HOUSTON, May 8, 2023
/PRNewswire/ -- Flotek Industries, Inc. ("Flotek" or the "Company")
(NYSE: FTK) today announced operational and financial results for
the first quarter ended March 31,
2023.
Financial Summary
(in
thousands)
|
Q1
2023
|
Q4
2022
|
Percent
Change
|
Q1
2022
|
Percent
Change
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
$
|
48,007
|
$
|
48,217
|
0 %
|
$
|
12,879
|
273 %
|
Gross Profit
(Loss)
|
$
|
1,880
|
$
|
(2,074)
|
191 %
|
$
|
(479)
|
492 %
|
Adjusted Gross
Profit (Loss) (1)
|
$
|
2,647
|
$
|
(522)
|
607 %
|
$
|
(226)
|
1,271 %
|
Net Income
(Loss)
|
$
|
21,343
|
$
|
(19,026)
|
212 %
|
$
|
(10,724)
|
299 %
|
Adjusted EBITDA
(1)
|
$
|
(3,851)
|
$
|
(5,079)
|
24 %
|
$
|
(5,446)
|
29 %
|
|
|
(1)
|
A non-GAAP financial
measure. See "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 Outlook
Flotek has initiated full year 2023 guidance for revenue of
$210 million to $230 million and an Adjusted Gross Profit margin
of 8% to 10%. Adjusted Gross Profit(1) excludes non-cash
costs, including contract amortization.
First Quarter 2023 Highlights
- Reached positive gross profit for the first quarter of 2023,
representing an almost 200% increase sequentially and growth of
nearly 500% from the year-ago quarter.
- Increased revenue by more than 270% from the first quarter of
2022 primarily as a result of Flotek's strategic 10-year supply
agreement with ProFrac Holdings, LLC ("ProFrac").
- Realized 135% revenue growth in the Company's Data Analytics
business versus first quarter of 2022. First quarter 2023 revenue
totaled $2.5 million, representing
45% of total Data Analytics revenue for all of 2022.
- Increased the average number of ProFrac fleets serviced from 17
in the fourth quarter of 2022 to 19 in the first quarter of
2023.
- Achieved approximately 12% market share of the active U.S. frac
fleets by the end of the first quarter of 2023. Flotek remains well
positioned to capture additional market share as a result of its
anticipated expanded scope of work with ProFrac and strategic
business development efforts with other customers, supported by the
Company's unique product and service offerings.
Management Commentary
Harsha V. Agadi, Interim Chief
Executive Officer for Flotek, stated, "Our first quarter results
reflect the continued progress we are making to be the
collaborative partner of choice for sustainable optimized chemistry
and data solutions. Importantly, we achieved a $3.2 million improvement in adjusted gross
profit, as compared to the fourth quarter, on nearly identical
revenue, which demonstrates the continuing underlying improvement
we are achieving in margins. The first quarter represents an
inflection point for gross profit. With support from additional
revenue opportunities and targeted cost reduction initiatives, we
remain focused on reaching positive adjusted EBITDA during
2023."
First Quarter 2023 Financial Results
- Revenue: Flotek recorded first quarter 2023 total
revenue of $48.0 million compared to
$48.2 million for the fourth quarter
of 2022 and $12.9 million for the
first quarter of 2022 – a 273% increase. Contributing to the
year-over-year growth was the Company's 10-year supply agreement
with ProFrac and continued growth in the Company's other Chemistry
Technologies and Data Analytics product and service offerings.
First quarter 2023 revenue remained flat sequentially, despite the
industry's seasonal slow-down in well stimulation operations early
in the quarter.
- Gross Profit (Loss): The Company generated a gross
profit of $1.9 million versus a gross
loss of $2.1 million for the fourth
quarter of 2022 and a gross loss of $0.5
million for the first quarter of 2022. The substantial
improvement in gross margin was the result of pricing improvements,
freight cost reductions and the Company's initiatives to drive
further efficiencies in the business, including focusing its
efforts on leveraging the scale of its ProFrac business to drive
margin enhancement.
- Adjusted Gross Profit (Loss) (Non-GAAP): Flotek
generated an adjusted gross profit of $2.6
million compared to adjusted gross losses of $0.5 million and $0.2
million for the fourth and first quarters of 2022,
respectively. Adjusted gross profit (loss) primarily excludes
non-cash items, including amortization of contract assets, which
reduces both revenue and gross profit.
- Selling, General and Administrative ("SG&A")
Expense: The Company's SG&A expense was $6.5 million for the first quarter of 2023
compared to $5.8 million for the
fourth quarter of 2022 and $4.9
million for the first quarter of 2022. First quarter 2023
SG&A included higher non-recurring legal fees, offset by lower
stock compensation costs. In addition, fourth quarter 2022 SG&A
benefited from a $1.5 million
reversal of an accrued discretionary bonus.
- Severance Costs: Flotek recorded $2.2 million in separation costs in the first
quarter of 2023, which was associated with the departure of the
Company's previous CEO and other management level headcount
reductions implemented in the period.
- Net Income (Loss) and EPS: Flotek reported net income of
$21.3 million, or $0.22 per basic share, for the first quarter of
2023. This is compared to a net loss of $19.0 million, or $0.25 per basic share, for the fourth quarter of
2022 and a net loss of $10.7 million,
or $0.15 per basic share, in the
first quarter of 2022. Net income during the first quarter of 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 forgiveness of the Company's PPP
loan.
- Adjusted EBITDA (Non-GAAP): Adjusted EBITDA was negative
$3.9 million in the first quarter of
2023 versus negative $5.1 million and
negative $5.4 million for the fourth
and first quarters of 2022, respectively. Adjusted EBITDA continues
to trend upward, improving 24% sequentially.
Balance Sheet and Liquidity
- Cash and cash equivalents remained stable at $12.4 million as of March
31, 2023, compared to $12.3
million as of December 31,
2022.
- Flotek is continuing to pursue asset-based borrowing options.
To date, the Company has received four non-binding proposals and is
evaluating the various terms and conditions in each of the term
sheets.
Conference Call Details
Flotek will host a conference call on May
9, 2023, at 9:30 a.m. CDT
(10:30 a.m. EDT) to discuss its first
quarter 2023 results. Participants may access the call through
Flotek's website at www.flotekind.com under "Webcasts'' or by
telephone toll free at 1-844-835-9986 (international toll:
1-412-317-5270) 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 unique 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 and commercial markets
improve their environmental performance. The Company's primary
focus is to enable its customers 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 energy customers,
both domestic and international. In addition, the Company is
positioned to integrate parallel industrial chemistry and data
platforms by capitalizing on its digitization, engineering,
chemical formulation knowledge, and intellectual property to drive
multi-disciplinary advancements in sustainability and enterprise
risk management. 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 STATEMENTS OF
OPERATIONS (in thousands, except per share
data)
|
|
|
Three Months
Ended
|
|
|
3/31/2023
|
|
3/31/2022
|
|
12/31/2022
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
Revenue from external
customers
|
$ 11,652
|
|
$ 10,382
|
|
$ 15,940
|
|
Revenue from related
party
|
36,355
|
|
2,497
|
|
32,277
|
|
Total
revenues
|
48,007
|
|
12,879
|
|
48,217
|
|
Cost of goods
sold
|
46,127
|
|
13,358
|
|
50,291
|
|
Gross profit
(loss)
|
1,880
|
|
(479)
|
|
(2,074)
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
Selling, general, and
administrative
|
6,451
|
|
4,886
|
|
5,779
|
|
Depreciation
|
176
|
|
195
|
|
180
|
|
Research and
development
|
614
|
|
1,415
|
|
922
|
|
Severance
costs
|
2,223
|
|
(7)
|
|
—
|
|
(Gain) loss on sale of
property and equipment
|
—
|
|
8
|
|
(1,000)
|
|
Gain on lease
termination
|
—
|
|
(584)
|
|
—
|
|
(Gain) loss in fair
value of Contract
Consideration Convertible Notes Payable
|
(26,095)
|
|
3,892
|
|
8,941
|
|
Total operating costs
and expenses
|
(16,631)
|
|
9,805
|
|
14,822
|
|
Income (loss) from
operations
|
18,511
|
|
(10,284)
|
|
(16,896)
|
|
Other income
(expense):
|
|
|
|
|
|
|
Paycheck protection
plan loan forgiveness
|
4,522
|
|
—
|
|
—
|
|
Interest
expense
|
(1,672)
|
|
(668)
|
|
(2,465)
|
|
Other income (expense)
, net
|
(9)
|
|
224
|
|
212
|
|
Total other income
(expense), net
|
2,841
|
|
(444)
|
|
(2,253)
|
|
Income (loss) before
income taxes
|
21,352
|
|
(10,728)
|
|
(19,149)
|
|
Income tax (expense)
benefit
|
(9)
|
|
4
|
|
123
|
|
Net income
(loss)
|
$ 21,343
|
|
$ (10,724)
|
|
$
(19,026)
|
|
|
|
|
|
|
|
|
Income (loss) per
common share:
|
|
|
|
|
|
Basic
|
$
0.22
|
|
$
(0.15)
|
|
$
(0.25)
|
|
Diluted
|
$
(0.02)
|
|
$
(0.15)
|
|
$
(0.25)
|
|
|
|
|
|
|
|
|
Weighted average
common shares:
|
|
|
|
|
|
|
Weighted average
common shares used in
computing basic income (loss) per
common share
|
98,808
|
|
73,858
|
|
75,405
|
|
Weighted average
common shares used in
computing diluted loss per common share
|
158,441
|
|
73,858
|
|
75,405
|
|
FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
|
March 31,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
12,433
|
|
$
12,290
|
Restricted
cash
|
101
|
|
100
|
Accounts receivable,
net of allowance for credit losses of $645 and
$623 at March 31, 2023 and December 31, 2022,
respectively
|
15,609
|
|
19,136
|
Accounts receivable,
related party
|
26,230
|
|
22,683
|
Inventories,
net
|
15,904
|
|
15,720
|
Other current
assets
|
4,516
|
|
4,045
|
Current contract
asset
|
7,066
|
|
7,113
|
Total current
assets
|
81,859
|
|
81,087
|
Long-term contract
assets
|
71,372
|
|
72,576
|
Property and equipment,
net
|
4,807
|
|
4,826
|
Operating lease
right-of-use assets
|
4,923
|
|
5,900
|
Deferred tax assets,
net
|
410
|
|
404
|
Other long-term
assets
|
17
|
|
17
|
TOTAL
ASSETS
|
$
163,388
|
|
$
164,810
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
41,929
|
|
$
33,375
|
Accrued
liabilities
|
9,870
|
|
8,984
|
Income taxes
payable
|
11
|
|
97
|
Interest
payable
|
—
|
|
130
|
Current portion of
operating lease liabilities
|
3,050
|
|
3,328
|
Current portion of
finance lease liabilities
|
36
|
|
36
|
Current portion of
long-term debt
|
179
|
|
2,052
|
Convertible notes
payable
|
—
|
|
19,799
|
Contract Consideration
Convertible Notes Payable
|
43,800
|
|
83,570
|
Total current
liabilities
|
98,875
|
|
151,371
|
Deferred revenue,
long-term
|
35
|
|
44
|
Long-term operating
lease liabilities
|
7,133
|
|
8,044
|
Long-term finance lease
liabilities
|
13
|
|
19
|
Long-term
debt
|
194
|
|
2,736
|
TOTAL
LIABILITIES
|
106,250
|
|
162,214
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.0001
par value, 240,000,000 shares authorized;
94,613,664 shares issued and 88,170,936 shares outstanding
at
March 31, 2023 ; 83,915,918 shares issued and
77,788,391 shares
outstanding at December 31, 2022
|
9
|
|
8
|
Additional paid-in
capital
|
421,596
|
|
388,177
|
Accumulated other
comprehensive income
|
160
|
|
181
|
Accumulated
deficit
|
(330,176)
|
|
(351,519)
|
Treasury stock, at
cost; 6,442,728 and 6,127,527 shares at March 31,
2023 and December 31, 2022 , respectively
|
(34,451)
|
|
(34,251)
|
Total stockholders'
equity
|
57,138
|
|
2,596
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
163,388
|
|
$
164,810
|
FLOTEK INDUSTRIES,
INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
|
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
21,343
|
|
$
(10,724)
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
|
Change in fair value
of contingent consideration
|
(359)
|
|
94
|
Change in fair value
of Contract Consideration Convertible Notes Payable
|
(26,095)
|
|
3,892
|
Amortization of
convertible note issuance costs
|
83
|
|
166
|
Payment-in-kind
interest expense
|
1,571
|
|
485
|
Amortization of
contract assets
|
1,251
|
|
—
|
Depreciation and
amortization
|
176
|
|
195
|
Provision for credit
losses, net of recoveries
|
23
|
|
238
|
Provision for excess
and obsolete inventory
|
258
|
|
310
|
Gain on sale of
property and equipment
|
—
|
|
8
|
Gain on lease
termination
|
—
|
|
(584)
|
Non-cash lease
expense
|
977
|
|
56
|
Stock compensation
expense
|
(1,112)
|
|
739
|
Deferred income tax
(benefit) expense
|
(6)
|
|
(4)
|
Paycheck protection
plan loan forgiveness
|
(4,522)
|
|
—
|
Changes in current
assets and liabilities:
|
|
|
|
Accounts
receivable
|
3,504
|
|
(194)
|
Accounts receivable,
related party
|
(3,546)
|
|
14
|
Inventories
|
(441)
|
|
(999)
|
Income taxes
receivable
|
—
|
|
(10)
|
Other
assets
|
(470)
|
|
(220)
|
Accounts
payable
|
8,554
|
|
616
|
Accrued
liabilities
|
1,236
|
|
(2,350)
|
Operating lease
liabilities
|
(1,190)
|
|
(214)
|
Income taxes
payable
|
(87)
|
|
—
|
Interest
payable
|
(8)
|
|
12
|
Net cash provided by
(used in) operating activities
|
1,140
|
|
(8,474)
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(157)
|
|
—
|
Proceeds from sale of
assets
|
—
|
|
24
|
Net cash (used in)
provided by investing activities
|
(157)
|
|
24
|
Cash flows from
financing activities:
|
|
|
|
Payment for forfeited
stock options
|
(617)
|
|
—
|
Payments on long term
debt
|
(15)
|
|
—
|
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
|
(200)
|
|
(59)
|
Proceeds from issuance
of stock
|
20
|
|
—
|
Payments for finance
leases
|
(6)
|
|
(14)
|
Net cash (used in)
provided by financing activities
|
(818)
|
|
19,993
|
Effect of changes in
exchange rates on cash and cash equivalents
|
(21)
|
|
8
|
Net change in cash
and cash equivalents and restricted cash
|
144
|
|
11,551
|
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
|
12,433
|
|
24,835
|
Restricted cash at the
end of period
|
101
|
|
40
|
Cash and cash
equivalents and restricted cash at end of period
|
$
12,534
|
|
$
24,875
|
FLOTEK INDUSTRIES, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ITEMS AND NON-CASH ITEMS
IMPACTING EARNINGS
(in thousands)
|
|
Three Months
Ended
|
|
|
3/31/2023
|
|
3/31/2022
|
|
12/31/2022
|
|
|
|
|
|
|
|
|
Gross profit
(loss)
|
$
1,880
|
|
$
(479)
|
|
$
(2,074)
|
|
Stock compensation
expense
|
(139)
|
|
156
|
|
85
|
|
Severance and
retirement
|
15
|
|
3
|
|
—
|
|
Contingent liability
revaluation
|
(359)
|
|
94
|
|
81
|
|
Amortization of
contract assets
|
1,250
|
|
—
|
|
1,386
|
|
Adjusted Gross
profit (loss) (Non-GAAP)
|
$
2,647
|
|
$
(226)
|
|
$
(522)
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
21,343
|
|
$
(10,724)
|
|
$
(19,026)
|
|
Interest
expense
|
1,672
|
|
668
|
|
2,465
|
|
Income tax expense
(benefit)
|
9
|
|
(4)
|
|
(123)
|
|
Depreciation and
amortization
|
176
|
|
195
|
|
180
|
|
EBITDA
(Non-GAAP)
|
$
23,200
|
|
$
(9,865)
|
|
$
(16,504)
|
|
Stock compensation
expense
|
(1,112)
|
|
739
|
|
1,062
|
|
Severance and
retirement
|
2,238
|
|
(4)
|
|
—
|
|
Contingent liability
revaluation
|
(359)
|
|
94
|
|
81
|
|
(Gain) loss on
disposal of assets
|
—
|
|
8
|
|
(1,000)
|
|
Gain on lease
termination
|
—
|
|
(584)
|
|
—
|
|
Contract Consideration
Convertible Notes
Payable revaluation adjustment
|
(26,095)
|
|
3,892
|
|
8,941
|
|
Amortization of
contract assets
|
1,250
|
|
—
|
|
1,386
|
|
PPP loan
forgiveness
|
(4,522)
|
|
—
|
|
—
|
|
Non-Recurring
professional fees
|
1,549
|
|
274
|
|
955
|
|
Adjusted EBITDA
(Non-GAAP)
|
$
(3,851)
|
|
$
(5,446)
|
|
$
(5,079)
|
|
|
|
(1)
|
Management believes
that adjusted gross profit and adjusted EBITDA for the three months
ended March 31, 2023 and 2022, and the three months ended December
31, 2022, are 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 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 operational
goals.
|
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SOURCE Flotek Industries, Inc.