Flotek Industries, Inc. · NYSE:FTK
Flotek Industries — Q3 2022 Earnings Presentation
28 slides from Flotek Industries's earnings presentation, November 2022
Slide 1: Investor Presentation
NOVEMBER 2022 Investor Presentation // NYSE: FTK
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements set forth in this presentation constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Flotek Industries, Inc.’s business, financial conditio
Slide 3: Company Overview
Company Overview FLOTEK INDUSTRIES (FTK) Technology-driven chemistry and data analytics company Founded: 1985 Marlow, OK Raceland, LA Houston, TX (HQ) Monahans, TX Employees: ~155 Abu Dhabi, Countries with Clients: 15+ UAE Headquarters Corporate Headquarters: Houston Offices Chemical Technologies Da
Slide 4: Our Vision And Mission
Our Vision And Mission Sustainable Chemistry & Data Solutions Collaborative Partnerships Our Vision Flotek Industries, Inc. creates solutions to reduce the environmental impact of energy on air, water, land and people. Our Mission To be the collaborative ESG partner of choice for sustainable chemist
Slide 5: Strategic Priorities
Strategic Priorities Capital-light Growth Flawless Execution No new capital required to support Exemplary safety and service delivery robust growth Sustainable Revenue Strong Balance Sheet 10-year contract with guaranteed Low debt balance positions company minimum of $2B+ to prosper through the cycl
Slide 6: Flawless Execution
Flawless Execution Safety is Priority #1 Flotek – HSE Metrics Average Recordable Lost Time Restricted DART Auto Year TRIR # of Employees Injuries Days Days (Days Away) Accidents • ISO 9001, EPA, and FDA certification – no 2018 0.963 357 5 180 0 0.385 2 major findings 2019 0.372 235 1 0 0 0.0 1 • Mai
Slide 7: Supportive Industry Fundamentals
Supportive Industry Fundamentals Increased Industry Stability – So Far This Cycle is Different • E&P focus on production stability and margin, not growth and market share • Capital discipline has been resilient across the value chain • Focus on ROIC and returning capital to shareholders Macro-enviro
Slide 8: Profrac Partnership Benefits
Profrac Partnership Benefits ProFrac Contract Proves FTK is Industry’s Collaborative Partner of Choice ProFrac Projected Contract Revenue 250 • $2.1B in revenue backlog over 10 years • Structure of contract provides 200 for predictability of cash flow • Contract provides industry endorsement and 150
Slide 9: Gaining Market Share – Customer Consolidation
Gaining Market Share – Customer Consolidation ProFrac Strategy Supportive of Flotek Growth 44 Fleets by the end of 2022 November 1: ProFrac closes on acquisition of US Well Source: ProFrac Services (USWS) in all stock transaction Investor Presentation / August 2022 // 9
Slide 10: Gaining Market Share – Customer Consolidation
Gaining Market Share – Customer Consolidation Market Share by Fleet Built-in revenue growth Current North America Frac Fleet • ~286 average total NAM frac fleets in Q3 Other Halliburton • Fully ramped ProFrac contract (30 fleets) translates to 10.5% market share • Served 16 ProFrac fleets on average
Slide 11: Transactional Growth
Transactional Growth Managing for Rapid Growth Q3 2022 Revenue Breakdown Transactional revenue expansion continues to outpace frac fleet market Transactional • 10% growth compared to Q2 2022 • 44% growth compared to Q3 2021 Transactional business produces higher margins • Higher proportion of value-
Slide 12: Flotek Revenue Opportunity
Flotek Revenue Opportunity Managing for Rapid Growth Quarterly Consolidated Revenue $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $- Q1 2020A Q2 2020A Q3 2020A Q4 2020A Q1 2021A Q2 2021A Q3 2021A Q4 2021A Q1 2022A Q2 2022A Q3 2022A Q4 2022E Investor Presentation / August 2022 // 12
Slide 13: Chemical Portfolio Strategy – Margin Improvement
Chemical Portfolio Strategy – Margin Improvement Multiple Opportunities to Drive Improved Margins COGS are the majority of cost Top Quartile SG&A (% of Revenue) Locked-in positive margin on industry Reducing costs loss-leading friction reducers • Reduced personnel costs while reinvesting in revenue
Slide 14: Capital-light Growth
Capital-light Growth Low Asset Utilization Rate Means Minimal Capex Required For Growth Marlow Liquid Blending Facility • Capacity ~ 60MM gallons/year • 35 bulk storage tanks: 755k gallons • Heated bulk storage: 195k gallons • Ambient bulk storage: 560k gallons Investor Presentation / August 2022 //
Slide 15: JP3 Gaining Traction
JP3 Gaining Traction Q3 agreement to provide 20 Verax® analyzers to ProFrac increases business momentum JP3 Total Addressable Market (TAM) = $1.3B JP3 Natural Gas TAM = $1.1B Natural Gas Crude Oil NGL Refined Product Transmission Production Processing Investor Presentation / August 2022 // 15
Slide 16: Path to Positive Adjusted EBITDA Margin
Path to Positive Adjusted EBITDA Margin Revenue Growth + Expense Management + Capital Light Growth = Positive Adjusted EBITDA Margin Consistently improving Adjusted EBITDA margin over past 5 quarters provides evidence of progress toward positive margins 2022 Quarterly Adjusted EBITDA Margin 0.0% -10
Slide 17: Strong Balance Sheet
Strong Balance Sheet Taking decisive action to preserve balance sheet strength and liquidity to weather all cycles Cash Balance • November 8th, 2022 – $11.1MM • September 30th, 2022 – $8.6MM ProFrac Equity Investment • ProFrac invested $19.5MM in Flotek pre-funded warrants • Purchase of pre-funded w
Slide 18: Our Solutions: Accelerating ESG Goals For Our Customers
Our Solutions: Accelerating ESG Goals For Our Customers Our strategy is to improve our customers’ ESG Flotek Green Chemistry performance through green chemistry and digital transformation solutions. High-performance green chemistry Bio-based chemistry portfolio reduces liabilities in the event of •
Slide 19: Appendix
// Appendix // 19
Slide 20: Recent Financials
Three Months Ended Nine Months Ended Recent Financials 9/30/2022 9/30/2021 6/30/2022 9/30/2022 9/30/2021 Revenue: Unaudited Condensed Consolidated Revenue from external customers $ 15,206 30,417 $ 8,847 1,332 $ 12,824 $ 38,412 $ 29,782 Statement of Operations Revenue from related party 16,549 49,462
Slide 21: Unaudited Condensed Consolidated Balance Sheets
September 30, 2022 December 31, 2021 Unaudited Condensed ASSETS Current assets: Cash and cash equivalents $ 8,508 $ 11,534 Restricted cash 100 1,790 Consolidated Balance Accounts receivable, net of allowance for doubtful accounts of $566 17,597 and $659 at September 30, 2022 and December 31, 2021, 1
Slide 22: Unaudited Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, Unaudited Condensed 2022 2021 Cash flows from operating activities: Net loss $ (23,278) $ (14,337) Adjustments to reconcile net loss to net cash used in operating activities: Consolidated Statements Change in fair value of contingent consideration (106) (701) Change i
Slide 23: Unaudited Reconciliation of Non-GAAP Items
Unaudited Three Months Ended 9/30/2022 9/30/2021 6/30/2022 Nine Months Ended 9/30/2022 9/30/2021 Reconciliation of Net income (loss) $ (18,794) $ 509 $ 6,240 $ (23,278) $ (14,337) Non-GAAP Items Interest expense 2,321 18 1,597 4,586 53 Interest income — (1) — — (9) Income tax (benefit) expense 7 3 9
Slide 24: Proforma Share Count Calculation
PROFORMA SHARE COUNT CALCULATION Shares (MM) Current Shares Outstanding 78 Convertible Notes – First Tranche 36 Convertible Notes – Second Tranche 63 Pre-funded Warrants 13 Unvested Equity Awards 7 Total Proforma Diluted Shares 197 Notes: 1) Proforma share count assumes maximum potential dilution. 2
Slide 25: Accounting for Convertible Notes
ACCOUNTING FOR CONVERTIBLE NOTES • Under ASC 718 (stock compensation), the contract notes are recorded at fair value upon issuance and remeasured to fair value quarterly with changes in fair value recorded as gains or losses. • Fair value is based on 3rd party valuation from Andersen and driven main
Slide 26: Accounting for Contract Assets
ACCOUNTING FOR CONTRACT ASSETS • Each quarter we will book non-cash contract asset amortization (revenue reduction) based on the value of the convertible notes issued to ProFrac amortized over the 10-year life of the Supply Agreement. • Amortization is based on a ten-year terms-based contract foreca
Slide 27: Accounting for Pre-Funded Warrants
ACCOUNTING FOR PRE-FUNDED WARRANTS • Pre-funded warrants issued on June 21, 2022 to Profrac for $19.5 million cash • Net cash proceeds of $18.33 million • Shareholder vote required to exercise • Exercise price and fee of $4,500,000 for 13,104,839 shares will be paid by Profrac when exercised (effect
Slide 28: Investor Contact
Investor Contact Bernie Colson SVP – Corporate Development & Sustainability investors@flotekind.com (713) 726-5322 // NYSE: FTK