Flotek Announces Increased 2024 Guidance and Continued Profitability Growth in Connection with Second Quarter 2024 Results
Financial Summary (in thousands, except 'per share' amounts)
|
Three Months Ended |
|
Six Months Ended |
||||
|
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.
Asset Based Loan Amendment: Increased Credit Capacity with Lower Interest Rate
On
Data Analytics: Access to New Upstream Flare Market
On
With over 55,000 existing flares in
Management Commentary
Chief Executive Officer Dr.
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
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 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 wasJune 1 through December 31, 2023 compared toJanuary 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 |
Conference Call Details
An updated corporate presentation that will be referenced on the call will be posted to the Investor Relations section of
Upcoming Investor Event
Members of the Company's management are scheduled to participate in EnerCom Denver –
About
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
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) |
|||
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ 4,777 |
|
$ 5,851 |
Restricted cash |
101 |
|
102 |
Accounts receivable, net of allowance for credit losses of |
13,316 |
|
13,687 |
Accounts receivable, related party, net of allowance for credit losses of |
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, |
— |
|
— |
Common stock, |
3 |
|
3 |
Additional paid-in capital |
463,844 |
|
463,140 |
Accumulated other comprehensive income |
185 |
|
127 |
Accumulated deficit |
(323,270) |
|
(326,806) |
|
(34,528) |
|
(34,504) |
Total stockholders' equity |
106,234 |
|
101,960 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ 156,040 |
|
$ 157,513 |
Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share data) |
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|
Three Months Ended |
|
Six Months Ended |
||||
|
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 |
— |
|
(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 |
29,449 |
|
23,906 |
|
29,440 |
|
20,207 |
Weighted average common shares used in |
30,668 |
|
28,250 |
|
30,512 |
|
27,361 |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) |
|||
|
|
||
|
Six Months Ended |
||
|
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) |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (continued) |
|||
|
|
||
|
Six Months Ended |
||
|
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 |
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings (in thousands) |
|||||||
|
|
|
|
||||
|
Three Months Ended |
|
Six Months Ended |
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
|
|
|
|
|
|
Gross profit |
$ 9,170 |
|
$ 3,904 |
|
$ 17,991 |
|
$ 5,785 |
Stock compensation expense |
3 |
|
2 |
|
7 |
|
(137) |
Severance and retirement |
— |
|
11 |
|
9 |
|
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 |
|
7 |
|
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 |
— |
|
(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 |
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