FLOTEK REPORTS POSITIVE GROSS PROFIT FOR FIRST QUARTER 2023 AND INITIATES 2023 GUIDANCE

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.

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