Flotek Industries, Inc.

Good morning, ladies and gentlemen, and welcome to the Flowtech Industries 2024 Q2 Earnings Conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time at this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 7th, 2024. I would now like to turn the conference over to Michael Critelli, Director of Finance and Investor Relations. Please go ahead.

Thank you, and good morning, everyone. We appreciate your participation in Float Tech's second 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 second quarter 2024, as well as our updated guidance for the full year 2024. Following that, we will open up the call for any questions you may have. Flowtech's second quarter 2024 financial and operating earnings press release was issued yesterday afternoon. We also posted to our website an updated Q2 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. Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, statements made by Flowtech management on today's call are forward-looking statements that are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, certain non-GAAP financial measures as designed under SEC rules may be discussed on this call. as required by applicable SEC rules. The company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website. Please refer to the reconciliations provided in the earnings press release and corporate presentations posted on our website. 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 second quarter 2024 operational and financial results. I'm extremely pleased with our performance during the first half of the year that continues our trend of delivering revenue and profitability growth. With that in mind, I'd like to turn to slide five and touch on our key highlights for the quarter that Bob will discuss in detail in just a moment. Against the backdrop of slower North American oilfield service activity, we grew revenue 14% sequentially, highlighting our strong execution and the continued progress we've made in capturing market share. This is an impressive accomplishment when considering that the active rig and frac fleet counts declined sequentially during this same period. Our Q2 2024 external customer chemistry sales grew up 40% from Q1 of 2024, and our data analytics segment saw a 22% quarter-over-quarter increase. We delivered significant year-over-year improvements in all profitability metrics, resulting in the fourth consecutive quarter of net income and seventh consecutive quarter of improvements and adjusted ADP stock. We also raised our full-year adjusted EBITDA guidance by 23% at the midpoint. We've amended our ABL facility, resulting in a sizable increase to our loan commitment with a reduction in the interest rate. And in addition to this progress, we received approval from the Environmental Protection Agency for the JP3 analyzer system for utilization in flare emission monitoring, facilitating access to a new upstream market application with an estimated annual total addressable market of $220 million. And most importantly, all of these achievements were accomplished with zero recordable and lost time incidents. I'd like to take a moment to thank our employees for their hard work and commitment to safety and service quality in achieving these outstanding results. I expect us to continue to build upon this momentum in the second half of 2024. Now looking at the quarter with a bit more granularity, revenue grew 14% compared to Q1 of 2024. This increase was mostly attributable to a significant growth in external customer chemistry sales versus Q1 of 2024 through the execution of our prescriptive chemistry sales strategy. As shown on slide six, external chemistry sales in the Permian Basin grew by 186% from the first quarter of 2024 and 68% year over year. Notably, we saw an 89% increase in our proprietary complex nanofluids technology cells in the first half of 2024 versus the first half of 2023. 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. Our data analytics segment revenue increased 22% in the first quarter of 2024. We remain focused on converting to a data-as-a-service model combined with the launch of our next-generation measurement systems, unlocking significant upstream market opportunities as we expect the business to see continued growth during the third quarter. As part of our commitment to being at the forefront of innovation, we recently announced that the EPA approved the JP3 system as an approved measurement technology with respect to recently enacted flare regulations. A picture of our new flare monitoring cart that is currently on location can be seen on slide 9. This state-of-the-art optical instrument is designed for the precise measurement of net heating values in flare gases. And it is the first to be approved as an alternative method under the new regulations. According to the EPA, there are over 55,000 existing flares in the U.S. expected to be subject to monitoring regulations by 2028. And this approval positions Flowtech for growth in this new upstream space. We believe we are well positioned to capitalize on this opportunity with approximately 75 units available to be deployed. and we have already received numerous orders with three units currently on customer locations. The EPA's approval not only validates our cutting-edge technology, but provides Flowtech with another pillar of growth, given the tangible ESG benefits that flare monitoring can provide. By integrating real-time, autonomous, and continuous data analytics with rigorous environmental measurement, We're providing our clients with innovative solutions that meet regulatory requirements while minimizing operational risk. And despite the near-term volatility in natural gas pricing, the long-term fundamentals for energy-related services remain strong. The North American E&P consolidation transactions are taking time to integrate, impacting near-term drilling and completion activity. We do expect activity to rebound in 2025, and further accelerate in 2026 as non-core assets assimilated during the consolidation phase are divested and developed. Our international opportunities will continue to expand as unconventional related activity grows in the Middle East and Latin America. The demand for oil and gas is expected to expand for the next decade with further requirements needed through 2045. For the first time in nearly two decades, the demand for electricity in the U.S. is expected to climb about 15% by 2030. And natural gas is expected to provide the bulk of this incremental demand. We expect the overall expansion of the global economy to continue to create substantial demand for all forms of energy, which will increase service intensity within the sector. As we look at the remainder of 2024, our efforts remain focused on revenue growth, market share expansion, cost efficiency gains, and creating value for our shareholders that we are well positioned to capitalize on opportunities both domestically and internationally. And we are confident that our expanding suite of services positions us to deliver unique and superior solutions to maximize our customers' value chains. We believe there is no company better positioned to provide strategic solutions to a variety of the industry's most challenging problems. Now, I'll turn the call over to Vaughn to provide key financial highlights.