Flotek(US:FTK)2020-05-19 19:50Financial Data and Key Metrics Changes - Revenue for Q1 2020 was $19.4 million, down from $43.3 million in the same period last year, but in line with the previous quarter's $19.5 million [35] - ECT operating expenses decreased to $22.8 million in Q1 2020 from $44 million in Q1 2019, reflecting a 48% reduction year-over-year [35] - Loss from continuing operations was $64 million, or $1.07 loss per diluted share, compared to a loss of $15.2 million, or $0.26 loss per diluted share in the prior year [37] - Adjusted EBITDA for Q1 was a loss of $6.5 million, an improvement from last year's loss of $7.6 million [38] - Cash and equivalents as of March 31, 2020, were $80.3 million, with no debt outstanding [39] Business Line Data and Key Metrics Changes - The acquisition of JP3, a high-growth data and analytics technology company, diversifies Flotek's business mix and is expected to enhance profitability [10][12] - JP3 has generated a revenue growth rate of 58% over the past four years, with a significant addressable market of about $1 billion annually in the U.S. [13] Market Data and Key Metrics Changes - The oil and gas industry is experiencing significant disruption due to COVID-19, leading to an oversupply of oil and reduced demand [7][28] - Management noted stabilization in customer activity as oil prices have recovered from extremely low levels, although the market remains challenging [44] Company Strategy and Development Direction - The company aims to reduce dependence on rig counts and the U.S. unconventional market while establishing a presence in the digital transformation market [9] - Cost measures have been implemented to enhance financial flexibility, including salary reductions for executives and board members, headcount reductions, and cuts in discretionary spending [28] - The focus is on derisking the business and identifying additional cost reduction opportunities to regain profitability [29] Management Comments on Operating Environment and Future Outlook - Management remains committed to achieving breakeven despite the challenging market conditions and has taken significant cost-cutting measures [44] - The company anticipates that the midstream and downstream markets will remain strong and less volatile compared to drilling activities [47] - Future growth is expected to come from enhancing oil recovery and leveraging JP3's data analytics capabilities [72] Other Important Information - The company produced approximately 12,000 gallons of hand sanitizer to donate to various community organizations during the pandemic [33] - Plans to consolidate office spaces in Houston are expected to save approximately $900,000 annually [41] Q&A Session Summary Question: Insights on Q2 and Q3 outlook and cash management - Management is focused on achieving breakeven and is managing costs tightly, with no expected increase in market activity in Q2 [44] Question: Impact of COVID-19 on JP3's business - JP3 has experienced some slowdown but remains strong with opportunities for growth, as it is less impacted than drilling activities [46] Question: Capital allocation priorities - The focus is on growth opportunities rather than stock buybacks, with an emphasis on acquiring high-growth companies [53] Question: Growth potential of JP3 - JP3 is viewed as a capital-light investment opportunity with significant growth potential, aiming to enhance sales efforts [50] Question: Market share growth in existing wells - The company is focusing on enhanced oil recovery in existing wells, which presents opportunities for growth even in a challenging market [72]