Flotek(US:FTK)2023-11-08 18:55Financial Data and Key Metrics Changes - The company reported positive adjusted EBITDA for the first time since Q3 2018, marking the ninth consecutive quarter of improvement [5][28] - Third quarter gross profit increased to $9 million compared to a gross loss of $2 million for the same period in 2022, with adjusted gross profit totaling $10 million [18][19] - Net income for Q3 was $1.3 million, a significant improvement from a net loss of $19 million in Q3 2022 [19] - Total revenues for Q3 were 4% higher year-over-year but down 6% sequentially due to market pullback in upstream drilling [35] Business Line Data and Key Metrics Changes - Transactional chemistry revenues grew 128% sequentially and over 250% annually, driven by the adoption of the Prescriptive Chemistry Management business model [11] - Data Analytics subscription-based revenue increased by 81% for the first nine months of 2023 compared to the prior year, with a 98% annualized retention rate [29] Market Data and Key Metrics Changes - The U.S. land rig count decreased by 19% and total frac fleets were down 12% from Q3 2022, indicating a broader market slowdown [31] - Despite the overall decline in drilling and completion activity, the company's impact was mitigated due to its differentiated chemistry and data technologies [31] Company Strategy and Development Direction - The company aims to capitalize on the demand for advanced chemistry and data solutions, with expectations for growth in various market verticals including industrial, geothermal, agricultural, solar, and hydrogen [15] - The corporate strategy is focused on maximizing production and return on investment for customers, leveraging differentiated technologies [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued demand for oilfield services in 2024 and beyond, emphasizing the need for long-term investments in production [15][32] - The company anticipates an approximately $27 million improvement in full-year 2023 adjusted gross profit compared to the previous year [51] Other Important Information - The company strengthened its liquidity with an asset-based loan, increasing credit availability from $10 million to $13.8 million [12][52] - The company completed a corporate office move, resulting in annualized savings of $1 million [12] Q&A Session Summary Question: Changes in fleet deployment and impact on gross margin - Management discussed the impact of fleet deployment changes, noting that the focus on gas-rich basins has improved gross margins [43][44] Question: Current backlog and pipeline opportunities - The company highlighted a diversified revenue stack with no single customer representing more than 8%, and almost 50% of Q3 revenue came from new customers [48] Question: Supply agreement with ProFrac - Management clarified that the supply agreement includes minimum annual chemistry purchase requirements, and expected shortfall payments positively impacted profitability [50]