Flotek Industries, Inc.

Greetings and welcome to Flowtech Industries' fourth quarter and full year 2021 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow management's prepared remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nick Bigney, Senior Vice President, General Counsel, and Chief Compliance Officer for Flowtech. Thank you. You may begin.

Thank you, and good morning, everyone. We appreciate your participation with us today. Joining me in participating on the call are John Gibson, Chairman, Chief Executive Officer and President, Michael Borton, Chief Financial Officer, Ryan Ezell, Chief Operating Officer, and James Silas, Interim President of Data Analytics and Senior Vice President of Research and Innovation. On today's call, we will first provide prepared remarks concerning our business and results for the quarter. Following that, we will answer your questions. We have now released our earnings announcement for our 2021 fourth quarter and full year results, which is available on our website. Additionally, we have uploaded an investor presentation to 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 and which 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 the earnings press release as we may discuss non-GAAP metrics on this call. And with that, I will now turn it over to John.

Thank you, Nick, and good morning. I just want to thank you for joining our discussion on the 2021 fourth quarter and full year results. 2021 has been another challenging year for many businesses and individuals. Blockchain instability became a household term. Worries about inflation have had an impact on markets. And as we hold this call, the conflict between Ukraine and Russia continues. Although 2021 was a difficult year here at Flowtech, we used the opportunity to strengthen our company both financially and operationally. We've also used the time to get laser focused on our strategic objectives. Those objectives calling us to focus on flawless execution, profitable growth, and strengthening our financial position. In this call, I will highlight these strategic priorities through the lens of what we accomplished in 2021. all of which may not be evident by strictly reviewing the financials. These accomplishments are what put us on the path to transformative deals like the recently announced ProPRAC agreement. We believe that the flow tech of 2022 and beyond will be vastly different than the version exiting 2021. And so today, instead of focusing on the past, let me share with you flow tech of the future. Our strategic priorities are built around a core commitment to environmental leadership, In the last few years, the term ESG has gained a tremendous amount of traction. But like many topics in the popular discourse, trending items often have their moment and then they fade away. At Flowtech, we believe that the concepts around improved environmental stewardship are inseparable from long-term sustainable growth in the energy industry. In addition to the issue of maintaining a social license to operate, companies already deal with increasing pressure around availability of water, minimizing waste, and maximizing efficiency of operations in the face of tighter cost structures. Our products and services, including our specialty green chemistry solutions, our VARACS analyzers, and our data analytics, help our customers minimize their environmental impact and make timely and efficient operating decisions. Environmental leadership is a key element of our business strategy today and will be in the future. In order to achieve our mission to be the collaborative environmental partner of choice for sustainable chemistry technology and digital analytics solutions, we will continue our focus on flawless execution of our vision. Morris Chang said, without strategy, execution is aimless. Without execution, strategy is useless. Our vision created the opportunities we now possess. Our execution will make us a leader in this field. Flowtech will continue to prioritize safety and service quality throughout our organization. I am extremely proud of the Flowtech team for achieving our goal of zero total recordable incidents and zero non-productive time for our customers in 2021. And we will build on this focus in 2022. I will tell you it's the first time in my career that I have ever achieved a zero TRIR and no nonproductive time. It's an amazing accomplishment, and just incredible congratulations to the operations team and to all of our employees. Our consistent attention to and performance on safety considerations communicate that Flowtech is a company that actively manages risk both for ourselves and our partners. In 2022 and beyond, Flowtech will continue to build upon the progress we made in 2021 in reestablishing our relationships with indirect channels to market through energy service companies, a critically important segment of the market. In fact, half of our new energy chemistry customers were service companies in 2021. Certainly, our most exciting win on the sustainable revenue goal is our new contract with Procrack valued at over $2 billion in revenues over the next decade, which will commence on April 1st. If you missed our in-depth discussion around our contract with Procrack, I encourage you to listen to our recorded investor call from March 10th. As we build upon this success, we will continue to solidify our partnerships by winning on a daily basis, remaining committed to building trust through reliability and quality of our products and services, impeccable logistics, transparency, and mutual value creation. As we enter 2022, we arrive at a significantly more efficient, streamlined organization, which we have achieved by realigning our entire organization to our vision. We have rebuilt our business development structure and tools to accelerate our revenue growth and more seamlessly forecast with our supply teams. We have implemented new supply chain management strategies to ensure we have multiple sourcing options, including in-basin sourcing, which has lowered our operational and logistics cost. These changes mean that we deliver more effectively to our customers while significantly improving our margins. The Flow Tech of 2022 and beyond is a lean, operationally efficient organization. Looking to the future? We will maintain our financial discipline by adhering to cost-saving initiatives that were begun in 2019, and we will effectively managing our SG&A and R&I costs, which have improved from 2020 by 11% and 23% respectively. We also enter 2022 with greater transparency in how we report our margins, which you will see reflected in our 10-K when it's released. As the saying goes, what gets measured gets managed. Mike Borton will speak in more detail about some of the changes that you will see moving forward. Finally, our future success as an organization comes down to the right leaders, teams, and structure to drive profitable growth well into the future. We've made changes to our cost structure, the way we approach our markets, and we've also implemented leadership changes that will help us better respond to uncertainty and support operational excellence and top-line revenue growth of over 4X in the next three years alone. This underlies the creation of a chief operating officer role. We named Ryan Ezell our COO in early March. I have no doubt that Ryan and Flowtech team will go forward with success. In December, we also named Dr. James Silas as the interim head of data analytics. James also retains his previous role as senior vice president of research and innovation. For anyone who has not had the great benefit of knowing James Silas, let me tell you a little bit about him. James joined Flowtech eight years ago, following 15 years of academic research investigating the physics and chemistry of surfactants and polymers in personal care products, bioengineering, and in our oil industry. Since joining Flowtech, James has been critical to our strategy of environmental leadership and the development of ESG grain scorecards, as well as having our intellectual property strategy. James has a long history with JP3 and has a considerable role in the development of our differentiated technologies. A big reason Flowtech's green chemistry stands apart from our competitors is James' leadership. Apart from his technical credentials, James is highly engaged with our customers. He has an exceptional commercial mind. For these reasons, I appointed him as interim head of data analytics, and he has already added exceptional value in this role, and I expect him to add more as the year progresses. With that, I'd like to turn the call over to James Silas to give you his perspectives on the data analytics segment. James.