
million for the first quarter 2024 compared to $6.5 million for the first quarter 2023. The
improvement was the result of lower personnel costs and
professional fees during the 2024 period.
- Net Income and EPS: Flotek reported net income of
$1.6 million, or $0.05 per diluted share, for the first quarter
2024. This compares to net income of $21.3
million, or $(0.12) per
diluted share, for the first quarter 2023. Net income for the first
quarter 2023 benefited from a $26.1
million non-cash gain related to the fair value adjustment
of the Company's convertible notes, as well as a $4.5 million gain from the partial forgiveness of
the Company's PPP loan.
- Adjusted EBITDA (Non-GAAP)(1):
Adjusted EBITDA was $4.0 million in
the first quarter 2024 as compared to negative $3.9 million in the first quarter 2023.
|
(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.
|
Conference Call Details
Flotek will host a conference call on May
8, 2024, at 9:00 a.m. CT
(10:00 a.m. ET) to discuss its first
quarter 2024 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. 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.
FLOTEK INDUSTRIES,
INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share data)
|
March 31,
2024
|
|
December 31,
2023
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
5,219
|
|
$
5,851
|
|
Restricted
cash
|
100
|
|
102
|
|
Accounts receivable,
net of allowance for credit losses of $374 and $745 at March 31,
2024 and December 31, 2023, respectively
|
10,718
|
|
13,687
|
|
Accounts receivable,
related party, net of allowance for credit losses of $0 at each
March 31, 2024 and December 31, 2023
|
38,655
|
|
34,569
|
|
Inventories,
net
|
13,871
|
|
12,838
|
|
Other current
assets
|
2,686
|
|
3,564
|
|
Current contract
asset
|
7,019
|
|
5,836
|
|
Total current
assets
|
78,268
|
|
76,447
|
|
Long-term contract
assets
|
66,369
|
|
68,820
|
|
Property and equipment,
net
|
5,061
|
|
5,129
|
|
Operating lease
right-of-use assets
|
4,336
|
|
5,030
|
|
Deferred tax assets,
net
|
91
|
|
300
|
|
Other long-term
assets
|
1,725
|
|
1,787
|
|
TOTAL
ASSETS
|
$
155,850
|
|
$
157,513
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
$
35,952
|
|
$
31,705
|
|
Accrued
liabilities
|
3,365
|
|
5,890
|
|
Income taxes
payable
|
78
|
|
45
|
|
Current portion of
operating lease liabilities
|
2,083
|
|
2,449
|
|
Current portion of
finance lease liabilities
|
13
|
|
22
|
|
Asset-based
loan
|
3,111
|
|
7,492
|
|
Current portion of
long-term debt
|
179
|
|
179
|
|
Total current
liabilities
|
44,781
|
|
47,782
|
|
Deferred revenue,
long-term
|
35
|
|
35
|
|
Long-term operating
lease liabilities
|
7,121
|
|
7,676
|
|
Long-term
debt
|
15
|
|
60
|
|
TOTAL
LIABILITIES
|
51,952
|
|
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; 30,772,837 shares issued
and 29,661,130 shares outstanding at March 31, 2024; 30,772,837
shares issued and 29,664,130 shares outstanding at
December 31, 2023
|
3
|
|
3
|
|
Additional paid-in
capital
|
463,484
|
|
463,140
|
|
Accumulated other
comprehensive income
|
169
|
|
127
|
|
Accumulated
deficit
|
(325,244)
|
|
(326,806)
|
|
Treasury stock, at
cost; 1,111,707 and 1,108,707 shares at March 31, 2024 and
December 31, 2023, respectively
|
(34,514)
|
|
(34,504)
|
|
Total stockholders'
equity
|
103,898
|
|
101,960
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
155,850
|
|
$
57,513
|
FLOTEK INDUSTRIES, INC.
Unaudited
Condensed Consolidated Statements of Operations
(in
thousands, except per share data)
|
|
Three Months Ended
March 31,
|
|
|
2024
|
|
2023
|
|
Revenue:
|
|
|
|
|
|
Revenue from external
customers
|
|
$
13,180
|
|
$
11,652
|
|
Revenue from related
party
|
|
27,194
|
|
36,355
|
|
Total
revenues
|
|
40,374
|
|
48,007
|
|
Cost of goods
sold
|
|
31,553
|
|
46,127
|
|
Gross
profit
|
|
8,821
|
|
1,880
|
|
Operating costs and
expenses:
|
|
|
|
|
|
Selling, general, and
administrative
|
|
6,084
|
|
6,451
|
|
Depreciation
|
|
220
|
|
176
|
|
Research and
development
|
|
406
|
|
614
|
|
Severance
costs
|
|
3
|
|
2,223
|
|
Gain in fair value of
Contract Consideration Convertible Notes Payable
|
|
—
|
|
(26,095)
|
|
Total operating costs
and expenses
|
|
6,713
|
|
(16,631)
|
|
Income from
operations
|
|
2,108
|
|
18,511
|
|
Other income
(expense):
|
|
|
|
|
|
Paycheck protection
plan loan forgiveness
|
|
—
|
|
4,522
|
|
Interest
expense
|
|
(278)
|
|
(1,672)
|
|
Other expense,
net
|
|
(26)
|
|
(9)
|
|
Total other income
(expense), net
|
|
(304)
|
|
2,841
|
|
Income before income
taxes
|
|
1,804
|
|
21,352
|
|
Income tax
expense
|
|
(242)
|
|
(9)
|
|
Net
income
|
|
$
1,562
|
|
$
21,343
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
Basic
|
|
$
0.05
|
|
$
1.30
|
|
Diluted
|
|
$
0.05
|
|
$
(0.12)
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
Weighted average
common shares used in computing basic income (loss) per common
share
|
|
29,431
|
|
16,468
|
|
Weighted average
common shares used in computing diluted income (loss) per common
share
|
|
30,316
|
|
26,462
|
FLOTEK INDUSTRIES, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
|
$
1,562
|
|
$
21,343
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Change in fair value
of contingent consideration
|
(26)
|
|
(359)
|
|
Change in fair value
of Contract Consideration Convertible Notes Payable
|
—
|
|
(26,095)
|
|
Amortization of
convertible note issuance costs
|
—
|
|
83
|
|
Payment-in-kind
interest expense
|
—
|
|
1,571
|
|
Amortization of
contract assets
|
1,267
|
|
1,251
|
|
Depreciation and
amortization
|
220
|
|
176
|
|
Amortization of
asset-based loan origination costs
|
85
|
|
—
|
|
Provision for credit
losses, net of recoveries
|
32
|
|
23
|
|
Provision for excess
and obsolete inventory
|
285
|
|
258
|
|
Non-cash lease
expense
|
694
|
|
977
|
|
Stock compensation
expense
|
311
|
|
(1,112)
|
|
Deferred income tax
expense (benefit)
|
209
|
|
(6)
|
|
Paycheck protection
plan loan forgiveness
|
—
|
|
(4,522)
|
|
Changes in current
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
2,937
|
|
3,504
|
|
Accounts receivable,
related party
|
(4,086)
|
|
(3,546)
|
|
Inventories
|
(1,318)
|
|
(441)
|
|
Other
assets
|
856
|
|
(470)
|
|
Accounts
payable
|
4,246
|
|
8,554
|
|
Accrued
liabilities
|
(2,499)
|
|
1,236
|
|
Operating lease
liabilities
|
(921)
|
|
(1,190)
|
|
Income taxes
payable
|
33
|
|
(87)
|
|
Interest
payable
|
—
|
|
(8)
|
|
Net cash provided by
operating activities
|
3,887
|
|
1,140
|
FLOTEK INDUSTRIES, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
(continued)
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
|
Cash flows from
investing activities:
|
|
|
|
|
Capital
expenditures
|
(152)
|
|
(157)
|
|
Net cash used in
investing activities
|
(152)
|
|
(157)
|
|
Cash flows from
financing activities:
|
|
|
|
|
Payment for forfeited
stock options
|
—
|
|
(617)
|
|
Payments on long term
debt
|
(45)
|
|
(15)
|
|
Proceeds from
asset-based loan
|
38,800
|
|
—
|
|
Payments on
asset-based loan
|
(43,181)
|
|
—
|
|
Payments to tax
authorities for shares withheld from employees
|
(9)
|
|
(200)
|
|
Proceeds from issuance
of stock
|
33
|
|
20
|
|
Payments for finance
leases
|
(9)
|
|
(6)
|
|
Net cash used in
financing activities
|
(4,411)
|
|
(818)
|
|
Effect of changes in
exchange rates on cash and cash equivalents
|
42
|
|
(21)
|
|
Net change in cash
and cash equivalents and restricted cash
|
(634)
|
|
144
|
|
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
|
5,219
|
|
12,433
|
|
Restricted cash at the
end of period
|
100
|
|
101
|
|
Cash and cash
equivalents and restricted cash at end of period
|
$
5,319
|
|
$
12,534
|
FLOTEK INDUSTRIES, INC.
Unaudited
Reconciliation of Non-GAAP Items and Non-Cash Items Impacting
Earnings
(in thousands)
|
|
Three Months Ended
March 31,
|
|
Twelve Months
Ended December 31,
|
|
|
2024
|
|
2023
|
|
2023
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
$
8,821
|
|
$
1,880
|
|
$
24,263
|
|
Stock compensation
expense
|
|
4
|
|
(140)
|
|
(132)
|
|
Severance and
retirement
|
|
9
|
|
15
|
|
29
|
|
Contingent liability
revaluation
|
|
(26)
|
|
(359)
|
|
(527)
|
|
Amortization of
contract assets
|
|
1,267
|
|
1,251
|
|
5,033
|
|
Adjusted Gross
profit (Non-GAAP) (1)
|
|
$
10,075
|
|
$
2,647
|
|
$
28,666
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
1,562
|
|
$
21,343
|
|
$
24,713
|
|
Interest
expense
|
|
278
|
|
1,672
|
|
2,857
|
|
Income tax
expense
|
|
242
|
|
9
|
|
149
|
|
Depreciation and
amortization
|
|
220
|
|
176
|
|
734
|
|
EBITDA (Non-GAAP)
(1)
|
|
$
2,302
|
|
$
23,200
|
|
$
28,453
|
|
Stock compensation
expense
|
|
311
|
|
(1,112)
|
|
(268)
|
|
Severance and
retirement
|
|
12
|
|
2,238
|
|
(17)
|
|
Contingent liability
revaluation
|
|
(26)
|
|
(359)
|
|
(527)
|
|
Gain on disposal of
assets
|
|
—
|
|
—
|
|
(38)
|
|
PPP loan
forgiveness
|
|
—
|
|
(4,522)
|
|
(4,522)
|
|
Contract Consideration
Convertible Notes Payable revaluation adjustment
|
|
—
|
|
(26,095)
|
|
(29,969)
|
|
Amortization of
contract assets
|
|
1,267
|
|
1,251
|
|
5,033
|
|
Non-Recurring
professional fees
|
|
160
|
|
1,548
|
|
3,343
|
|
Adjusted EBITDA
(Non-GAAP) (1)
|
|
$
4,026
|
|
$
(3,851)
|
|
$
1,488
|
|
|
|
|
|
|
|
|
|
(1) Management believes
that adjusted gross profit, EBITDA and adjusted EBITDA for the
three months ended March 31, 2024,
2023, and 12 months ended December 31, 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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SOURCE Flotek Industries, Inc.