TETRA Technologies(US:TTI)2022-11-01 19:19Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $135 million, with adjusted EBITDA of $18.6 million, reflecting a 75.5% increase in revenue and a 12% increase in EBITDA from Q2 2022 [10] - Adjusted EBITDA excluding unrealized losses was $19.1 million for the quarter, marking a 24% increase from $15 million in Q3 2021 [30] - Free cash flow was negative $9.8 million in Q3 2022, with expectations for total capital expenditures in the $40 million range for the year [32] Business Line Data and Key Metrics Changes - The energy services business grew revenue by 15% and EBITDA by 33% quarter-on-quarter [11] - Water and Flowback services generated revenue of $76 million, up 62% year-on-year and 15% quarter-on-quarter, with adjusted EBITDA of $13.2 million, marking a 158% increase year-on-year [15] - Completion fluids and products segment revenue was $59 million, a 22% increase year-on-year but a 21% decrease from Q2 2022 [19] Market Data and Key Metrics Changes - The company holds a 30% market share in completion fluids in the Gulf of Mexico, as reported in the Kimberlite Annual Completion Fluids and Wellbore Cleanup Tools Supplier Performance Report [20] - The offshore and deepwater markets are expected to continue improving, with a growing pipeline of completion fluids opportunities [21] Company Strategy and Development Direction - The company is focused on low carbon energy technologies and has executed exclusive technology agreements for recycling produced water [12] - A positive inferred resource report confirmed bromine and lithium brine resource estimates in Arkansas, with bromine estimated at 5.25 million tons and lithium at 234,000 tons of lithium carbonate equivalent [14] - The company aims to leverage its resources in Arkansas to meet the growing demand for critical minerals in energy storage markets [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from supply chain issues and inflation, particularly regarding raw material prices [25] - Despite short-term challenges, management is optimistic about generating positive momentum and expanding margins into 2023 [27] - The company expects to end the year with liquidity around $100 million and significant free cash flow generation in 2023 and 2024 [39] Other Important Information - The company has been in dialogue with the Department of Energy regarding grants and loans to support investments in critical minerals [38] - The company has significant federal tax loss carryforwards that can offset future profits, enhancing cash flow from operations [36] Q&A Session Summary Question: How do you see the bridge in the two segments between the third and fourth quarter? - Management expects the onshore business to continue performing well, but a shift of revenue from Eos to 2023 will impact Q4 results [46] Question: Is the shift from Eos a sequential drop or just not growth? - It will be a sequential decline [50] Question: How do you balance CapEx versus the need to generate free cash and reduce leverage? - The company plans to generate free cash flow to fund initial bromine investments while maintaining capacity for future investments [52] Question: What is the update on the Finland calcium chloride plant? - The plant is operating at 70-80% capacity and is expected to reach full production by the second quarter of 2023 [56] Question: What are the expectations for PureFlow sales in the first half of next year? - Sales growth is anticipated, but specifics will depend on Eos's guidance [68] Question: What is the outlook for potential calcium chloride sales in light of the Inflation Reduction Act? - Revenue opportunities from carbon capture are expected to materialize in late 2023 or 2024 [70]