TETRA Technologies(US:TTI)2024-02-28 19:09Financial Data and Key Metrics Changes - The company achieved a full year 2023 adjusted EBITDA of $106 million, which grew by 37% from 2022 and was nearly three times higher than that of 2021 [40] - Adjusted free cash flow for 2023 was $41.1 million, representing a 61.6% increase compared to 2022, with a conversion rate of approximately 40% of adjusted EBITDA to adjusted free cash flow [10][21] - The adjusted EBITDA margin increased by 300 basis points year-over-year to 17.1% [21][52] Business Line Data and Key Metrics Changes - Completion Fluids & Products revenue for the full year was $313 million, the highest since 2015, with a year-over-year growth of $40 million or 15% [4][11] - The Water & Flowback Services segment saw a revenue increase of $33 million or 12%, with adjusted EBITDA up $10 million or 23% [15] - The industrial chemicals business achieved its highest revenue and adjusted EBITDA in history, with a revenue growth of over 18% year-over-year [42] Market Data and Key Metrics Changes - The company reported a strong market position in Northern Europe and the U.S., providing stable markets with predictable revenue and earnings [5] - Offshore projects attributed to Energy Services increased total revenue by 11% year-over-year, with expectations for continued double-digit growth in 2024 [43][118] - Marketed utilization is expected to peak at 91% in 2028 due to steady growth in project development activity [44] Company Strategy and Development Direction - The company is focusing on strategic partnerships and investments in high-growth opportunities, particularly in lithium and bromine projects in Arkansas [24][50] - The company plans to shift growth capital towards Arkansas and produced water beneficial reuse projects while maintaining a focus on returns rather than additional growth [17][54] - The company anticipates generating revenue and EBITDA from the first desalination project in the second half of 2024, which will be a catalyst for growth [56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a strong recovery in activity for the first half of 2024, expecting another year of growth despite year-end slowdowns in 2023 [2] - The company expects 2024 revenue, adjusted EBITDA, and free cash flow to exceed 2023 levels, driven by electrolyte sales and desalination projects [55][131] - Management highlighted the importance of regulatory engagement regarding produced water solutions, indicating a collaborative approach with agencies [123][134] Other Important Information - The company ended 2023 with a net leverage ratio of 1.1x and a 27% reduction in net debt [52] - Liquidity as of February 26 was reported at $212 million, including a $35 million delayed draw feature for the bromine project [22] - The company is in advanced negotiations for a beneficial reuse project with a major U.S. oil producer and expects to deploy its first commercial project in the second half of 2024 [18][35] Q&A Session Summary Question: Timing of CapEx requirements for the bromine project - Management indicated that detailed engineering design and civil work for the bromine project will begin this year, with significant construction expected to start next year [30][63] Question: Next steps for investors regarding the bromine project - Management discussed ongoing evaluations and the potential for significant synergies between the bromine and lithium projects [100][152] Question: Growth expectations for the Water business - Management expressed confidence in achieving mid-single-digit growth in the Water business, supported by technology and market share gains [78][121] Question: Desalination project specifications and ownership - Management confirmed ownership of the desalination technology and equipment, with a partner handling civil works [89] Question: Lithium project revenue expectations - Management anticipates first revenue from lithium projects in late 2026 or early 2027, with significant resource potential identified [141][102]