Flotek Industries, Inc.

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 during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, November 5, 2024. I would now like to turn the conference over to Mike Critelli, Director of Finance and Investor Relations. Please go ahead.

Thank you, and good morning, everyone. We appreciate your participation in Flow Tech's third quarter 2024 earnings conference call. Joining me on the call today are Ryan Ezell, Chief Executive Officer, and Vaughn Clement, Chief Financial Officer. First, we will provide prepared remarks concerning our business operations and financial results for the third quarter of 2024, as well as our updated guidance for the full year 2024. Following that, we will open up the call for any questions you have. Float Tech's third quarter 2024 financial and operating results press release was issued yesterday afternoon. We also posted an updated Q3 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 the SEC. Please refer to the reconciliation provided in the earnings press release and corporate presentation as management will be discussing non-GAAP metrics on this call. With that, I'll 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 third quarter of 2024 operational and financial results. I'm pleased with our overall strategy execution during this quarter, but we remain laser focused on elevating our performance to increase market share and profitability growth in both of our complimentary business segments as we challenge the organization to close out our strongest year since 2017. These final months of the year are going to be arduous work. We are confident in our team's ability to execute in the face of market headwinds and continue the trend of delivering strong results and resultant value creation for Flowtech shareholders. 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. With the backdrop of weaker North American oilfield services activity, We were able to grow total revenue 5% compared to the third quarter of 2023 and 8% sequentially over the second quarter of 2024, highlighting our strong execution and the continued progress we have made in capturing market share. This is quite an accomplishment when considering the fact that the active RAC fleet counts have declined over 14% from the peak of the first quarter of 2024. Our data analytics segment revenues grew 30% in the third quarter, as shown on slide 7, with data as a service revenue growth of 40% sequentially. Following the EPA's approval of our JP3 analyzer in mid-July of 2024, we recognized our first revenues from flare monitoring in August and September, which comprised 25% of total quarterly segment revenues. Revenue from our chemistry technology segment increased 7% in the third quarter. Our persistent revenue growth in this segment, despite a declining frac fleet market, is clear evidence that we are gaining market share through our differentiated chemistry technology solutions. We delivered significant year-over-year improvements in virtually all profitability metrics, resulting in net income of $2.5 million and adjusted EBITDA of $4.8 million, representing a year-over-year increase of 97% and 43% respectively. This marks Flowtech's fifth consecutive quarter of net income and eighth consecutive quarter of improvement in adjusted EBITDA. As a result, we are increasing our adjusted EBITDA guidance for the second time this year. On a trailing 12-month basis, as is shown in slide 8, Flowtech has delivered almost $25 million of improvement in adjusted EBITDA. Finally, we reduced borrowings outstanding under the asset base loan by 81% or $6.1 million when compared to year end of 2023. 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 all of our employees for their hard work and commitment to safety and service quality in achieving these outstanding results. And I continue to be excited about the future of Flowtech. and believe we are well positioned to capture further market share. We continue to be an industry leader, driving innovation and delivering differentiated chemistry and data solutions that are tailored to our customers' needs. We strive to create solutions for the future challenges that will impact our industry before they are needed by leveraging chemistry as the common value creation platform. Blowtech will remain at the forefront of innovation and multidisciplinary advancements as we bring new technologies to the market. Through the convergence of data and chemistry solutions, Flowtech is creating AI-driven reservoir modeling to address the impacts of water imbibition, drive pressure-rental microfluidic behavior in nanopore environments, and improve the ultimate recovery of hydrocarbons from each asset. Through the utilization of real-time data measurements, we are unlocking the potential to apply predictive analytics to holistically manage our customers' assets and maximize their return on invested capital. We expect the continued expansion of our data-as-a-service model with the launch of our next-generation near-infrared, Raman, and aqueous environment measurement systems, unlocking significant upstream and downstream market opportunities if we expect the business to see continued growth going forward. As part of our commitment to being at the forefront of innovation, we announced in July the EPA approval of our JP3 system with respect to recently enacted FLIR regulations. A picture of our new flare monitoring cart that is currently on location can be seen on slide 10. This state-of-the-art optical instrument is designed for the precise measurement of net heating values in flare gases and 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 United States and are expected to be subject to monitoring regulations by 2028. and this approval positions Flowtech for growth in this new upstream space. We have already received numerous orders with 11 units already being delivered, which is up from three we mentioned on our call in August. The majority of FLIR application revenues to date have been through rental and service contracts, which imply a recurring revenue stream. Furthermore, our upstream custody transfer use case with a total of three active units in the third quarter and additional eight committed units added thus far in the fourth quarter. We're on track to receive full certification for field utilization by year end. Our ability to monitor hydrocarbon composition and quality in real time, with measurements taken every five seconds, will create an emerging market for flow tech to enter into 2025 and beyond. This revolutionary application creates an elevated level of transparency and enterprise risk minimization for producing wells that's never been achieved in the oil and gas industry to date. As we look forward, we see 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 15% by 2030, with natural gas expected to provide the bulk of the 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 as we are well positioned to capitalize on opportunities both domestically and internationally we are confident that our expanding suite of services positions us to deliver unique and superior solutions to a variety of our industry's most challenging problems while maximizing our customers value chain now i'll turn the call over to bond to provide key financial highlights