TETRA Technologies(US:TTI)2022-05-02 21:24markdown [PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the quarter ended March 31, 2022, show a significant year-over-year revenue increase to $130.0 million from $77.3 million, with net income attributable to TETRA stockholders decreasing to $7.7 million from $108.7 million due to a prior-year gain from discontinued operations, while total assets increased to $406.8 million and cash from operations remained stable at $5.9 million [Consolidated Statements of Operations](index=3&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2022, total revenues increased by 68.2% year-over-year to $130.0 million, gross profit surged to $32.4 million from $7.9 million, and income from continuing operations was $7.7 million, a significant turnaround from a loss of $11.9 million in the prior-year period, while net income attributable to stockholders was $7.7 million, compared to $108.7 million in Q1 2021, which was inflated by a $121.0 million gain from discontinued operations Consolidated Statements of Operations Highlights (In Thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Total Revenues** | $130,037 | $77,324 | | **Gross Profit** | $32,420 | $7,869 | | **Income (loss) from continuing operations** | $7,734 | $(11,943) | | **(Loss) income from discontinued operations** | $(15) | $120,990 | | **Net income attributable to TETRA stockholders** | $7,720 | $108,714 | | **Diluted EPS from continuing operations** | $0.06 | $(0.10) | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income attributable to TETRA stockholders was $7.9 million for the first quarter of 2022, a significant decrease from $105.9 million in the same period of 2021, with the 2021 figure largely driven by the high net income from discontinued operations Consolidated Comprehensive Income (In Thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net Income | $7,719 | $109,047 | | Comprehensive Income | $7,911 | $106,268 | | **Comprehensive income attributable to TETRA stockholders** | **$7,912** | **$105,935** | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets were $406.8 million, a slight increase from $398.3 million at year-end 2021, total liabilities remained stable at $299.9 million, and total TETRA stockholders' equity increased to $108.1 million from $99.7 million at the end of 2021, primarily due to net income for the quarter Balance Sheet Summary (In Thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $217,247 | $210,390 | | **Total Assets** | **$406,768** | **$398,266** | | **Total Current Liabilities** | $97,038 | $97,142 | | **Total Liabilities** | $299,866 | $299,703 | | **Total TETRA Stockholders' Equity** | **$108,054** | **$99,704** | [Consolidated Statements of Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Equity) Total TETRA stockholders' equity increased from $99.7 million at the end of 2021 to $108.1 million as of March 31, 2022, primarily driven by a net income of $7.7 million for the quarter - Equity increased by **$8.4 million** during Q1 2022, moving from **$98.6 million** to **$106.9 million**. This was mainly due to **$7.7 million** in net income and **$1.1 million** in equity compensation expense[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first quarter of 2022, net cash provided by operating activities was $5.9 million, similar to the prior year, net cash used in investing activities was $5.6 million, mainly for property, plant, and equipment purchases, and financing activities provided $0.7 million in cash, a significant shift from the $29.9 million used in Q1 2021 for debt repayment Consolidated Cash Flows (In Thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $5,934 | $5,825 | | **Net cash used in investing activities** | $(5,592) | $(4,301) | | **Net cash provided by (used in) financing activities** | $722 | $(29,887) | | **Increase (decrease) in cash** | $1,300 | $(29,666) | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's structure with two segments: Completion Fluids & Products and Water & Flowback Services, a key event was the Q1 2021 sale of the CSI Compressco general partner, resulting in a $120.6 million gain reported in discontinued operations, revenue is disaggregated by segment and geography, with the U.S. accounting for the majority of sales, and the company details its debt structure, including credit facilities in the U.S., Sweden, and Finland, confirming compliance with all covenants - The company operates through two segments: **Completion Fluids & Products Division** and **Water & Flowback Services Division**[23](index=23&type=chunk) - In Q1 2021, the company sold the general partner of CSI Compressco (the "GP Sale"), resulting in a primarily non-cash accounting gain of **$120.6 million**, which is included in income from discontinued operations[36](index=36&type=chunk) Revenue by Geography (Q1 2022 vs Q1 2021, In Thousands) | Geography | Q1 2022 Revenue | Q1 2021 Revenue | | :--- | :--- | :--- | | United States | $91,606 | $53,528 | | International | $38,431 | $23,796 | | **Total** | **$130,037** | **$77,324** | Long-Term Debt Summary (as of March 31, 2022, In Thousands) | Facility | Scheduled Maturity | Amount Outstanding | | :--- | :--- | :--- | | Swedish Credit Facility | Dec 31, 2022 | $1,533 | | Asset-based credit agreement | May 31, 2025 | — | | Term credit agreement | Sep 10, 2025 | $152,531 | | **Total Debt** | | **$154,064** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the strong Q1 2022 performance to upward trends in customer activity driven by higher oil and gas prices, with revenue of $130.0 million comparable to pre-pandemic levels, the Completion Fluids & Products division benefited from higher activity in the Gulf of Mexico and international markets, while the Water & Flowback Services division saw growth from increased customer activity and price recovery, the company is actively pursuing low-carbon energy initiatives, including drilling an exploration well in Arkansas for bromine and lithium, and liquidity remains strong at $95.3 million - Customer activity trended upward in Q1 2022, with oil prices averaging over **$95 per barrel**. Consolidated revenue of **$130.0 million** is comparable to pre-pandemic Q1 2020[63](index=63&type=chunk) - The company is pursuing **low-carbon energy initiatives**, leveraging its bromine and lithium assets. An exploration well was completed in Arkansas during Q1 2022 to gather fluid samples for bromine and lithium analysis[66](index=66&type=chunk) - The Russia-Ukraine conflict has caused **supply constraints** for hydrochloric acid from a European supplier, impacting calcium chloride production in Finland. The financial impact in Q1 was not significant but could increase[64](index=64&type=chunk) - As of the end of Q1 2022, the company's **liquidity was $95.3 million**, defined as unrestricted cash plus availability under its credit facilities[105](index=105&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Comparing Q1 2022 to Q4 2021, revenues grew 14.9% to $130.0 million and gross profit surged 69.0% to $32.4 million, aided by a $3.8 million insurance settlement, year-over-year, Q1 2022 revenue increased 68.2% from $77.3 million in Q1 2021, with gross profit increasing over 300%, and both divisions showed significant YoY growth, with Water & Flowback Services turning a gross loss into a profit Q1 2022 vs Q4 2021 Consolidated Comparison (In Thousands) | Metric | Q1 2022 | Q4 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $130,037 | $113,148 | 14.9% | | Gross Profit | $32,420 | $19,188 | 69.0% | | Gross Margin | 24.9% | 17.0% | | Q1 2022 vs Q1 2021 Consolidated Comparison (In Thousands) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $130,037 | $77,324 | 68.2% | | Gross Profit | $32,420 | $7,869 | 312.0% | | Gross Margin | 24.9% | 10.2% | | - Consolidated gross profit for Q1 2022 was boosted by a **$3.8 million insurance settlement** from damage to the Lake Charles facility during Hurricane Laura in 2020[71](index=71&type=chunk) [Non-GAAP Financial Measures](index=25&type=section&id=Non-GAAP%20Financial%20Measures) The company uses Adjusted EBITDA as a primary management tool to evaluate financial performance, with total Adjusted EBITDA for Q1 2022 at $20.5 million (15.7% of revenue), a significant increase from $13.1 million (11.6% of revenue) in Q4 2021 and $9.0 million (11.6% of revenue) in Q1 2021, driven by higher earnings across both segments Adjusted EBITDA Reconciliation (In Thousands) | Period | Completion Fluids & Products | Water & Flowback Services | Total Adjusted EBITDA | Adjusted EBITDA Margin | | :--- | :--- | :--- | :--- | :--- | | **Q1 2022** | $19,097 | $8,225 | **$20,477** | **15.7%** | | **Q4 2021** | $16,789 | $6,886 | **$13,074** | **11.6%** | | **Q1 2021** | $11,039 | $897 | **$8,981** | **11.6%** | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a solid liquidity position of $95.3 million as of March 31, 2022, consisting of cash and credit facility availability, capital expenditures in Q1 2022 were $9.3 million, primarily for deploying additional SandStorm units, and the company is also investing in its lithium and bromine exploration targets in Arkansas, incurring $1.9 million in Q1 2022 to drill an exploration well, with debt management including significant repayments on the term credit agreement in 2021 - Total liquidity at the end of Q1 2022 was **$95.3 million**, comprising unrestricted cash plus availability under the ABL and Swedish Credit Facilities[105](index=105&type=chunk) - Capital expenditures were **$9.3 million** in Q1 2022, with **$7.4 million** spent by the Water & Flowback Services Division, mainly on SandStorm units[108](index=108&type=chunk) - The company incurred **$1.9 million** in Q1 2022 to drill an Arkansas exploration well for bromine and lithium analysis and is proceeding with a preliminary economic assessment (PEA)[112](index=112&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to interest rate risk as borrowings under its ABL and Term Credit Agreements are tied to floating rates like LIBOR, with the weighted average interest rate on the $163.1 million term loan at 7.25% as of March 31, 2022, and also faces foreign currency exchange rate risk from its international operations, particularly with the Euro, but had no outstanding hedging contracts at the end of the quarter - The company is exposed to **interest rate risk** on its ABL Credit Agreement and Term Credit Agreement, which bear interest at rates based on LIBOR[130](index=130&type=chunk) - The company is exposed to **foreign currency exchange rate fluctuations**, primarily with the Euro, but did not have any foreign currency exchange contracts outstanding as of March 31, 2022[132](index=132&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of March 31, 2022[133](index=133&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[134](index=134&type=chunk) [PART II—OTHER INFORMATION](index=32&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) There have been no material developments in the company's legal proceedings during the quarter ended March 31, 2022, with further details available in the 2021 Annual Report - **No material developments in legal proceedings** occurred during the quarter. For more information, refer to the 2021 Annual Report and Note 6 of the financial statements[53](index=53&type=chunk)[136](index=136&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company's operations continue to be subject to the risk factors that were previously disclosed in its 2021 Annual Report on Form 10-K - The company is subject to the **risk factors disclosed in its 2021 Annual Report**, with no new factors reported in this filing[137](index=137&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any of its equity securities during the first quarter of 2022, and the previously authorized $20 million stock repurchase program from January 2004 was terminated by the Board of Directors on October 28, 2021 - **No shares were repurchased** during the first quarter of 2022[139](index=139&type=chunk) - The Board of Directors **terminated the company's stock repurchase program** on October 28, 2021[139](index=139&type=chunk) [Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[140](index=140&type=chunk) [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - None[141](index=141&type=chunk) [Other Information](index=32&type=section&id=Item%205.%20Other%20Information) The company reported no other information - None[142](index=142&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL data files - Exhibits filed include **certifications pursuant to the Sarbanes-Oxley Act of 2002** and XBRL data files[144](index=144&type=chunk)[146](index=146&type=chunk)