HOUSTON, May 16, 2022
/PRNewswire/ -- Flotek Industries, Inc. ("Flotek" or the "Company")
(NYSE: FTK) today announced first quarter results for the
three months ended March 31,
2022.
"We closed the quarter in a strong position with March
performance returning to pre-pandemic levels, leading to improved
quarterly revenue and adjusted EBITDA compared to last quarter. In
addition, we closed on our PIPE transaction in the quarter,
securing growth capital for the initial phase of our contract with
ProFrac to deliver our full-suite of downhole chemistries to a
significant portion of its hydraulic fracturing fleets in
North America. The second quarter
is off to a strong start with our first full month of services to
ProFrac completed in April. We are now supplying chemistry to 10
ProFrac fleets across 4 major basins. Through this agreement,
E&Ps now have a comprehensive, vertically integrated
completions solution that reduces emissions and delivers green
chemistries, thereby protecting air, water, land and people," said
John W. Gibson, Jr., Chairman,
President, and Chief Executive Officer. "We are grateful to our
shareholders for voting in strong support of our long-term
contract, thus helping unlock our future with more than
$2 billion in revenue over the next
decade, excluding other organic growth opportunities. While we will
have ramp-up costs associated with the ProFrac contract in the
coming quarters, we are optimistic about the future and look
forward to improving financial performance throughout the year and
we are on target to achieve positive Adjusted EBITDA excluding
convertible notes amortization before the end of the fourth quarter
2022."
Key First Quarter 2022 Financial Results
The first quarter results, which are substantially comprised of
revenue from customers other than ProFrac, are as follows:
- Consolidated Revenues: Flotek generated first quarter
2022 consolidated revenue of $12.9
million, up 6% from $12.2
million in the fourth quarter 2021, driven by increased
activity with domestic and international energy chemistry
customers.
- Net Income: The Company recorded a net loss of
$10.7 million, or $0.15 per basic/diluted share, in the first
quarter 2022 compared to a net loss of $16.2
million, or $0.22 per
basic/diluted share, in the fourth quarter of 2021. The sequential
improvement is primarily due to the absence of the goodwill
impairment of $8.1 million that was
reported in the fourth quarter of 2021, partially offset by a
charge for the change in fair value of contingent convertible notes
payable of $3.9 million.
- Adjusted EBITDA: Adjusted EBITDA for the first quarter
2022 was a loss of $5.4 million, a 5%
improvement compared to a loss of $5.7
million in the fourth quarter 2021, improving generally
in-line with revenues, partially offset by ramp-up costs associated
with increased activity associated with the ProFrac agreement.
Operational & Segment Highlights
- In the first quarter, the Company entered into a long-term
supply agreement with ProFrac Services, LLC, to provide full
downhole chemistry solutions for the greater of 33% of ProFrac's
crews or 10 crews minimum for three years. Subsequently, the
Company entered into an amended agreement with ProFrac Holdings,
LLC to expand the Agreement to a term of 10 years and up to 30
hydraulic fracturing fleets, which was overwhelmingly approved by
shareholders on May 9, 2022.
Combined, the contracts are expected to exceed $2 billion in revenue over the next decade.
Additional details can be found in the Company's SEC and 10-Q
filings.
- First quarter 2022 Chemistry Technologies revenues were
$11.8 million, up 2% sequentially and
15% year-over-year, outpacing market activity which was flat in the
quarter. Customer diversification continued with both domestic and
international E&P operators with 12% of quarterly revenue
attributed to new customers. Additionally, since Q1 2021, the
segment's customer base has grown by more than 37%, reducing
customer concentration and risk.
- First quarter 2022 Data Analytics revenues were $1.1 million, up 83% sequentially and down 27%
year-over-year. Sequential improvement was driven by increased
interest across midstream and transportation customers that are
increasingly interested in driving facilities efficiencies to help
meet ESG goals.
Balance Sheet and Liquidity
- As of March 31, 2022, the Company
had cash and equivalents of $24.8
million compared to $11.5
million in the fourth quarter 2021, benefitted by the
Private Investment in Public Equity (PIPE) transaction with a
consortium of investors, previously disclosed.
- Flotek also had $4.8 million in
Payroll Protection Program loans outstanding. The Company has
applied for forgiveness for substantially all of its PPP loans and
has received an extension of the loan maturity date from
April 15, 2022, to April 5, 2025, reducing the current portion of
long-term debt from $4.8 million to
$1.4 million as of December 31, 2021.
- During the first quarter, the Company continued progress on its
plans to sell its warehouse facility in Monahans, Texas and its manufacturing facility
in Waller, Texas, which were
classified as held for sale as of March 31,
2022. Subsequently, on April 18,
2022, the Company closed on its contract to sell the
Waller facility for $4.3 million. The proceeds will be included in
the Company's second quarter 2022 results. In addition, the Company
is in the later stages of executing an agreement to sell the
Monahans facility with an
anticipated close in the coming quarters.
Leadership Updates
- Flotek welcomes Bernie Colson as
Senior Vice President of Corporate Development &
Sustainability. In this role, Bernie will lead the Company's
corporate development, sustainability and investor relations
strategies. Bernie is an experienced investment executive and ESG
leader with more than 20 years of experience. He joins Flotek from
Delaware Ivy Investments, where he was Global Equity Analyst,
Portfolio Manager and Energy Team Lead. He has also held leadership
roles at investment bank Seaport Global Holdings, solar asset
holding company Clean Focus Yield and investment bank Oppenheimer
& Co., Inc. Bernie received a Master of Business Administration
from Michigan Ross School of Business at the University of Michigan and a Bachelor of Arts from
Yale University. He holds CFA and SASB
FSA certifications. He will report to the CEO, John W. Gibson, Jr.
- Flotek welcomes Ron Holsey as
Vice President of Data Analytics. Ron will be responsible for
developing and leading profitable growth through market
penetration, structured business optimization and process
improvement in the JP3 business. Ron brings extensive analyzer,
automation and oil and gas experience to Flotek as a global
business leader with a proven history of business transformation,
increasing market share, revenue and profit. Most recently, he
served as Vice President of Artificial Lift Automation &
Optimization at ChampionX, where he led transformation and growth
of the global production optimization business. He has also held
senior leadership roles at GE, Siemens, ABB and Rosemount, Inc. He
will report to the COO, Ryan
Ezell.
Governance & Board of Directors
- Flotek will hold its 2022 Annual General Meeting ("the AGM") on
Thursday, June 9 at 9:00 a.m.
- On April 15, 2022, Directors
Ted Brown and Paul Hobby notified Flotek they would not stand
for re-election to the Board of Directors at the AGM. The Company
wishes to thank them for their exceptional service, professionalism
and guidance during the past years.
- Concurrent with the initiation of the ProFrac contract,
Matt Wilks, President &
Executive Chairman of the Board of Directors for ProFrac Holding
Corporation, stands for election to the Flotek Board of Directors
at the AGM.
Conference Call Details
Flotek will host a conference
call on May 17, 2022, at 9:00 a.m. CST (10:00 a.m.
EST) to discuss its first quarter results for the three
months ended March 31, 2022.
Participants may access the call through Flotek's website at
www.flotekind.com under "Webcasts'' or by telephone at
1-844-835-9986 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.
About Flotek Industries, Inc.
Flotek Industries, Inc.
creates solutions to reduce the environmental impact of energy on
air, water, land and people. A technology-driven, specialty
green chemistry and data company, Flotek helps customers across
industrial, commercial, and consumer markets improve their
Environmental, Social, and Governance performance. Flotek's
Chemistry Technologies segment develops, manufactures, packages,
distributes, delivers, and markets high-quality cleaning,
disinfecting and sanitizing products for commercial, governmental
and personal consumer use. Additionally, Flotek empowers the
energy industry to maximize the value of their hydrocarbon streams
and improve return on invested capital through its real-time data
platforms and green chemistry technologies. Flotek serves
downstream, midstream, and upstream customers, both domestic and
international. Flotek is a publicly traded company
headquartered 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, 2022
|
|
December 31, 2021
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash equivalents
|
24,835
|
|
$
11,534
|
Restricted cash
|
40
|
|
1,790
|
Accounts receivable, net of allowance for doubtful accounts
of $684
and $659 at March 31, 2022 and December
31, 2021, respectively
|
13,239
|
|
13,297
|
Inventories, net
|
10,143
|
|
9,454
|
Deferred tax assets, net
|
—
|
|
—
|
Income taxes receivable
|
32
|
|
22
|
Other current assets
|
3,372
|
|
3,740
|
Current contract asset
|
3,533
|
|
|
Assets held for sale
|
2,752
|
|
2,762
|
Total current assets
|
57,946
|
|
42,599
|
Property and equipment,
net
|
5,079
|
|
5,296
|
Operating lease
right-of-use assets
|
1,827
|
|
2,041
|
Deferred tax assets,
net
|
282
|
|
279
|
Other long-term
assets
|
17
|
|
29
|
Long term contract
assets
|
7,067
|
|
—
|
TOTAL ASSETS
|
$
72,218
|
|
$
50,244
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable
|
8,233
|
|
7,616
|
Accrued liabilities
|
6,747
|
|
8,996
|
Income taxes payable
|
4
|
|
4
|
Interest payable
|
94
|
|
82
|
Current portion of operating lease liabilities
|
619
|
|
602
|
Current portion of finance lease liabilities
|
33
|
|
41
|
Current portion of long-term debt
|
1,553
|
|
1,436
|
Convertible notes payable
|
17,609
|
|
—
|
Contingent convertible notes payable
|
14,050
|
|
—
|
Total current
liabilities
|
48,942
|
|
18,777
|
Deferred revenue,
long-term
|
84
|
|
91
|
Long-term operating
lease liabilities
|
6,806
|
|
7,779
|
Long-term finance lease
liabilities
|
47
|
|
53
|
Long-term
debt
|
3,235
|
|
3,352
|
Deferred tax
liabilities, net
|
—
|
|
—
|
TOTAL LIABILITIES
|
59,114
|
|
30,052
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.0001 par value, 140,000,000 shares
authorized;
82,563,610 shares issued and
76,490,522 shares outstanding at
March 31, 2022 ; 79,483,837 shares
issued and 73,461,203 shares
outstanding at December 31,
2021
|
8
|
|
8
|
Additional paid-in capital
|
367,104
|
|
363,417
|
Accumulated other comprehensive income (loss)
|
89
|
|
81
|
Accumulated deficit
|
(319,938)
|
|
(309,214)
|
Treasury stock, at cost; 6,022,634 and 5,580,920 shares at
December
31, 2021 and December 31, 2020,
respectively
|
(34,159)
|
|
(34,100)
|
Total stockholders'
equity
|
13,104
|
|
20,192
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
|
$
72,218
|
|
$
50,244
|
FLOTEK INDUSTRIES, INC.
|
Unaudited Condensed
Consolidated Statements of Operations
|
(in thousands,
except per share data)
|
|
|
Three Months Ended
|
|
3/31/2022
|
|
3/31/2021
|
|
12/31/2021
|
|
|
|
|
|
|
Revenue
|
12,879
|
|
11,770
|
|
$ 12,154
|
Cost of goods sold
|
13,358
|
|
12,080
|
|
13,131
|
Gross profit (loss)
|
(479)
|
|
(310)
|
|
(977)
|
Operating costs and expenses:
|
|
|
|
|
|
Selling, general, and administrative
|
4,879
|
|
6,082
|
|
5,792
|
Depreciation and amortization
|
195
|
|
307
|
|
218
|
Research and development
|
1,415
|
|
1,542
|
|
1,342
|
(Gain) loss on disposal of property and
equipment
|
8
|
|
2
|
|
(39)
|
(Gain) on lease termination
|
(584)
|
|
—
|
|
—
|
Change in fair value of contingent convertible
notes payable
|
3,892
|
|
—
|
|
—
|
Impairment of goodwill
|
—
|
|
—
|
|
8,092
|
Total operating costs and
expenses
|
9,805
|
|
7,933
|
|
15,405
|
Income (loss) from operations
|
(10,284)
|
|
(8,243)
|
|
(16,382)
|
Other income (expense):
|
|
|
|
|
|
Interest expense
|
(668)
|
|
(18)
|
|
(25)
|
Other income (expense) , net
|
224
|
|
(33)
|
|
149
|
Total other income (expense),
net
|
(444)
|
|
(51)
|
|
124
|
Income (loss) before income
taxes
|
(10,728)
|
|
(8,294)
|
|
(16,258)
|
Income tax (expense) benefit
|
4
|
|
(6)
|
|
70
|
Net Income (loss)
|
$
(10,724)
|
|
$
(8,300)
|
|
(16,188)
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
Basic
|
(0.15)
|
|
(0.12)
|
|
$
(0.22)
|
Diluted
|
(0.15)
|
|
(0.12)
|
|
$
(0.22)
|
|
|
|
|
|
|
Weighted average common shares:
|
|
|
|
|
|
Weighted average common shares used in
computing basic loss per common
share
|
73,858
|
|
68,447
|
|
73,423
|
Weighted average common shares used in
computing diluted loss per common
share
|
73,858
|
|
68,447
|
|
73,423
|
FLOTEK INDUSTRIES, INC.
|
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
|
|
Three months ended March 31,
|
|
2022
|
|
2021
|
Cash flows from operating
activities:
|
|
|
|
Net loss
|
$
(10,724)
|
|
$
(8,300)
|
Adjustments to reconcile net loss to net cash used in
operating activities:
|
|
|
|
Change in fair value of contingent consideration
|
94
|
|
(335)
|
Change in fair value of contingent convertible
notes
|
3,892
|
|
—
|
Amortization of convertible note issuance costs
|
166
|
|
—
|
PIK interest expense
|
485
|
|
—
|
Depreciation and amortization
|
195
|
|
307
|
Provision for doubtful accounts, net of recoveries
|
238
|
|
—
|
Provision for excess and obsolete inventory
|
310
|
|
307
|
Gain on sale of assets
|
8
|
|
2
|
Gain on lease termination
|
(584)
|
|
—
|
Non-cash lease expense
|
56
|
|
105
|
Stock compensation expense
|
739
|
|
778
|
Deferred income tax benefit
|
(4)
|
|
2
|
Changes in current assets and liabilities:
|
|
|
|
Accounts receivable
|
(180)
|
|
255
|
Inventories
|
(1,007)
|
|
(78)
|
Income taxes
receivable
|
(10)
|
|
267
|
Other current assets
|
168
|
|
405
|
Other long-term
assets
|
(388)
|
|
541
|
Accounts payable
|
616
|
|
695
|
Accrued liabilities
|
(2,564)
|
|
(317)
|
Income taxes payable
|
—
|
|
89
|
Interest payable
|
12
|
|
12
|
Net
cash used in operating activities
|
(8,474)
|
|
(5,265)
|
Cash flows from investing
activities:
|
|
|
|
Capital expenditures
|
—
|
|
(19)
|
Proceeds from sale of assets
|
24
|
|
2
|
Net
cash provided by (used in) investing activities
|
24
|
|
(17)
|
Cash flows from financing
activities:
|
|
|
|
Proceeds from issuance of convertible notes
|
21,150
|
|
—
|
Payment of issuance costs of convertible notes
|
(1,084)
|
|
|
Payments to tax authorities for shares withheld from
employees
|
(59)
|
|
(105)
|
Proceeds from issuance of stock
|
—
|
|
38
|
Payments for finance leases
|
(14)
|
|
(14)
|
Net
cash (used in) provided by financing activities
|
19,993
|
|
(81)
|
Effect of changes in exchange rates on cash and cash
equivalents
|
8
|
|
23
|
Net change in cash, cash equivalents and restricted
cash
|
11,551
|
|
(5,340)
|
Cash and cash equivalents at the beginning of
period
|
11,534
|
|
38,660
|
Restricted cash at the beginning of period
|
1,790
|
|
664
|
Cash and cash equivalents and restricted cash at
beginning of period
|
13,324
|
|
39,324
|
Cash and cash equivalents at end of period
|
24,835
|
|
33,945
|
Restricted cash at the end of period
|
40
|
|
40
|
Cash, cash equivalents and restricted cash at end of
period
|
$
24,875
|
|
$
33,985
|
FLOTEK INDUSTRIES, INC.
|
Unaudited
Reconciliation of Non-GAAP Items and Non-Cash Items
Impacting Earnings
|
(in
thousands)
|
|
|
Three Months Ended
|
|
3/31/2022
|
|
3/31/2021
|
|
12/31/2021
|
|
|
|
|
|
|
Net Income (Loss)
|
$
(10,724)
|
|
$
(8,300)
|
|
$
(16,188)
|
Interest expense
|
668
|
|
18
|
|
25
|
Interest income
|
—
|
|
(5)
|
|
—
|
Income tax (benefit) expense
|
(4)
|
|
6
|
|
(70)
|
Depreciation and amortization
|
195
|
|
307
|
|
218
|
Impairment of goodwill
|
—
|
|
—
|
|
8,092
|
Impairment of property and equipment and
intangible assets
|
—
|
|
—
|
|
—
|
EBITDA (Non-GAAP)
|
(9,865)
|
|
(7,974)
|
|
(7,923)
|
Stock compensation expense
|
739
|
|
738
|
|
1,090
|
Severance and retirement
|
(4)
|
|
33
|
|
354
|
Inventory write downs
|
—
|
|
—
|
|
—
|
Terpene purchase commitment
|
—
|
|
—
|
|
—
|
M&A transaction costs
|
94
|
|
(157)
|
|
(107)
|
Inventory step-up
|
—
|
|
48
|
|
21
|
(Gain) loss on disposal of assets
|
8
|
|
2
|
|
(39)
|
Gain on lease termination
|
(584)
|
|
—
|
|
—
|
Contingent convertible notes payable revaluation
adjustment
|
3,892
|
|
—
|
|
—
|
PPP
loan forgiveness
|
—
|
|
—
|
|
—
|
Employee retention credit
|
—
|
|
—
|
|
—
|
COVID-19 related costs
|
—
|
|
—
|
|
—
|
Non-Recurring professional fees
|
274
|
|
518
|
|
950
|
Winter storm (natural disaster)
|
—
|
|
199
|
|
—
|
Adjusted EBITDA (Non-GAAP)
|
$
(5,446)
|
|
$
(6,593)
|
|
$
(5,654)
|
|
(1) Management believes
that adjusted EBITDA for the three months ended March 31, 2022 and
2021, and the three months ended December 31, 2021, is useful to
investors to assess and understand operating performance,
especially when comparing those results with previous and
subsequent periods. Management views the 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 operational goals.
|
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SOURCE Flotek Industries, Inc.