Flotek Industries, Inc.

Welcome to the Flowtech Industries fourth quarter and year-end 2023 earnings conference call. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Wednesday, March 13, 2024. And I would like to turn the conference over to Mike Critelli, Director of Finance at Flowtech. Please go ahead, sir.

Thank you, and good morning, everyone. We appreciate your participation in Flowtech's fourth quarter and full year 2023 earnings conference call. Joining me on the call today are Ryan Ezell, Chief Executive Officer, and Bon Clement, Chief Financial Officer. On today's call, we will first provide prepared remarks concerning our business and results for the fourth quarter and full year 2023. Following that, we will open up the call for any questions you have. Low Tech's fourth quarter and full year 2023 earnings press release was issued yesterday afternoon. We also posted an updated corporate presentation we will reference on today's call. These can be found on the investor relations section of our website. In addition, today's call is being webcast and a replay will be available on our website following the conclusion of this call. Please note that the comments made on today's call regarding projections or 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. In addition, please refer to the reconciliations provided in the earnings press release and corporate presentation, as management may discuss non-GAAP metrics on this call. With that, I will turn the call over to our CEO, Ryan Ezell.

Thank you, Mike, and good morning. We appreciate everyone's interest in Flowtech and for joining us today as we discuss our fourth quarter and full year 2023 operational and financial results. I'm extremely pleased with our results as 2023 was truly a transformational year in which we restored profitability in all key financial metrics, enhanced our liquidity, and strengthened our leadership team through the execution of our corporate strategy utilizing chemistry as the common value creation platform. With a relentless focus on technology, we remain at the forefront of innovation and multidisciplinary advancements that continue to forge gains in market share through our differentiated chemistry and data analytics solutions. Both carry an undeniable value proposition that maximize our customer's value chain while generating a meaningful return on investment for our shareholders. With that in mind, I'd like to turn to slide seven and touch on our key highlights for 2023 that Bob will discuss in detail in just a moment. We delivered strong year-over-year growth in all key profitability metrics, including gross profit, adjusted gross profit, and adjusted EBITDA, with the fourth quarter of 2023 adjusted EBITDA representing the 10th consecutive quarter of improvement and full year 2023 marking our best year in nearly a decade. The total company revenue was up 38% compared to 2022 as we executed the largest volume of products sold in the company's history. Chemistry revenues from external customers grew each quarter during the year, and we're up over 21% compared to 2022, as a result of our rapidly expanding customer base and the continued adoption of our prescriptive chemistry management business model. Our customized engineering approach, combined with our proprietary complex nanofluid technologies, continues to deliver wells that outperform adjacent competitor wells in all basins. Our data analytics revenue saw strong growth of 47% in 2023 versus 2022. The segment has seen a 250% increase in subscription-based revenue since 2022, which supports our strategy to evolve to a data-as-a-service business model. These subscription-based services have had a 95% annualized retention rate. We also expanded our global footprint with a successful commercial launch of our slick water fluid systems in the Kingdom of Saudi Arabia and established a new entity in Abu Dhabi to facilitate diverse market share growth and margin expansion internationally. We also recently announced the addition of Amy Blakely as the newest member of our senior leadership team as our Senior Vice President at General Counsel. She will be an asset to the organization as she brings extensive sector experience and joins at a pivotal time as we look to capitalize on both organic and inorganic growth opportunities. Most importantly, all of these achievements were accomplished with zero recordable and lost time incidents in the field of operations, thus extending the current streak to over 753 days without a recordable incident. I'd like to take time to thank all of our employees for their commitment to safety and service quality in achieving these outstanding results. And I expect us to continue to build upon this momentum throughout 2024. Now, looking at the quarter in a bit more granularity, revenue was slightly down sequentially. This decrease is attributable to the fact that overall market slowdown in upstream onshore activity that has been experienced this year as natural gas continues to face near-term pricing pressure. And despite this decline in overall drilling and completion activity, the impact on flow tech has been much less given the execution of our strategy around our differentiated and complementary chemistry and data technologies. To that end, we have continued to grow our external chemistry business revenues every quarter this year, and they were up another 10 percent in the fourth quarter. More importantly, we saw a 75 percent increase in our reservoir-centric technology sales related to complex nanofluids. Furthermore, the chemistry purchase requirements contained in the long-term supply agreement with Profrac were designed to mitigate the volatility of the market and provide some insulation to Flowtech operations for maintaining economies of scale and stability. We expect sustained growth in reservoir-centric and international chemistry revenues that should help offset the headwinds of the slowing upstream completion environment. On a more macro level, the demand for oil and gas is expected to expand for the next decade with further requirements needed through 2045. Long-term investments in both short and long barrel cycles will be necessary to maintain production and add the required incremental supply. Despite the near-term volatility in commodity pricing, the fundamentals for energy-related services remains strong. The overall expansion of the global economy will continue to create substantial demand for all forms of energy, which will increase service intensity within the sector. As we look ahead to 2024, our efforts remain laser focused on revenue growth, market share expansion, and cost efficiency gains, as we are well positioned to capitalize on opportunities both domestically and internationally. The continued adoption of our prescriptive chemistry management for improved reservoir performance along with the launch of the next generation JP3 measurement system, unlocks significant upstream market opportunities as the company expects the data analytics business to grow by 50% in 2024. We are confident that our expanding suite of services positions us to deliver unique and superior solutions to maximize our customers' value chain. Consistent with this outlook, We believe that the demand for our advanced chemistry and data solutions will continue to increase and will provide new opportunities in market verticals such as industrial, geothermal, agricultural, solar, and hydrogen. Now I'll turn the call over to Bon to provide key financial highlights.