Flotek Industries, Inc. · NYSE:FTK
Flotek Industries — Q3 2022 Earnings Presentation
28 slides from Flotek Industries's earnings presentation, Nov 9, 2022
Slide 1: November 2022 Investor Presentation
NOVEMBER 2022 Investor Presentation // NYSE: FTK Exhibit 99.2
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: Flotek Industries (FTK) Company Overview
FLOTEK INDUSTRIES (FTK) Technology-driven chemistry and data analytics company Founded: 1985 Employees: ~155 Countries with Clients: 15+ Corporate Headquarters: Houston Company Overview Energy Chemistry Technologies Sustainable stimulation chemistry to maximize production and minimize environmental
Slide 4: Our Vision And Mission
Our Vision And Mission 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 chemistry technology and digital analytics solutions. Value Proposition W
Slide 5: Strategic Priorities
Strategic Priorities Flawless Execution Exemplary safety and service delivery Capital-light Growth No new capital required to support robust growth Environmental Leadership Focus on protecting people, land, air, and water Investor Presentation / August 2022 // 5 Sustainable Revenue 10-year contract
Slide 6: Flawless Execution
Flawless Execution • ISO 9001, EPA, and FDA certification – no major findings • Maintained HSE regulatory compliance in the areas of: Air Permits, Storm Water Permits, Haz Mat Reporting, Haz Waste Reporting, OSHA Programs and Reporting. Flotek – HSE Metrics Year TRIR Average # of Employees Recordabl
Slide 7: Supportive Industry Fundamentals
100 150 200 250 300 350 400 Supportive Industry Fundamentals • 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 Increased Industry Stability – So Far This Cyc
Slide 8: ProFrac Partnership Benefits
Profrac Partnership Benefits • $2.1B in revenue backlog over 10 years • Structure of contract provides for predictability of cash flow • Contract provides industry endorsement and is not exclusive • Scale allows for greater cost efficiency through procurement • Friction reducers covered by a cost-pl
Slide 9: Gaining Market Share – Customer Consolidation
Gaining Market Share – Customer Consolidation Source: ProFrac ProFrac Strategy Supportive of Flotek Growth 44 Fleets by the end of 2022 November 1: ProFrac closes on acquisition of US Well Services (USWS) in all stock transaction Investor Presentation / August 2022 // 9
Slide 10: Gaining Market Share – Customer Consolidation
Gaining Market Share – Customer Consolidation Built-in revenue growth • ~286 average total NAM frac fleets in Q3 • Fully ramped ProFrac contract (30 fleets) translates to 10.5% market share • Served 16 ProFrac fleets on average in Q3 • FTK entitled to provide chemistry by volume on the greater of 30
Slide 11: Transactional Growth Managing for Rapid Growth
Transactional Growth Managing for Rapid Growth Investor Presentation / August 2022 // 11 Transactional revenue expansion continues to outpace frac fleet market • 10% growth compared to Q2 2022 • 44% growth compared to Q3 2021 Transactional business produces higher margins • Higher proportion of valu
Slide 12: Flotek Revenue Opportunity
Flotek Revenue Opportunity Managing for Rapid Growth Quarterly Consolidated Revenue Investor Presentation / August 2022 // 12 $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 Q1 2020A Q2 2020A Q3 2020A Q4 2020A Q1 2021A Q2 2021A Q3 2021A Q4 2021A Q1 2022A Q2 2022A Q3 2022A Q4 2022E
Slide 13: Chemical Portfolio Strategy – Margin Improvement
Chemical Portfolio Strategy – Margin Improvement Investor Presentation / August 2022 Reducing costs • Reduced personnel costs while reinvesting in revenue generating roles - net annualized cost savings of $1MM+ $- $10,000 $20,000 $30,000 $40,000 $50,000 2017 2018 2019 2020 2021 2022 (Budget) G&A R&D
Slide 14: Capital-light Growth
Capital-light 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 Low Asset Utilization Rate Means Minimal Capex Required For Growth 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 Natural Gas TAM = $1.1B Investor Presentation / August 2022 // 15 Natural Gas Crude Oil NGL Refined Product JP3 Total Addressable Market (TAM) = $1.3B Transmission Production Processing
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 Investor Presentation / August 2022 // 16 -80.0% -70.0% -60.0% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% Q1 2020A Q2 2020A Q3 2020A Q4 2020A Q1 2021A Q2 2021A Q3 2021A Q
Slide 17: Strong Balance Sheet
Strong Balance Sheet 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 warrants completed at a 20% premium to 30-day VWAP Real Estate Asset Optimization • Waller, TX:
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 performance through green chemistry and digital transformation solutions. • Our products are positioned to deliver value in an ESG-focused world. • We help our partners and customers enhance their l
Slide 19: Appendix
// Appendix // 19
Slide 20: Recent Financials: Statement of Operations
Recent Financials Unaudited Condensed Consolidated Statement of Operations (in thousands, except share data) // 20 Three Months Ended Nine Months Ended 9/30/2022 9/30/2021 6/30/2022 9/30/2022 9/30/2021 Revenue: Revenue from external customers $ 15,206 $ 8,847 $ 12,824 $ 38,412 $ 29,782 Revenue from
Slide 21: Unaudited Condensed Consolidated Balance Sheets
Unaudited Condensed Consolidated Balance Sheets (in thousands, except share data) // 21 September 30, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 8,508 $ 11,534 Restricted cash 100 1,790 Accounts receivable, net of allowance for doubtful accounts of $566 and $659 at Sep
Slide 22: Unaudited Condensed Consolidated Statements of Cash Flows
Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) // 22 Nine months ended September 30, 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: Change in fair value of contingent
Slide 23: Reconciliation of Non-GAAP Items and Non-Cash Items
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings (in thousands) // 23 Three Months Ended Nine Months Ended 9/30/2022 9/30/2021 6/30/2022 9/30/2022 9/30/2021 Net income (loss) $ (18,794) $ 509 $ 6,240 $ (23,278) $ (14,337) Interest expense 2,321 18 1,597 4,586 53 Inter
Slide 24: Proforma Share Count Calculation
PROFORMA SHARE COUNT CALCULATION // 24 Notes: 1) Proforma share count assumes maximum potential dilution. 2) Proforma share count excludes approximately 6MM treasury shares and shares reserved for equity compensation. Shares (MM) Current Shares Outstanding 78 Convertible Notes – First Tranche 36 Con
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