Flotek Industries, Inc.

Good morning, ladies and gentlemen, and welcome to the Flowtech Industries' first quarter 2024 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 8, 2024. I would now like to turn the conference over to Michael Critelli, Director of Finance. Please go ahead.

Thank you and good morning everyone. We appreciate your participation in Float Tech's first quarter 2024 earnings conference call. Joining me on the call today are Ryan Ezell, Chief Executive Officer, and Bon Clement, Chief Financial Officer. First, we will provide prepared remarks concerning our business operations and financial results for the first quarter 2024, as well as guidance for the full year 2024. following that we will open up the call for any questions you have flow tech's first quarter 2024 financial and operating results press release was issued yesterday afternoon we also posted an updated q1 earnings presentation that we will be referencing on today's call these can all 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 risk factors discussed in our filings with SEC. Please refer to the reconciliations provided in the earnings press release and corporate presentation as management will be discussing non-GAAP metrics on this call. With that, I will turn the call over to our CEO, Ryan Azell.

Thank you, Mike, and good morning. We appreciate everyone's interest in Flowtech and for joining us today as we discuss our first quarter of 2024 operational and financial results. I'm pleased with our first quarter of 2024 performance and even more energized about what's to come this year. Without a doubt, 2023 was a transformative year for the organization. But 2024 will be the beginning of a revitalized flow tech that demonstrates consistent profitability and expansion in shareholder value as we accelerate into a new era of differentiated chemistry and data analytics solutions. There is no company better positioned to provide strategic solutions to a variety of our industry's most challenging problems, whether it's operators solving for complex completion challenges such as increased water production and reduced BOE, Pumping companies looking to advance their differentiation through maximizing utilization, or oil and gas operators racing to meet the new EPA flare regulations with their unique real-time measurement technologies. There's never been a more exciting time to be at Flowtech. With that in mind, I'd like to turn to slide seven and touch on our key highlights for the quarter that Bob will discuss in detail in just a moment. We delivered significant year-over-year improvements in gross profit, adjusted gross profit, and adjusted EBITDA, leading to the third consecutive quarter of net income and 11th consecutive quarter of improved adjusted EBITDA as a percentage of revenue. Notably, Q1 2024 adjusted EBITDA surpassed the total for the entire year of 2023. We realized gross profit margin and adjusted gross profit margin of 22% and 25% respectively. Our Q1 2024 external chemistry sales were the highest achieved in the first quarter since we began this turnaround over three years ago and was up 27% year over year. And although down sequentially, this pattern is consistent with the first quarter in each of the last three years, as well as average fleet counts in Q1 were down sequentially. Our data analytics segment saw 18% quarter-over-quarter revenue growth, thanks in part to our continued progress in data-as-a-service revenues, In addition to this progress, we continue to push forward with the field testing of our new CalX spectrometer, which is still on track for a mid-year 2024 release. Most importantly, all of these achievements were accomplished with zero recordable and lost time incidences in the field of operations, extending Flowtech's current streak to over 843 days without a recordable incident. And I'd like to take the time to thank every single employee for their commitment to safety and service quality in achieving these outstanding results. 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 mostly attributable to lower external chemistry sales versus Q4 2023. We have observed this consistent seasonality since the organization began its strategic turnaround over three years ago. At a detailed glance on slide 9, Q1 2024 external chemistry revenues were up 27% versus Q1 of 2023. This was the largest Q1 revenue reported for our external chemistry cells during the last three years with the lowest average RAC fleet counts in North American land during the same period. This indicates we are gaining market share through each annual cycle of fleet count stabilization by the execution of our corporate strategy utilizing chemistry as the common value creation platform. We are seeing continued adoption of our prescriptive chemistry management business model that leverages our customized engineering approach combined with our proprietary complex nanofluids technologies to deliver wells that outperform adjacent competitor wells. Flowtech will remain at the forefront of innovation and multidisciplinary advancements as we bring new technologies to the market, including AI-driven reservoir modeling to address the impacts of water imbibition, drive preferential microfluidic behavior in nanopore environments, and improve the ultimate recovery of hydrocarbons from each asset. We expect a substantial increase in our external customer chemistry sales during the second quarter and anticipate total annual external chemistry growth for 2024. To that note, April external chemistry sales have already achieved over 70% of what we did in all of Q1 of 2024. We realized 19% sequential growth in our ProFrac-related revenue. 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 operational stability. Our partnership continues to evolve into a truly transformational offering for EMP operators in regards to efficiency and overall reservoir performance. Our data analytics segment revenues increased 18% from the fourth quarter of 2023, Our continued success in converting to a data-as-a-service model combined with the launch of the next-generation JP3 measurement system continues to unlock significant upstream market opportunities as the company expects the data analytics business to grow by 50% in 2024. 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. And despite near-term volatility in commodity pricing, the fundamentals for energy-related services remain strong. And for the first time in nearly two decades, the demand for electricity in the U.S. will climb over 15% by 2030, with natural gas providing over 40% of the current demand. The overall expansion of the global economy will continue to create substantial demand for all forms of energy, which will increase service intensity within our sector. As we look at the remainder of 2024, our efforts remain laser focused on revenue growth, market share expansion, cost efficiency gains, and returns on shareholder value, as we are well positioned to capitalize on opportunities both domestically and internationally. We're confident that our expanding suite of services positions us to provide unique and superior solutions to maximize our customers' value chains. Now I'll turn the call over to Bond to provide key financial highlights.