Flotek Industries, Inc.

Ladies and gentlemen, greetings and welcome to Flowtech Industries' second quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode, and a question and answer session will follow management's prepared remarks. If anyone should require operator assistance during today's conference, simply press star zero on your telephone keypad. As a reminder, today's meeting is being recorded. It is now my pleasure to introduce Danielle Allen, Senior Vice President and Chief of Staff for Flowtech, Welcome, Danielle. Good morning.

Thank you, and good morning, everyone. We appreciate your participation. Joining me today and participating on the call are John Gibson, Chairman, Chief Executive Officer and President, Michael Borton, Chief Financial Officer, King Bain-Coyd, President of Global Business, and Ryan Ezell, President of Chemistry Technologies. On today's call, we will first provide prepared remarks concerning our business and results for the quarter. Following that we will answer any questions you may have. Yesterday we released our earnings announcement for the second quarter which is available on our website. Please note we have also posted a supplemental presentation on our website. Today's call is being webcast and a replay will also be available on our website. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward looking statements. Forward looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Also, please refer to our reconciliations provided in our earnings press release as management may discuss non-GAAP metrics on this call. With that, I will now turn it over to John.

Thanks very much, Danielle. As we face these extraordinary times together as a company and as a country, I'm extremely grateful to our employees for their work ethic, commitment, and can-do ingenuity. Prioritizing the safety of our employees, customers, and the communities where we work is our top priority, and we continue to focus on providing a safe working environment for all under very tough circumstances. We're fortunate to be optimally positioned in this market given our strong financial position with little debt and a healthy cash position. Flowtech's highly focused on fostering an entrepreneurial culture compromised with talented, highly motivated people with impeccable integrity who will allow us to move ahead with speed and focus. These characteristics of Flowtech are extremely important to position our company for the future. As such, I'd like to provide updates on our leadership team and then go into further detail on the macro environment and the actions Flowtech is taking, particularly in terms of new growth opportunities. Now, management changes. The most rewarding aspect of my job is identifying and developing leaders who can build a differentiated, best-in-class business that leverage extraordinary opportunity that we have before us. And we have that team. This is a team that is entrepreneurial, who can work together to bring value to all of our stakeholders during one of the most challenging environments in history. So I'm excited to introduce new additions to our leadership team are helping to position Flowtech for future growth. First, I'm really excited to have Mike Borden join as Chief Financial Officer. Mike is a strong financial and operational leader who is highly experienced in building and accelerating growth for digital and software as a service technology companies. Another great strength of Mike is cost management. And I think that you'll see he's very aligned with how this company is controlling the controllables. Next, we're pleased that Tang Bang Coyd joins us in the newly created role of President of Global Business, where he oversees our domestic and international business development strategy for both divisions of Flowtech. One of Coyd's key responsibilities is to accelerate the transition of JP3's data as a service and open doors to new markets. I really hope you'll take the time to review his credentials as they speak for themselves. It has been a joy to work with Tang Bang Coed in the past as well, throughout the world. It's also a great pleasure to work with Mike and Coed again as we all work together at Landmark and then Halliburton, and I can say from experience, both of them are battle-tested and their track records are impeccable. Next, I'm thrilled to announce the promotion of Ryan Azell to the newly created role as President of the Chemistry Technologies. Ryan was most recently Senior Vice President of Operations at the company, and in the time I've known Ryan, I've witnessed his determined leadership, relentless focus on operational excellence and profitability, as well as his deep knowledge of flow tech speciality chemistry, and has a Ph.D. in chemistry as well. The one thing that I should say about him, too, is a tremendous passion for his employees, and he's been continuously getting up to the facilities and visiting with the people during this tough time and demonstrating leadership on the ground. I really appreciate Ryan. He's truly an asset, and I have full confidence in his ability to lead our chemistry technology segment. I'm happy to introduce each of them to you and their new roles, and you'll be hearing directly from them in the call. They round out a very strong management team. Lastly, an important development on our board. This morning, we announced that Harsha Agadi has joined Clotec as director and chair of our compensation committee. He brings incredible experience gained from serving as the senior executive of Fortune 50 companies and marquee global brands like Crawford & Company, Brindley's Ice Cream Corporation, Church's Chicken, And Little Caesars Enterprises. My favorite, of course, was Crystal growing up in the South. There are several of us here that we hope that he can introduce us there, which every good Southern boy knows really well. Perhaps not well known to some of you on the West Coast. But he's energetic and a passionate leader who cares deeply about the companies and organizations with which he's affiliated. And we launched our sanitizer business. We're really grateful for his depth of knowledge in that market and the insights and relationships within key market segments who need these high-quality products. And we look forward to leveraging that network from Harsha. Now let's go to probably the least pleasant part of anybody's talk this quarter, and that's the macro environment. Throughout this earnings season, you've undoubtedly heard about the extraordinary challenges that the oil and gas market has experienced, resulting from demand destruction due to response by governments to COVID-19 and oversupply in the market, which was exacerbated by the Saudi-Russia price wars. We've seen prices pre-fall to levels unforeseen with gasoline demand falling by approximately 45% in April alone. U.S. refinery utilization dropping below 70% caused by sharp reductions in travel. And by early May, operators announcing budget reductions of more than 40%, with some cutting even more dramatically. I'll not spend too much time telling you what you already know, but it was an incredibly difficult quarter, one of the most challenging that I've witnessed in my career. However, in this environment, you have to seek out opportunities for improvement and control what you can control. And that's been our team's focus. We're certainly not immune to the macro environment conditions and to the challenges prevented by COVID. However, we are adapting to our customers' needs by focusing on areas to diversify our business away from rig count and drill bits and capturing distinctive opportunities in the digital transformation of the energy industry and leveraging our strong speciality chemical capabilities to produce FDA-registered, high-quality sanitizers, and surface cleaners, both of which are complementary to Flowtech's industry-leading chemistry applications and are permanently domestically sourced supply for these needed products. Liquidity and the cost measures I'd like to address as well. As we position ourselves for the future, we've also taken quick and decisive actions guided by our strategic pillars to preserve our liquidity and financial flexibility. We have a healthy balance sheet with little debt outstanding. They've been disciplined in our approach to our capital allocation. In fact, we've evaluated several inorganic opportunities over the past several months. and we passed on multiple acquisition opportunities that looked appealing and were complimentary to our business, but would have required us to take on additional debt, in some cases substantial. So we passed on all of these, and in hindsight, that seems to be the right decision. We continue to take further steps to strengthen our balance sheet position, and have called out numerous initiatives ranging from a reduction in workforce, to lowering compensation, to cutting back discretionary spending. In addition, we're focused on inventory rationalization and believe we will have opportunities to improve our liquidity as we go forward. Mike will provide a more detailed discussion on liquidity shortly. Digital transformation. Now, this is a topic you see in almost every research report. Energy customers are increasingly looking to access actionable, real-time data and insights that have an impactful business outcome, which really is a euphemism for improved profitability. As noted in the recent in-depth study by Evercore from June 2020 on digital transformation, more than 90% of energy executives surveyed believe that technology and digital transformation will play a critical role in improving their profitability, providing cost savings, and they are noted as key drivers for adoption to improve their business. With our recent acquisition of JP3, an innovative data technology company, we're helping our customers accelerate their digital transformation through real-time composition and valuation data necessary to manage crude oil and natural gas processing in the digital age. The acquisition of JP3 provides compelling strategic and financial benefits as it diversifies Flowtech's business across all segments of the hydrocarbon value chain, from the wellhead to refined product terminals. As we talked about at the time of purchase, JP3 has seen a 58% CAGR over the past four years, and it helps to insulate us from the volatility of rig count. However, it has not been immune to the challenging market conditions, particularly sharp declines seen in refined fuel product demand. As a result, its top-line revenue was significantly impacted in Q2 by a near halt of its clients' capital spending. Despite the difficult market conditions, JP3 is maintaining its customer base, winning both repeat business from existing customers and securing several orders from new customers. We are confident that there's a strong market need for JP3's unique data offerings, given a deep customer loyalty that we have, and are confident that as oil and gas demand ramps up, we expect to see a corresponding rebound in our sales. And a key reason why I recruited Coy. Now, I'm going to turn it over to him to share more about the growth opportunities here at Flowtech. Great pleasure to introduce you to Pang Bang Coy, president of the global business.

Thank you, John. Thank you, John. It's a great pleasure to be here and to work with John again. I've been involved in digital solutions in the oil and gas industry for over 30 years, and for the past 10 years, I was leading a company that helped midstream oil and gas companies enhance their business operations through digital transformation. With JP3, we have a unique and differentiated game-changing technology that I believe will transform the oil and gas companies through the continuous collection and analysis of real-time data. GP3 has 22 patents with another 16 patents pending. Since joining about a month ago, I have had the opportunity to speak to several existing customers and also a number of potential customers. Their responses have been overwhelmingly positive. The various use cases that GP3 technology has been applied created significant value for our customers. One example of such value creation is the reduction of refined products transmits for pipelines and terminal operators, which we have since then signed a data and as a service cooperation agreement with Phillips 66. As part of this agreement, we will jointly market such services to all the refined fuel transportation operators. Phillips 66 has already started the ball rolling on this cooperation and has arranged meetings with several refined fuel pipeline operators. It's great to have our customers for us, and that is a testimony to the value that our technology delivers. Other examples of use cases include crude blending and composition tracking. In the area of composition tracking, we are enhancing our offering, the capabilities to measure CO2 to meet the need for natural gas customer need transfer requirements, and to support our customers' ESG efforts. As we have previously discussed, JPTree's focus in the past has been in the North American market. Since coming on board about five weeks ago, we have started exploring growth in the international market. We have significant interest in JPTree's highly differentiated technology from several countries in Middle East, Africa, and Asia. We have conducted presentations to these companies, including to the largest oil and gas company in Middle East and one of the largest gas pipeline operators in India. We are taking actions to address exports and other regulatory compliance, including international standard certification, to ensure that JP3 technology will be ready to be launched internationally in 2021. I'm excited. There are lots of opportunities to take this business to a different level, and the total addressable market is huge. With that, I'll turn the call over to Ryan, who will discuss our other growth engine.

Thank you, Koi. I'm pleased to announce the launch of Flowtech's line of FDA-quality sanitizers and disinfectants for industrial and personal consumer applications. Our initial efforts were cultivated as a result of community outreach that began the first quarter when we started producing and donating sanitizer to local communities, first responders, hospitals, schools, homeless shelters, and senior residential communities. Subsequently, we recognized the opportunity to diversify our revenue stream into a rejuvenated high-growth potential market, which was a natural extension of our specialty chemistry experience. This enabled us to leverage our chemical production capabilities and maximize utilization of our existing facilities. Thus, in Q2, we launched and are actively selling FDA registered sanitizer products into multiple markets, including hospitals and medical facilities, the travel and hospitality industry, food services, e-commerce and retail, sports and entertainment, and other industrial and consumer markets. In order to develop this business, we applied our existing competitive advantages of innovating and delivering differentiated chemistries, our ISO certified manufacturing capabilities, our strong supply chain management, efficient production capacity, and an R&D footprint that is highly respected in the energy and chemistry business. Applying our technical abilities and R&D skills, we're able to offer high quality FDA registered products. And as you know, more than 100 hand sanitizers are being pulled from the market due to regulatory violations at the FDA's directive. Quality is more important than ever if you want to be a long-term major player in this market. Flowtech offers high-quality, American-made products that stand out in the marketplace. The active components that make up our sanitizer are pharmaceutical-grade and are sourced here in the United States. Our liquid and gel products are formulated in Houston and blended in our facilities in Texas and Oklahoma. Given the flexibility of our business model, we've been able to quickly pivot our manufacturing operations by leveraging the exact same chemistry and facilities we already utilize in the energy chemistry technology business, thereby minimizing the need for entry-level capital investment for such a large potential revenue opportunity. Our sanitizer initiative exemplifies how we're adapting and reallocating resources to businesses that will drive greater returns given its low cost, high margin profile. Our current assets have total blending capacity of 2.1 million gallons of specialty chemistries on a monthly basis, which includes both energy chemistry technologies and sanitizer product lines. Furthermore, the hand sanitizer market was nearly $3 billion in 2019. And although the market saw growth of 1,400% from December of 2019 to February of 2020 due to the COVID pandemic demand, market experts still anticipate healthy market growth rates in excess of 7%, even in a post-COVID world. And we look forward to providing additional updates as we expand ourselves in this exciting new market. I'll turn it back to John.

Thank you, Ryan. Although our energy-focused business model has been impacted in the short term due to pause in demand related to COVID-19 and price destruction of oil, we are confident that our strategy is intact and that the initiatives that we've outlined will better position our company for the future. We have a long-term vision to have a platform that optimizes profitability all the way from the reservoir to the refined product's final destination. Our innovative chemistry enhances the ultimate recovery reserves. JP3's data creates a new dimension for profitability by measuring the injected chemistry's effectiveness. And by JP3 joining our company, they have the capital available to them to really expand that business and grow into international markets. And our new sanitizer business offers us a high growth opportunity that leverages our existing chemical production capabilities in a new market. Now, we know that it is difficult to determine when the world will return to normal. And given the risk of a second wave of COVID cases, potential lockdowns, continued high levels of unemployment, there's a lot to consider. But we are preparing our team as we adapt and diversify our operations to mitigate the risks faced by the oil and gas market. And while we say that, it's really exciting. We do have cameras that monitor our facility in Marlow, Oklahoma. And here over the last few weeks, as you look at the floor, Ryan and I were talking about the number of forklifts and the activity that's picking up and the number of pads for energy chemistry that we are producing and delivering. And so it's pretty exciting to see that even on the energy chemistry side, momentum is beginning to reemerge. So our focus really is to take all of these capabilities and to build shareholder value with the goal to rapidly return to profitability by offering premium, differentiated solutions to our market. Now, at this point, I think it's a good opportunity to let our finance team know that we no longer have an interim CFO named John Gibson. We have the real deal, and Mike, I'm going to turn it over to you.

Good morning, everyone. It's great to be here. It's day four, and I'm excited about the potential of Flowtech and to bring a fresh vision based on my experience in the SaaS and technology space. I look forward to speaking with our shareholders in the days ahead and understanding your perspectives. Given our recent acquisition of JP3 last quarter, we are now presenting our results in two reportable segments, Chemistry Technologies and Data Analytics. The chemistry technology segment was previously referred to as the energy chemistry technology segment, but now includes our recently launched sanitizer operations that Ryan just described. The data analytics business was created in conjunction with the acquisition of JP3. Please also note that the second quarter results only includes business operations for JP3 as of May 18, 2020. It's important to make you aware that we may need to make adjustments to our cash flow statements related to the sale of the Florida Chemical Company to ADM in February 2019 and the related escrow accounts. We are thoroughly reviewing our previously filed financial statements to see if reclassifications are needed. However, we do not anticipate at this time that there will be any impact on our earnings or cash position. And we expect to file our 10-K around August 17th. With a strong financial team in place and a new auditor, we are confident that we will be able to address this issue in the most efficient manner possible. As John previously discussed, we face a challenging second quarter driven by significant industry pressures impacting both our segments. Let's first discuss the income statement. During the second quarter, consolidated revenue was $8.9 million compared to $34.7 million during the same period last year and below first quarter of $19.4 million. This sharp decline in revenue is largely a result of continued volatility in the macro environment for U.S. onshore drilling and completion activity impacted by the political and economic events in foreign markets. Furthermore, COVID-19 impacted our productivity as a result of reduced customer demand in our service and products, with the exception of our sanitizer operations. Consolidated operating expenses were $11.6 million in the second quarter of 2020, down 69.5% from last year's level of $38.1 million in the second quarter last year. The decline was primarily due to lower cost of sales due to reduced revenues and reduction in freight personnel and travel and entertainment expenses. We continue to work on expense reductions to improve supply chain and operational efficiencies and negotiate the amendment to our Terpene contract in February. These actions will enable us to manage our inventory levels significantly lower going forward, resulting in additional operating efficiencies. Corporate G&A was at $5.4 million versus $6.1 million last year due to a reduction in headcount and discretionary spending and lower stock-based compensation and professional fees. Our depreciation and amortization expense declined $1.7 million to a half a million in the second quarter versus $2.1 million last year. Research and development costs were at $1.6 million in the second quarter, down $2.1 million last year. We reported a net loss from continuing operations of $9.6 million or a $0.14 loss per diluted share in the second quarter of 2020 compared to a loss of $12.8 million or $0.22 loss per diluted share last year. The loss of $9.6 million included a $0.6 million gain on disposal of long-lived assets relating to buying out the remaining term of the corporate headquarters lease for a significant discount as we moved all of our employees to the existing POTEC Global Research and Innovation Center at the end of June. Our adjusted EBITDA for the second quarter was a loss of $6.8 million, which narrowed from the loss of $9.4 million Q2 last year. The improvement in adjusted EBITDA is primarily due to the lower expenses as previously discussed. We want to also point out that our EBITDA is nearly flat versus last quarter, and an improvement of over the 54% sequential decline in sales, demonstrating our progress in driving operational efficiencies. Now we move to our balance sheet. Performance. As John mentioned previously, our cash position has been healthy. As of June 30, 2020, we had cash in quotes of $59.9 million versus the $80.3 million in the first quarter. To bridge the gap, there were four key factors that impacted our cash positions. One, an outflow of $25 million cash payment for the acquisition of JP3. Two, an inflow of $6.6 million that reflected our claim to the remaining balance of the generally escrow related to the sale of the Florida chemical to ADM. an inflow of $4.8 million cash related to the paycheck protection program loan as part of the CARES Act, and for an outflow of $1 million related to the lease termination of our corporate headquarters. We also received a $6.3 million tax refund, including interest, in July related to the net operating loss carryback provision of the recently enacted CARES Act. Now, let me pass this over the call back to John for some final remarks.

Appreciate that, Mike. Kind of hard to beat a new guy with three days on the job and be thrown onto a call, so I appreciate you jumping in here. As we look forward, there's still ongoing uncertainty around the market environment. We do not intend to offer any guidance at this time, and hopefully not in the future as well. Last quarter, however, we did discuss our intent to be break-even this fiscal year, which is based on our best estimates at that time. Given the prolonged impact of the pandemic and the near halt in capital spending in the energy sector, we now believe that achieving break-even during the fiscal year is going to be increasingly unlikely, though it is still our goal. We remain incredibly entrepreneurial and agile as we pivot our strategy towards growth-oriented businesses while leveraging the strength of our differentiated business model and our financial flexibility. I close, and I'd like to thank everyone for joining us on Earnings Call today. And I do want to particularly thank our finance team, Yilan and Kent and Misty. I mean, they have really been troopers here working with me and have given it their all. I just want to particularly call them out and say thanks. It's been a challenging period for us and for the industry given the unprecedented volatile market conditions. We're taking swift actions to adapt to the environment, focus our business, and to really grow our top line and enhance our profitability. Furthermore, we've been aggressively cost-cutting to mitigate the decline in margins and position us to succeed in the future, and I hope you took that away from Mike's comments as to how much of our EBITDA we retained, even with a tremendous drop in revenues. We remained excited about our recent acquisition of JP3, and that will help accelerate our digital transformation strategy, complementing our chemistry applications business. Our announcement today to build a premium grade sanitizer operation exemplifies how we are naturally extending our core business to growth areas. We believe that these two growth initiatives will position our company for market share gains and provide a bright future for the company. We appreciate the support of our shareholders. We love working for you. We thank our employees and partners for their hard work. As we navigate through this crisis, we continue to want to update you as we move forward, and we will be continuously expanding our growth initiatives and calls to come. With that, Daniel, why don't I turn it back and let's take some questions.

Excellent. Thank you for your remarks today, gentlemen. To our audience, if you would like to ask a live question over your telephone line, simply press star and 1 on your telephone keypad. Pressing star and 1 will place your line into a queue, and we will take your questions one at a time in order. Also, a friendly reminder that if you're joining today on a speakerphone, please return to your handset prior to pressing star and 1 to be certain that your signal does reach our equipment. Once again, ladies and gentlemen, that is star and one. If you would like to ask a question, gentlemen, we'll take just a few seconds to give everyone a chance to signal. We'll take our first question this morning from Daniel Burke at Johnson Rice. Please go ahead, Daniel.

Yeah, good morning, guys.

Good morning, Daniel.

Let's see, John. I understand visibility is not great at this point and recognize that even guidance is a challenge, and you addressed that directly. But still, we look at Q3 completion activities, picking up your new initiatives. I would imagine we'll make some incremental contribution. Is there any reason not to think that top line should be up sequentially in Q3?

Well, I get up every day with a prayer for top line to be larger every quarter from here going forward. And I don't really intend to give any guidance, but there would be no reason to believe that we're not going to be well positioned in the market as it recovers. And so COID is working hard on a JP3 front. I think some of the biggest opportunities there for us are international, as he highlighted. There's a lot of regulatory work and that needs to be done for us to sell those internationally to include registration and ECCN numbers and other technical activities that need to be done. But we are on that path right now. Nick Bigney is here with us and working on the legal aspects. Ryan and the sanitizer business, the demand there is strong. And we continue to see opportunity there. So that was a reasonably poor quarter. So I'm happy to set the bar there and say that we should be above that. But that's about all the guidance I can give you, Daniel, on that.

Understood. I think that's helpful as a recap. So 2.1 million gallons a month of blending capacity across chemistry. Can you talk about what maybe your utilization is now and maybe what utilization was like against that capacity over maybe a trailing two- or three-year perspective just to take us back to a time when the energy market was a bit more healthy?

Well, you know, when the market was a lot healthier, you'd have probably seen us utilizing a lot more of the capacity than we are now. We're a little reluctant to give – the capacity number, the utilization number, Danielle, because we are entering a new market, and we really don't want our competitors to know how much we can produce and at what margin, because we do think there's some competitive strategies there in the sanitizer business emerging we're trying to learn. But in the past, we had capabilities that were probably as much as 30% greater. But the way that we increase capacity now is really simple. The capacity we're stating is an eight-hour day. And so if you can take a look at our facilities and assume that they could be run 24 hours a day, probably with maintenance and other things calculated in on a 24-hour day, we could probably hit somewhere in the mid-70s for total utilization of those facilities in a perfect market. And I'm hoping that Coyd and Ryan can drive us towards complete utilization on a 24-hour period. But right now, we're just quoting an eight-hour day uh, Marlowe Waller facility, uh, capacity number and hope we can start talking about how we're expanding beyond eight hours as, as the markets improve.

Got it. Um, that, that, that's helpful. Uh, and then, uh, maybe a last one just on, on JP three. Good to see the progression in the, uh, initiative with, with Phillips 66 as highlighted the press release in this morning. Um, Can you talk about just sort of, it was touched on in the comments, but sort of next steps here? I mean, is Phillips 66 the logical first customer? If so, when do we see that conversion? Perhaps they're already a customer of decent size. But I just wanted to understand a little better the timeline from this point forward there.

I'm going to turn it over and let Coyd and Matt jump in here, but I'll start out by saying we're pretty excited. We're going to go look at a new ESG product. solution associated with JP3 where we're trying to add the ability with a third-party sensor to look at CO2 and have customers coming in this week to look at that. We think that the ESG market sort of bolted on to where we are is going to be tremendous for us and Matt's modifying the desktop so that we can really sort of provide all of that. I think it's already in pretty good shape. But COID, so how do you see that open up?

So with Phillips 66, they have implemented the technology across all their refined fuel pipelines and terminals, and they see the significant value, and that's why they believe in this partnership that we're embarking. They have started to line up customers for us to present, actually jointly present. In fact, the first one will present on Monday next week, the first customer that they have lined up, and there are a few others that they are lining up as well. They are lining up these meetings with senior level of this customer location, so that's pretty exciting about this, that having a customer being testimony to the value that we deliver and being able to present jointly with us to other customers.

Great. Well, thank you, guys. I appreciate the comments. I'll leave it there. Thank you.

Daniel, thank you for your question this morning. Next, we'll hear from Eric Swearegold from Firestorm Capital. And as a reminder, ladies and gentlemen, it's going to be star and one on your telephone keypad if you would like to ask a live question. Mr. Swearegold, good morning.

Good morning. Eric Swergold here. John, on behalf of the shareholders, thanks for taking a machete to the cost structure of Flowtech and doing exactly what you said you were going to do when you came in and took the job. Thanks also today for introducing us to the team, as new as they are. It's nice to hear from some of the new people. I've got two questions. The first is, can you give us some idea of the size of the NOLs that we've got on Flowtech's balance sheet? Because it seems like when you return to profitability... it could be a very long time before we're paying any taxes.

Mike, why don't you jump in?

Yeah, good morning. So as we talked about earlier, we had roughly around a little over 49 at the end of last year. We used some of that to get a nice cash inflow back from the federal government, and we received that in July. We also think, so that's around 43 net after that, and then we think we're generating about the same through the first six months of the year. So we're probably over 80. We don't actually look at it in that great detail yet, but we're probably in the 80 million range today.

So you have over a dollar share in NOLs.

That's pretty close. And, you know, we did bring it down a little bit by taking advantage of the CARES Act and going back and collecting that $6 million there. But I think that was the appropriate thing to do.

Yep. And the second question is respect to JP3. and this new data as a service business. This is a segment that's new to me and probably new to most of us as shareholders. And I'm wondering, is it contemplated, is JP3 really a platform for further acquisitions in the data as a service business, or is this a one-off?

It's a great question. And we bought it because we thought it was a platform. Their analytics and how they look at crude and crude analysis. It's the transformation of the energy industry from using gravity as a measurement to using composition as a measurement. And there's so many different avenues of that that are available to us, Eric. So if I'm a refiner, one of the most important things that I do is maintain consistency of feedstock coming in. And so who do I buy from and how do I blend that so that I have continuous feedstock? And so the whole of the upstream side of the business and how they configure that buying is exciting and how we could participate in that. The ESG component is really exciting to us. Analyzing minor components that are costly to them in the refinery and working on automation and robotization based on that data. So we're looking at a lot of different companies. We just need to be honest. What I'd like to focus on at the moment would be making JP3 really profitable and winning some of the accounts that we think are eminently possible here between now and the first of the year, particularly on the internationalization side. And I'm the sanitizer business. I think Ryan is just doing an outstanding job there. So I do think it's an acquisition opportunity, and sanitizer is just a straight growth engine for us. But it also has new products, believe it or not, too.

Great. And then if I could throw in one more third question, even though I only said two. The executive compensation for yourself and the rest of the team appears to be a big payoff at $7, which is four and a half times where the current share price is. Can you give us a little bit into your thinking of having such a shareholder-friendly executive comp structure where you've got to make a ton of money for all of us before you guys really make good money for yourselves?

Well, I'll reverse it a bit and say, how are you going to keep us all together after we hit seven, Eric? So I think that gives you some idea of the confidence of the people I have in the room here. We're beginning to talk about what do we do after we get to seven. So, I mean, we're clearly focused on that because that's how our compensation program rewards us. And so, you know, I think the thing that I'd like to say about the culture of this company is high integrity management. highly focused on shareholder value creation, and that we're trying to do that through everything that we do. And customer satisfaction is what drives that. We want customers that are absolutely delighted And that rolls over into our new business line with sanitizer as well. I think we've got the team that does it, and cost. I mean, Mike is a cost-cutting machine, too, in creating value. So I think it's one thing to take cost out. It's another thing to keep it out. And so having a financial leadership that can help us sustain that, I think, is critical as we go forward. But pretty excited about the whole of the team. And, you know, we're getting there. We've still got a few historical issues to work out that we noted in the press release. But, you know, things that happened 18 months ago, I'm hoping Mike and the team can manage those. And that will allow us to focus really on the growth and get to that $7 a share.

All right. Go get them, guys. Thanks.

Thank you.

Ladies and gentlemen, thank you for your questions today. Gentlemen, we have no further questions from the audience. I'll turn it back to our leadership team for any additional or closing remarks.

Well, you know, I just want to thank all of you for joining us on the call. I really look forward to hearing more from Ryan. His ability to manage logistics and supply chain in order for us to create a new business and really create a really profitable new business has just been outstanding. And I think the more you listen to him, the more confident you'll get. I think you're more confident you'll get in COIN and MAT as we go forward on the JP3 side as well. The whole transmix opportunity, which is kind of a piece of jargon for most people that own shares, but it's multiple products in a product line back-to-back. So you have diesel, then you have gasoline, then you have jet fuel. And it's how do you make sure you don't have mixing on that and measuring it in seconds instead of hours. And so, I mean, it's a real opportunity to keep them from losing money as a result of allowing too much mixing. And so that's a direct profit generator for our customers. Our ECT business, we are beginning to get started back on the rigs. And that's pretty exciting as our core customers go back to work. And we work towards the diversification of our customer base there. There's just a lot of good things going on. And I appreciate you guys. owning shares and supporting us, and we really enjoy working for you. With that, I'll just say thank you, and we'll see you soon.

Ladies and gentlemen, this does conclude today's session, and we thank you all for your participation. You may now disconnect your lines, and we hope that you enjoy the rest of your day.