PresentationJeffrey GramppNorthland Capital Markets, Research Division All right. Hi, everyone. Good morning. I'm Jeff Grampp from the research team at Northland. And thanks for joining our fireside chat session today with Flotek, ticker FTK. We currently have an outperformed rating and $16 price target on the stock. With us today from the team, we have CEO, Ryan Ezell; CFO, Bond Clement; and Director of Investor Relations, Mike Critelli. We'll start this off with just kind of a brief overview of the busine ...

PresentationJeffrey GramppNorthland Capital Markets, Research Division All right. Hi, everyone. Good morning. I'm Jeff Grampp from the research team at Northland. And thanks for joining our fireside chat session today with Flotek, ticker FTK. We currently have an outperformed rating and $16 price target on the stock. With us today from the team, we have CEO, Ryan Ezell; CFO, Bond Clement; and Director of Investor Relations, Mike Critelli. We'll start this off with just kind of a brief overview of the busine ...

Flotek Industries Fireside Chat Summary Company Overview - Flotek Industries is a publicly traded company on the New York Stock Exchange (NYSE: FTK) with over 30 years of experience in the energy chemistry sector [2][3] - The company has undergone a significant turnaround since late 2020, focusing on innovative chemistry and technology solutions [2][3] Core Business Strategy - Flotek aims to build itself into an innovative chemistry and technology company, leveraging real-time data measurements to enhance performance in the energy infrastructure sector [3][4] - The company has shifted from a reliance on traditional oil field services to a focus on data analytics and recurring revenue models [5][6] Market Share and Growth - Flotek's market share in North American chemistries has increased from approximately 1% in 2021 to nearly 20% as of Q3 2025 [4] - The data analytics segment is projected to more than double its revenue from $8.5 million in 2024 to over $20 million by the end of 2025 [5] Financial Performance - Flotek achieved adjusted EBITDA of $1.5 million in 2023, growing to $20.3 million in 2024, with guidance for 2025 ranging between $36 to $39 million [7] - The company's share price has increased by approximately 230% over the last 18 months [7] Addressable Market Expansion - The addressable market for Flotek has expanded from $2.6 billion in 2021 to nearly $20 billion in Q3 2025 [8] - The company is positioned as a strong investment opportunity due to its strategic execution and profitability improvements [8] Recurring Revenue Model - As of Q2 2025, over 26% of Flotek's gross profit comes from recurring revenue data services, a significant increase from 0% in 2021 [11][12] - The company has secured substantial contracts, including a $2 billion recurring revenue chemistry contract and a $160 million data analytics contract [12] Data Analytics and Technology - Flotek's proprietary near-infrared measurement technologies allow for real-time data analytics, enhancing decision-making and operational performance [4][30] - The company has developed a recurring revenue backlog of approximately $180 million, providing continuity for growth [9] Market Opportunities - Flotek is exploring adjacent markets, including water treatment and advanced analytics for chemical plants, to diversify its revenue streams [7] - The company is also focusing on the growing power generation segment, which is expected to see significant growth in North America [6] Custody Transfer and Production Chemistry - Flotek's custody transfer solutions utilize real-time data to provide accurate compositional analysis, which is crucial for reservoir valuation [30][34] - The production chemistry market, valued at $5.5 to $6 billion annually, presents a unique opportunity for Flotek to leverage its data analytics capabilities [66][67] M&A Strategy - Flotek is actively seeking M&A opportunities that align with its strategy of moving away from cyclical impacts and focusing on steady, data-driven growth [58][59] - The company aims to enhance its market position and achieve a billion-dollar market cap through strategic acquisitions [60] Conclusion - Flotek Industries is positioned for significant growth through its innovative approach to chemistry and data analytics, with a strong focus on recurring revenue models and market expansion opportunities [8][67]

Flotek Industries (FTK) Conference Summary Company Overview - Flotek Industries focuses on innovative chemistry and data solutions aimed at enhancing value for customers and shareholders [3][4] - The company is undergoing a transformation to integrate real-time data analytics with its core chemistry business [4][6] Key Financial Metrics - Achieved 11 consecutive quarters of adjusted EBITDA improvement [5][8] - Stock value increased by 230% since 2023 [6] - Revenue growth of 31% year-over-year from 2024 to 2025 [6] - Adjusted EBITDA increased by nearly 102% year-over-year [6] - Data analytics segment revenue grew by 189%, now representing 24% of total gross profit [6] Strategic Initiatives - Launched a three, five, and ten-year strategic plan in 2021 focusing on core chemistry and data analytics [4] - The addressable market expanded from $2.1 billion to over $15 billion due to the addition of data analytics [9][30] - Transitioning to a data as a service model, which is expected to contribute over 60% of adjusted EBITDA by 2026 [7][29] Data Analytics Segment - The data analytics segment is a key growth area, with significant profitability improvements [6][14] - The company has secured long-term contracts, including a $160 million backlog from PowerTech services [15][16] - Real-time gas monitoring and custody transfer solutions are being developed, with successful pilot programs leading to long-term contracts [12][21] Chemistry Technology Segment - Flotek has developed prescriptive chemistry management, utilizing AI-driven models to optimize chemical usage [25][26] - The company has reduced R&D costs significantly while improving production efficiency [25] - Market share in completion chemistry has grown from less than 1% to nearly 20% [9][27] Safety and Operational Excellence - The company has maintained a strong safety record, with ten years without lost time incidents [5][31] - Emphasis on safety and service quality as a competitive advantage in the industry [31] Future Outlook - Continued growth expected in both data analytics and chemistry segments, with plans to expand into international markets [24][29] - The company is positioned for long-term growth with a focus on innovative solutions and operational efficiency [31] Conclusion - Flotek Industries is undergoing a significant transformation, with strong financial performance and strategic initiatives aimed at long-term growth in both chemistry and data analytics sectors [28][31]

Core Viewpoint - Flotek Industries (FTK) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system emphasizes the correlation between changes in earnings estimates and stock price movements, making it a valuable tool for investors [2][3]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to price movements based on their buying or selling actions [3]. Business Improvement Indicators - The upgrade in earnings estimates for Flotek Industries suggests an improvement in the company's underlying business, which should encourage investors to drive the stock price higher [4]. Importance of Earnings Estimate Revisions - Research indicates a strong correlation between earnings estimate revisions and stock movements, highlighting the significance of tracking these revisions for investment decisions [5]. - The Zacks Rank system effectively leverages earnings estimate revisions to classify stocks, providing a structured approach to investment [6]. Specifics on Flotek Industries - Flotek Industries is projected to earn $0.66 per share for the fiscal year ending December 2025, with no year-over-year change expected [7]. - Over the past three months, the Zacks Consensus Estimate for Flotek Industries has increased by 29.4%, reflecting a positive trend in earnings estimates [7]. Zacks Rating System Overview - The Zacks rating system maintains a balanced distribution of ratings, ensuring that only the top 20% of stocks receive a "Strong Buy" or "Buy" rating, indicating superior earnings estimate revisions [8][9]. - Flotek Industries' upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for near-term price appreciation [9].

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, show a significant increase in total revenue and gross profit compared to the prior year, with net income of $1.8 million for the second quarter and $7.1 million for the first half of 2025, while the balance sheet reflects a major asset acquisition from a related party, financed through a new note payable and other considerations, resulting in a substantial increase in total liabilities and a decrease in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $86,831 | $96,456 | | Property and equipment, net | $21,223 | $6,178 | | **TOTAL ASSETS** | **$172,243** | **$170,796** | | Total current liabilities | $54,676 | $50,368 | | Note payable - related party, net | $39,536 | $0 | | **TOTAL LIABILITIES** | **$100,393** | **$56,896** | | **Total stockholders' equity** | **$71,850** | **$113,900** | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $58,350 | $46,152 | $113,712 | $86,526 | | Gross profit | $14,407 | $9,170 | $26,856 | $17,991 | | Income from operations | $2,587 | $2,222 | $8,154 | $4,330 | | Net income | $1,768 | $1,974 | $7,148 | $3,536 | | Diluted EPS | $0.05 | $0.06 | $0.21 | $0.12 | Condensed Consolidated Statements of Cash Flow Highlights (in thousands) | Cash Flow Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,822 | $827 | | Net cash used in investing activities | ($1,302) | ($195) | | Net cash used in financing activities | ($740) | ($1,765) | | **Net change in cash** | **$625** | **($1,075)** | [Note 3 — Asset Acquisition](index=11&type=section&id=Note%203%20%E2%80%94%20Asset%20Acquisition) On April 28, 2025, the Company acquired mobile power generation assets from a related party, ProFrac, in a series of transactions valued at $107.5 million, with assets recorded at ProFrac's historical book value of $15.1 million, and the $92.4 million excess consideration recorded as a reduction to additional paid-in capital, funded via an offset of a $17.6 million shortfall fee, a new $40 million note payable to ProFrac, a warrant for 6 million shares, and future shortfall fee offsets, with the acquired assets leased back to ProFrac under a six-year agreement - The acquisition of mobile power generation assets from related party ProFrac is classified as an asset acquisition between entities under common control, with assets recorded at ProFrac's historical book value of approximately **$15.1 million**[47](index=47&type=chunk)[55](index=55&type=chunk) PWRtek Transactions Consideration Summary (in thousands) | Components of consideration | April 28, 2025 | | :--- | :--- | | April 2025 Warrant (6,000,000 shares) | $42,660 | | PWRtek Note | $40,000 | | 2024 Contractual Shortfall Fee offset | $17,552 | | Future Contract Shortfall Fee offset | $7,248 | | **Total consideration** | **$107,460** | | **Total assets book value** | **$15,060** | | **Excess consideration over assets historical book value** | **$92,400** | - The acquired assets were leased back to ProFrac GDM for a six-year term, with lease revenue recognition for operating units beginning on April 28, 2025[48](index=48&type=chunk) [Note 8 — Leases](index=15&type=section&id=Note%208%20%E2%80%94%20Leases) This note details the company's lease expenses as a lessee and its new lease income as a lessor, with significant rental income generated from the ProFrac asset acquisition, projecting $128.8 million in future minimum lease income through April 2030 Future Minimum Lease Agreement Income (in thousands) | Years ending December 31, | Lease Agreement Income | | :--- | :--- | | 2025 (remaining) | $10,218 | | 2026 | $27,375 | | 2027 | $27,375 | | 2028 | $27,375 | | 2029 | $27,375 | | Thereafter | $9,125 | | **Total rental income (through April 2030)** | **$128,843** | [Note 17— Related Party Transactions](index=24&type=section&id=Note%2017%E2%80%94%20Related%20Party%20Transactions) The company has extensive transactions with ProFrac and its affiliates, which owned approximately 61% of the company's common stock, including a long-term supply agreement with minimum purchase obligations, leading to $15.2 million in Contract Shortfall Fees for H1 2025, and the 2024 shortfall fee of $32.6 million was settled via cash and an asset acquisition offset - As of June 30, 2025, ProFrac Holdings or its affiliates owned approximately **61%** of the Company's common stock, including the effects of outstanding warrants[117](index=117&type=chunk) - The company recognized **$15.2 million** in Contract Shortfall Fees for the six months ended June 30, 2025, as it does not expect ProFrac to meet its minimum purchase requirements for the year, compared to **$17.1 million** recognized in the same period of 2024[113](index=113&type=chunk) - The 2024 Contract Shortfall Fees of **$32.6 million** were settled with **$15.0 million** in cash and a **$17.6 million** offset used as consideration for the PWRtek asset acquisition[54](index=54&type=chunk)[143](index=143&type=chunk) [Note 18 — Business Segment, Geographic and Major Customer Information](index=25&type=section&id=Note%2018%20%E2%80%94%20Business%20Segment%2C%20Geographic%20and%20Major%20Customer%20Information) The company operates through Chemistry Technologies (CT) and Data Analytics (DA) segments, with CT driving revenue and operating income, while DA's revenue grew substantially in Q2 2025 due to a new lease agreement with ProFrac, which remains a major customer accounting for 56.8% of total revenue Segment Performance for Q2 2025 vs Q2 2024 (in thousands) | Segment | Revenue Q2 2025 | Revenue Q2 2024 | Operating Income (Loss) Q2 2025 | Operating Income (Loss) Q2 2024 | | :--- | :--- | :--- | :--- | :--- | | Chemistry Technologies | $52,420 | $44,102 | $8,049 | $6,145 | | Data Analytics | $5,930 | $2,050 | $(1,919) | $(358) | - A single related party customer, ProFrac (Customer A), accounted for **56.8%** of consolidated revenue for the three months ended June 30, 2025[129](index=129&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant impact of the recent asset acquisition from ProFrac, which diversifies revenue streams into equipment rental within the Data Analytics segment, leading to a 26% consolidated revenue increase and improved gross profit margin in Q2 2025, with liquidity deemed sufficient for the next twelve months - The recent PWRtek Transactions with related party ProFrac involved acquiring mobile power generation assets for **$107.5 million**, which are now leased back to ProFrac, creating a new rental revenue stream in the Data Analytics segment[136](index=136&type=chunk)[137](index=137&type=chunk)[139](index=139&type=chunk) Consolidated Results of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total revenues | $58,350 | $46,152 | 26% | | Gross profit | $14,407 | $9,170 | 57% | | Gross profit % | 24.7% | 19.9% | +4.8 p.p. | | Income from operations | $2,587 | $2,222 | 16% | - The company's liquidity position is considered sufficient for the next 12 months, supported by **$5.0 million** in cash, **$9.2 million** in availability under its ABL as of June 30, 2025, and expected cash flows from operations[177](index=177&type=chunk)[179](index=179&type=chunk)[81](index=81&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes to its market risk disclosures from its 2024 Annual Report, with key exposures remaining related to interest rates, raw material prices, freight costs, and foreign currency exchange rates - There have been no material changes to the quantitative or qualitative disclosures about market risk from the 2024 Annual Report[195](index=195&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of June 30, 2025, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[197](index=197&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the three months ended June 30, 2025[199](index=199&type=chunk) [PART II - OTHER INFORMATION](index=40&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) No material changes in legal proceedings were reported since the 2024 Annual Report - No material changes in legal proceedings were reported since the 2024 Annual Report[202](index=202&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) No material changes in risk factors were reported since the Q1 2025 Quarterly Report - No material changes in risk factors were reported since the Q1 2025 Quarterly Report[203](index=203&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities, but repurchased 5,647 shares of common stock during the quarter to satisfy tax withholding obligations for employees related to stock compensation plans Issuer Repurchases of Equity Securities (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 5,523 | $6.82 | | May 2025 | 0 | $0.00 | | June 2025 | 124 | $14.63 | | **Total** | **5,647** | | [Other Information](index=40&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter, and effective August 6, 2025, the Board of Directors approved and adopted amendments to the company's bylaws - Effective August 6, 2025, the Company's Board of Directors approved and adopted amendments to the company's bylaws[209](index=209&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and documents related to the recent asset purchase and lease agreements

Financial Data and Key Metrics Changes - Total revenue during Q2 2025 rose 26% compared to Q2 2024, driven by a 189% increase in data analytics revenue and a 38% increase in external chemistry revenue [6][21] - Gross profit climbed 57% year-over-year, with the gross profit margin rising to 25% [7][20] - Adjusted net income totaled $6,000,000, representing a 202% improvement compared to 2024 [7][23] - Adjusted EBITDA increased by 113% year-over-year and over 20% sequentially [7][24] Business Line Data and Key Metrics Changes - Data analytics segment revenue represented 10% of total second quarter revenues, up from 4% a year ago, with service revenues increasing 452% year-over-year [21][10] - Chemistry technology segment revenue surged 38% year-over-year despite a 24% decline in average active frac fleets [17][18] Market Data and Key Metrics Changes - The company secured a multi-year contract in the data analytics segment estimated to deliver $156,000,000 in revenue [6] - The data analytics segment is expected to contribute over half of the company's profitability in 2026 [28] Company Strategy and Development Direction - The company is focused on expanding its presence in the energy infrastructure sector through its Measure More strategy [6][28] - The strategic entry into the energy infrastructure sector is anticipated to significantly increase high-margin data analytics revenue and cash flow [27][28] - The company aims to leverage chemistry as a common value creation platform while expanding its data analytics capabilities [27][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing geopolitical and macroeconomic challenges affecting the commodities market but emphasized resilience and growth in market share [5][27] - The company remains cautiously optimistic about the chemistry business, anticipating potential commodity price volatility but viewing it as an opportunity to expand market share [18][66] Other Important Information - The company achieved zero lost time incidents in operations during the quarter [7] - The PowerTech assets generated $3,200,000 in revenues and contributed approximately $3,000,000 in gross profit despite operating for only two months of the quarter [19][20] Q&A Session Summary Question: Update on contracting additional PowerTech units to third parties - Management reported solid traction with five additional customers in the pilot phase for VariX monitoring, with expectations for the first smart filtration skid to be deployed soon [34] Question: Details on custody transfer locations and customer breadth - Management confirmed nine custody transfer locations are now fully commercial, with six more expected to convert, and highlighted ongoing pilot programs with eight to ten additional customers [38][40] Question: Sustainability of gross margins on PowerTech assets - Management indicated that while initial margins were strong, sustainability at 80% to 90% is a reasonable expectation moving forward [41][42] Question: Market size represented by PowerTech customers - Management noted that the five customers are split between oil and gas operations and energy infrastructure, with significant market potential [47] Question: Manufacturing capacity to meet demand - Management confirmed sufficient backlog and capacity to meet demand for PowerTech and custody transfer units, with streamlined processes in place [51][53] Question: Revenue potential from non-ProFrac customers - Management expects to see revenue from non-ProFrac customers in Q3, with initial VariX revenue anticipated to grow significantly in the back half of the year [60] Question: Outlook for the chemistry business - Management acknowledged potential softness in the chemistry business due to commodity price pressures but remains confident in proprietary technologies driving growth [66][68]

Financial Performance Highlights - Flotek Industries reported a 26% increase in revenue, reaching $58.4 million in 2Q25 compared to $46.2 million in 2Q24[12] - Gross profit increased by 57%, from $9.2 million in 2Q24 to $14.4 million in 2Q25[12] - Adjusted EBITDA increased by 113%, from $4.4 million in 2Q24 to $9.5 million in 2Q25[12] - Adjusted net income increased by 202%, from $2.0 million in 2Q24 to $6.0 million in 2Q25[12] Data Analytics Growth - Data Analytics revenues experienced a 189% increase compared to 2Q24[9, 13] - Service revenue within Data Analytics grew by 452% since 2Q24[25] - Power Services, part of Data Analytics, carried approximately 90% gross margin in 2Q25[33, 46] - The company expects $15 million in revenues from PWRtek in 2025, and over $27 million in 2026[27] Chemistry Technologies Performance - External Chemistry Technologies revenue grew by 38% year-over-year in 2Q25[13, 45, 46] - International chemistry revenue increased by 83% from $3.9 million in 2Q24[45] Future Outlook - The company projects total revenue for FY 2025 to be between $200 million and $220 million, representing a 12% increase compared to 2024[17] - Adjusted EBITDA for FY 2025 is guided to be between $34 million and $39 million, an 80% increase compared to 2024[17]

| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change | | --- | --- | --- | --- | --- | | EPS (Non-GAAP) | $0.16 | $0.14 | $0.06 | 167% | | Revenue (GAAP) | $58.4 million | $54.8 million | $46.2 million | 26% | | Gross Profit | $14.4 million | | $9.2 million | 57% | | Adjusted EBITDA (Non-GAAP) | $9.5 million | | $4.4 million | 113% | | Net Income (GAAP) | $1.8 million | | $2.0 million | -10% | Company Overview and Strategic Focus Flotek Industries operates in the upstream energy sector, supplying pr ...

Flotek Industries (FTK) came out with quarterly earnings of $0.16 per share, beating the Zacks Consensus Estimate of $0.13 per share. This compares to earnings of $0.06 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +23.08%. A quarter ago, it was expected that this oilfield services company would post earnings of $0.06 per share when it actually produced earnings of $0.17, delivering a surprise of +183.33%.Over the last four ...