Flotek Industries, Inc.

Good morning, ladies and gentlemen, and welcome to Flowtech Industries' fourth quarter and fourth year 2024 earnings conference call. At this time, note that all lines are in the 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 an operator. Also note that the call is being recorded on Tuesday, March 11, 2025. And now I would like to turn the conference over to Mike Cotelli, Director of Finance and Vista Relations. Please go ahead, sir.

Thank you, and good morning, everyone. We appreciate your participation in Flowtech's fourth quarter and full year 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 fourth quarter and full year 2024. Following that, we will open up the call for any questions you have. Flow Tech's fourth quarter and full year 2024 financial and operating results press release was issued yesterday afternoon. We also posted an updated 2024 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 the risk factors discussed in our filings with SEC. Please refer to the reconciliations provided in the earnings press release and investor 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 fourth quarter and full year 2024 operational and financial results. The closing months of the year brought industry-wide challenges, but the Flowtech team remained steadfast on the execution of our corporate strategy, delivering the strongest quarter since 2017. I'm proud of the organization's laser focus on elevating our performance to increase market share and profitability growth in both of our complementary business segments in the face of such market headwinds. We remain unwavering in our commitment to create value for shareholders through continuous improvement of our processes, market share expansion, and innovative products and services. and maintaining the trend of delivering strong results that outpace the market as we head into 2025. With that, I'd like to turn to slide five and touch on some key highlights for the quarter and the year that Bon will discuss in detail in just a moment. With a backdrop of weaker North American oilfield service activity, Q4 2024 total revenues rose 20% versus Q4 of 2023. This is led by a 21% jump in external customer revenue, highlighting our ability to execute and the continued progress we've made in capturing market share through the deployment of differentiated chemistry and data solutions. This is quite an accomplishment considering the fact that the active frac fleet counts declined over 25% from the peak of the first quarter of 2024. It's also important to note that our Q4 external customer revenue was the highest in the last five years, with our international chemistry business making its largest quarterly contribution in the last 10 years. Our data analytics service revenue grew 124% versus Q4 2023 and 44% versus the full year of 2023. Additionally, we completed the development of three new products within our data analytics segment in the second half of 2024, which results in opening access to a future total addressable market of more than $500 million. These include our new EXPECT custody transfer units, Raman measurement devices, and VeriCal analyzers for flare monitoring. In Q4 2024, net income was $4.4 million. And adjusted EBITDA was $7 million, up 111% and 78% respectively, versus Q4 of 2023. Full year, 2024 adjusted EBITDA reached $20.3 million, up $18.5 million from 2023, and being the highest since 2017. This exceeded our guidance of $18.5 million by 10%. Float Tech's 2024 stock performance ranked in the top three out of all old field service stocks. Delivering on our commitment to enhancing shareholder value, we saw a 140% improvement in our stock price. And most importantly, all of these achievements were accomplished with zero lost time incidents in the field of operations. Now 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 continue to be excited about the future of Flowtech as we expand our position as a technology leader, driving innovation and delivering differentiated chemistry and data solutions that are tailored to our customers' needs. We strive to create solutions for future challenges that impact our industry, leveraging chemistry as the common value creation platform. Flowtech will remain at the forefront of novel and multidisciplinary advancements as we bring new technologies to the market through the convergence of data and chemistry solutions. Flowtech is creating unique products and services to expand our addressable market through the application of real-time data and predictive chemical management that improves the ultimate recovery of hydrocarbons from each asset while providing a level of transparency never achieved in energy and infrastructure segments. As we move into 2025, we're excited about three of our upstream data analytics applications. The first is our VeriCal flare monitoring solution. In Q4 2024, we grew the number of VeriCal units to 13 in rental service and sold an additional two units. These numbers exceeded the expectations provided on our call in October, despite fourth quarter flare monitoring revenues being impacted by the delayed EPA update. The majority of FLIR application revenues to date continue to be through rental and service contracts, which imply a recurring revenue stream that generated over $1.3 million in the final five months of 2024. The second is our EXPECT custody transfer solution. Our upstream custody transfer use cases continue to expand into field trials with a total of 14 committed units in the fourth quarter of 2024, This is 27% higher than what was discussed in last quarter's earnings call. Our ability to monitor hydrocarbon quality and composition in real time with the measurements taken every five seconds will create an emerging market for Flowtech in 2025. 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. And the third is our power generation solutions. In Q4 of 2024, we expanded to 15 active power generation units deployed, with nine more already committed for a 2025 delivery date. With 100% of these units committed to monthly subscriptions, these assets support our measure more strategy focused on data as a service revenue models. Our technology provides mobile power generation customers with unmatched real-time gas quality and volume visibility, protecting high-value equipment while displacing diesel and or CNG with lower-cost field gas, and simplifying the royalty payment process. Leveraging these unique technologies provides significant opportunities to expand Flowtech's presence in the energy infrastructure space. And finally, we expect the continued expansion of our data-as-a-service model with the launch of our next-generation near-infrared, Raman, and aqueous measurement systems, unlocking significant upstream and downstream market opportunities to support further growth. As we look forward, 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 targeted sectors. As we look at 2025, and although the first quarter has historically posed difficulties for revenue growth, given customer operating schedule and weather slowdowns, we're currently cautiously optimistic about sustaining our profitability momentum into the early months of 2025. We are confident that our expanding suite of services positions us to deliver unique and superior solutions to a variety of the industry's most challenging problems while maximizing our customers' value chains. Now, I'll turn the call over to Von to provide key financial highlights.

Thanks, Ryan. Yesterday afternoon, we reported our strongest quarter since the fourth quarter of 2017. As shown on slide five of the presentation we posted yesterday, we increased revenue, net income, and adjusted EBITDA in every quarter during 2024. Last year was a remarkable year in terms of consistent growth and execution, culminating with an outstanding fourth quarter, which included the following highlights. It was our highest quarterly adjusted EBITDA in seven years. It was the first quarter with over $50 million in revenue since the second quarter of 2023. Our external customer chemistry revenue increased 50% sequentially. International revenues during the fourth quarter increased nearly 300% sequentially and exceeded the total from the first nine months of the year. And finally, roughly two-thirds of our data analytics revenue was derived from service contracts. As it relates to revenue, we inserted a new table into the press release to aid in quantifying components of revenue by segment. For our chemistry revenue, we segregated into related party versus external customers. And for the data analytics segment, we separated product versus service revenues. During the quarter, we grew total chemistry revenues 18% versus 4Q23. As compared to the year-ago quarter, we increased external customer chemistry revenue by 17% and related party chemistry revenue by 19%. As Ryan mentioned, the fourth quarter for external chemistry was very strong as we posted a 50% increase versus the third quarter of 2024. For data analytics, we grew revenue 74% versus the fourth quarter of 2023, which included a 124% increase in service revenue as compared to the year-ago quarter. Our fourth quarter 2024 service revenue of $1.6 million was the highest quarterly amount recorded since we acquired the business in 2020. Slide 10 of the presentation shows our success in growing service revenue over the last four years. For 2024, service revenue made up 46% of total data analytics revenue versus only 35% in 2023. Fourth quarter gross profit increased 35% sequentially, representing a 600 basis point improvement as a percentage of revenue. Sequential margin improvement was driven by the significant jump in external customer chemistry revenues, the 67% sequential increase in data analytics service revenue, and an increase attributable to the order shortfall penalty under our long-term supply agreement. As shown on slide four, during 2024, gross profit margin totaled 21%, handily beating 2023 gross margin of 13%. On the SG&A front, 2024 SG&A costs declined 11% or approximately 3 million compared to last year, and SG&A was down 17% from 2023 when factoring in non-cash stock compensation costs. Fourth quarter SG&A was up sequentially due to higher bonus accrual as well as higher stock comp costs associated with our annual grant made in October, but we do expect quarterly SG&A to trend back down in the first quarter. Net income for 2024 totaled $10.5 million or $0.34 per diluted share. During 2023, we reported a net loss of approximately $10 million or a net loss of $0.10 per share after backing out non-cash gains that were realized during 2023. For the quarter, our earnings per share totaled $0.14. That's a 75% increase from the third quarter of 2024. As shown on slide six in the presentation, during the fourth quarter, we continued our streak of up and to the right with respect to adjusted EBITDA. The fourth quarter represented the ninth consecutive quarter of improvement. Fourth quarter adjusted EBITDA was up 46% sequentially. As Ryan mentioned, as it relates to our guidance on annual adjusted EBITDA, the 20.3 million we posted for 2024 easily exceeded the top end of our guidance range of 18.5 million. Regarding 2025 guidance, consistent with our practice in 2024 and 2023, we expect to issue guidance in connection with our first quarter results. Touching on the balance sheet, at year-end, we had $4.8 million drawn under our ABL. Currently, we have nothing drawn on our ABL. Our current year-end debt to adjusted EBITDA totaled 0.2x versus year-end 2023 of 5x. This significant improvement was driven by the over 1,200% increase in adjusted EBITDA versus 2023. In closing, we obviously set a very high bar with respect to our fourth quarter results. As we turn the focus to 2025, we look forward to continuing the operational and financial momentum we have established over the last several quarters. With that, I'll turn the call back to Ryan for closing comments. Thanks, Vaughn.

Our 2024 results delivered significant profitability product innovation, and shareholder value. We are still in the early innings of Flowtech's transformation as we continue to grow and maximize return on investment for our customers and shareholders. There is no other company better positioned in our industry to provide the required technologies to address the unique challenges of the energy and infrastructure sectors. I'm proud of the progress we have made, and I'm confident in our ability to execute going forward. And as I stated at the start of the call, there has never been a more exciting time to be part of Flowtech. The management team and I are optimistic about the future growth potential in both our chemistry and data analytics segments, and we believe that Flowtech represents a compelling investment opportunity for current and potential shareholders. We appreciate the continued support of all of our stakeholders, and we hope that you share our excitement regarding the future of Flowtech, and we look forward to reporting further progress. Operator, we are now ready to take questions.

Thank you, sir. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the process, please press star followed by two. And if you're using your speakerphone, we ask that you please lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. First will be Jeff Krempf at Alliance Global Partners. Please go ahead, Jeff.

Ryan, you mentioned international was a big contributor to the strong revenue in Q4. I was curious to kind of dig into that a bit more, if you could kind of, I guess, share what you think drove that inflection, because I know that's been a big area of focus and investment for you guys. And also just curious, a sense of materiality there, like can you share how much revenue was international in Q4 or any other metrics would be helpful. Thanks.

Yeah, so I'll kind of talk a little bit around the strategy component there and then I'll let Vaughn comment on the numbers and how they hit, right? But basically, you're dead on the spot. We've been working for a number of months on expanding and stabilizing our international business because as you start to see fluctuation in the North American market, having an international presence really helps add stability and air under the wings to keep us running in a profitable manner. The big turns there are that growth of what we had mentioned is we have only one of two slick water fracturing systems approved in Saudi Arabia. We made some significant sales in that part, and we're seeing those continue into 2025. We also turned the curve, and we look at some of the conventional acid stimulation and support work that we're doing for ADNOC in UAE and additional business in Oman. But the big driving factor was in UAE and Saudi with the level of work that's going on there on the fracturing side.

So, Jeff, in terms of the numbers, international chemistry was about $4.5 million in the fourth quarter.

uh for the year we did about 9.2 million with about 7.4 of that in the uae like ryan mentioned so overall international revenues were up about 20 2024 versus 2023. great that's really helpful um as a follow-up staying on the international side is it fair to assume these are a bit higher margins um i guess i'm just kind of inferring that based on the performance in q4 wondering you know to the extent that The international side outpaces the growth of the company. Does that bias margins higher, or how should we think about that?

So I would think that definitely we look at the conventional cementing sales and the conventional asset simulation jobs. Those are what we consider to be value-add technologies, and they represent high margins. We do sell in the Saudi, though, there is one component of the – friction reducers that i would say in comparison to north america friction reducing margins they're actually pretty good uh but not um but not anything of real significance because as you know friction reducers are often moved as a commodity so the majority of that strong margins comes from the uh specialty products that move along with those different programs okay great um and uh my follow-up uh with respect to epa regulations and rules and some of those um changes in uncertainty there

Can you update us on what you guys are hearing from customers or how the business development funnel is looking? I mean, it still looks like there's still pretty good adoption, and you guys have a lot of different products and services you're rolling out. But, you know, how are operators or customers responding to some of the dynamics there?

You know, it's been interesting because there's no doubt when you look at government-regulated products, activity um there's been a few you know the the response and the original regulations that rolled out in may of 24 delayed almost until like december 20th right for their comment period um and so that that slows some of the activity but i will tell you some of the major players that's committed to the flare monitoring have continued to grow and expand into multiple basins right and that's where you're seeing this service uptick and the continued growth. We're adding an additional five VeriCal units already in the quarter into the current fleet of what we've got doing call-off monitoring. And we suspect that when you look at Quad OB and Quad OC, that those will probably stay around in terms of flare monitoring. You did see a rollback by Congress around the methane tax which doesn't necessarily impact directly to the flare monitoring, but it does lower some of the bureaucracy around potential penalties to the operators. But as of right now, there's still a good bit of growth room, we think, on the continued monitoring of new wells and some of the prior existing what we call assisted wells for the flare monitoring going forward. And a lot of the big, I would say, EPA operators are putting us into their sustainability programs irrespective of what the EPA may make any other final decisions on that.

Yeah, I agree. That makes a lot of sense, Ron. I appreciate those details. I'll let someone else stop in. Thanks.

Thank you. Next question will be from Donald Christ at Johnson Rice. Please go ahead, Donald.

Good morning, guys. Hope you all are doing well this morning. But given the international exposure on the on the chemicals and the growth there, are you expecting a pullback like we did last year in the first quarter? I know it was a little bit lumpy. Do you think those, you know, the the Saudi approval for the slick water fracts actually smooths that out some or do you still think it pulls back a little bit in the first quarter just from normal seasonality?

I think that there's no doubt that the assistance from the international business will help smooth out that lumpiness in Q1. There's no doubt about that. I still think we do see some of our bigger customers. In North America specific, there's still a little bit of seasonality that we see January, February, but we have started to see that activity pick up. But in comparison to past Q1s, I think we're going to see that smooth out a little bit this year is what we kind of mentioned to our optimism about it. You know, we're already in March, and we feel like that's going to be a little bit better performance relative to our past Q1s.

Okay. That's really good color. On the data analytics side, I mean, obviously you've got a lot of different products that are highlighted in the presentation. Would it be possible for you to kind of walk through? I mean, we know the Vericals are for flares, but can you talk about the other two and kind of what their end use is, primary end use is?

Sure. So the first one, let's talk about the EXPECT custody transfer solution. So the EXPECT unit is a – third generation of our near infrared monitoring technology uh that served two purposes as far as one is they significantly brought down manufacturing costs that allowed us to put a unit that we could deploy at thousands of different well locations um in the in the us and it makes it cost effective for full-time monitoring year-round of these flows where we look at these custody transfer solutions. We look at composition of BTU quality 24 hours a day. That has, you know, we had talked about in Q3 about maybe having 11 sites running. In Q4, we actually exceeded that and got up to 14, and that's continuing to grow in Q1. So it's a very exciting piece. And what you see there is, you know, traditionally speaking, when a well is flowing, they're taking one composite sample every six to nine months. And then the operator and resource owner is compensated based on that net heating value and or BTU content or compositional breakdown. And what we see when we monitor and we're taking a measurement every five seconds, you're seeing consistent fluctuations throughout the day on the BTU values as well as the hydrocarbon composition, which could potentially leave money on the table either for the person who's buying in or the person who's receiving uh benefits right and so when you look at hundreds of thousands of wells this is a massive opportunity uh here for for flow tech in the future and it offers up a level of transparency that has never been seen inside of the uh i'll say that you know the crude and uh gas trading markets in terms of gas quality um and it's also a big driver that translates into what we do into the power generation as well because When we have units that are located, whether it be in an EXPECT unit or a VAREX unit at PowerGen locations, they're doing the same thing. We're monitoring net heating value or BTU quality, one, to look at fuel consumption and to protect the engines from overrev and the fires. And then, two, it allows for proper pay on the resource owners from the co-mingling aspects when you bring gas together at these sites. And so these are phenomenal opportunities when you start to see the requirements for mobile power gen and the protection of those, whether you're running AI data centers, you're looking at infrastructure on the industrial side, you're looking at rig power, you're looking at frack power, gas compression, whichever. It's a really large market. And those are some of the target areas for the new technologies. The final one I'll mention is our new Raman technology, where we have an exclusive agreement to bring brookers – Raman technology to the field. We actually have three of those in the field running now. We look for some continued sales for those in Q1. And they do a lot of things similar to what our original VAREC unit does in the, I would say, midstream to downstream component. We look at vapor pressure monitoring, flashpoint detection, refined fuels, and things of that nature. And they can actually see certain points uh depending on levels of aromatics different pieces you see they offer some unique advantages and it just is part of our complete measure more strategy to add weapons into our arsenal to continue to grow this data as a service business that was a lot of color and i appreciate all that one final one for me i mean obviously you have 14 of these units committed to pilot locations what what is the general term

of those pilot programs and do you expect, I mean, obviously it's dependent on results of the pilot program, but when do you think that more broad acceptance of this could happen? I mean, is that a three-month pilot program or six-month or a year? Just curious on that.

So most of them, what we have is we've been, the biggest pilot program we have is spread out darn over, three particular basins, one in Mexico, one in Texas, and one up in the north of near the DJ and Powder River. And so what we do there is we install the units. We'll go walk there as we do the installing units. And we've allowed them to have a 45-day monitoring period to to see how the equipment works uh see the data that value is going to provide and at the end of the 45 days they they kick into a multiple year type service revenue contract or they pay a monthly rental rate for the data and the service of having the unit there And so those, some of the units, I'd say the first installation, which was the first four or five, will come on live for generating revenue at the very end of this quarter, and then another four, and then another four, because there'll be a 20 total in that big pilot program. And so they'll actually start, we'll actually start to generate revenue in this segment in the second quarter of 25.

I appreciate the call, and I'll turn it back. Yeah.

Thank you. Next question will be from Jerry Sweeney at Roth Capital. Please go ahead, Jerry.

Good morning, Ryan, Vaughn, Mike. Thanks for taking my call. So I apologize, balancing a couple things here. So if this was asked or touched upon, I apologize in advance. But just want to stay on the data analytics side. Obviously, you're rolling it out. The subscription side is great. But maybe what are some of the key milestones we should keep an eye on for this year as you roll it out, maybe development, maybe what you're targeting, you know, longer term for units in the field, et cetera?

You know, I don't – you know, we're always conservative, Jerry. You've got no-sows period on the guys we give on that. I'm sorry. I had to ask. In terms of – but when I look at it in generalities, in terms of operation, you know, you look at – we were running – 13, 14 full rental flare units in Q4. We've got an additional five built to add into the fleet. So we're going to continue to make probably double-digit increases in those as we go out for the flare monitoring. I do believe that we're going to start to see a solid access to that, or should I say acceptance of that by the market and the growth there, just because it's being a regulatory body. I think that as we get past these larger use cases with custody transfer and we're able to put some of the data out for fully on these large-scale value-add projects for custody transfer, we will start to see that start to accelerate in the back half of the year. And, you know, those are hard to put a number on because those projects can come 25 to 30 units at a time, right, in terms of big deployment because there's so many wells. And so, we're a little cautious on that number yet because, you know, you could miss the mark plus or minus, but we do think we're going to see consistent movement there um and then we talked about we're going to be adding an additional at minimum nine to ten power gen uses in a solution that business is really exciting It's starting to take off because we're not only diversifying the customer base, but also the way we do the applications, whether it's in compression, frac power, we're looking at electricity for grid support, gas monitoring going to AI data centers. We've seen a lot of those coming to Texas. So there's a lot of unique opportunities there. And I think we're going to continue to probably add a little bit more color and numbers around those when we get to the Q1 numbers and we put some guidance out.

That's fair. That's actually good detail. I apologize. I didn't mean to necessarily put you on the spot there. That's all right. Bob will yell at me later. Natural gas. Natural gas demand feels as though it's picking up. Lots of talk into next year, LNG exports. You did mention international on the chemistry side, but just curious, maybe looking a little bit out onto the playing field for this year, next year in North America. or U.S. land. What are you thinking on that front, and how beneficial to chemistry, prescriptive chemistry, would that be if natural gas stays elevated and drilling picks up?

We've talked a lot about this last year. We were seeing a lot of the frack activity leave or migrate away from these gas-heavy basins. What I can tell you is that our unique partnership with ProFrack works very well in a majority of the gas spaces. Particularly, you look at the Haynesville, their proximity of materials and operations, everything works very well. And traditionally, we see a great uptick in revenue per fleet in the Haynesville just due to the higher pressures and temperatures you see on the frack and the complex systems that they run. So I think, as we mentioned earlier, we're a great hedge in our chemistry technologies in a strong natural gas environment. You also look at what all our measurement technologies can do when producing natural gas, the LNG exports and everything like that. This plays into the wheelhouse and the value chain of what flow tech can add in these gas basins. And when you start moving in pipeline and doing liquid natural gas exports. And, you know, these markets where you've seen the consolidation and you're looking at the return on invested capital, This is the wheelhouse and the strength of what Flowtech does in putting its proprietary technologies, providing transparency and performance operations, whether in chemistry or data analytics. And I think this plays well into our long-term strategy.

I appreciate it. And thanks for all the color. I really do appreciate it. Thank you.

Yep. Thanks, Jared.

Once again, ladies and gentlemen, a reminder to please press star followed by one if you have any questions. Next is Josh Jane at Daniel Energy Partners. Please go ahead, Josh.

Thanks. Good morning. I wanted to follow up on that last question quickly. You talked about revenue per fleet being higher in some of the gassy areas. So would that mean that in the chemistry business that margins would be higher in the event that we saw a lot more spending go towards gas-directed activity over the course of 2025 and 2026 versus just oily areas?

So, you know, that's a unique question in that there's two things that we consider. One is When you look at, let's say, for instance, the Haynesville, there's more advanced technologies just due to temperature and pressure and whether you're running a hybrid cross-link system combined with slick water and the different additives you need to stabilize that well from scale control, et cetera. And traditionally speaking, the higher-end technologies that's required in there are usually what we call value-add technologies, right? And so... Most of the way we look at margins is all just based on product mix and not total revenue. But no doubt, in a lot of these gas areas, we typically run a different or better surfactant choices. We run better scale and different, I would say, value-add items, which helps out our product mix better. usually a little bit to the better margin side than a less complex system that we use in West Texas, which traditionally will be slick water driven with a little biocide, you know, because it definitely plays into our higher end technology performance standards.

Okay, thanks. And then just on the oil side, there's obviously been a lot of volatility to start this year from the commodity price. Maybe you could just speak to in North America what you're seeing from your customer budget standpoint. Do you think that budgets potentially could change based on how oil has been acting this year? Or do you think budgets are pretty much locked for the year? Maybe just a comment on that and North America outlook.

You know, and, you know, this is always a little bit of a look into a really smoky crystal ball for us, right? Being on the services side here is that all in all, when you look at the potential impact at the macro level from what we're going to see from OPEC plus some of the larger I would say deep water operations in Guyana, some of the updates and operations you're seeing out of the North Sea, they're going to be providing incremental supply into a market that's probably not accepting it as fast as what we would like to see. So I think we're going to see a little bit of a glut that's going to put downward pressure on the liquid hydrocarbons. On the opposite side of that, I do think that the potential for LNG exports, what we're going to see on the power generation side of business stuff is really going to create a relatively bullish natural gas market in the back half of the year, rolling in 26. So hopefully that'll kind of help to balance each other out i do think that the level of diversification that we put into our revenue streams on the chemistry side with international our ability to operate in gas basins and our stabilization in the in the liquid components will add uh some insulation for us combined with our largest supply agreement with our largest customer and then you couple up with the data analytics business i think that puts us in a position to continue to perform in 2025 overall

Okay, thank you. And maybe just one more follow-up from my last question. Could you speak to, again, the growth from the external customer base? Even if you strip out international, given what's happened throughout North America from a rig count and frack crew perspective, it's been pretty significant on a year-over-year basis just looking at what the company has done. Could you speak to why you've been so successful? um for the customers who aren't using your chemistry technology today um where the opportunities are and maybe just speak to the total addressable market like how you know how much um opportunity there is still for that business to grow um in north america would be great thanks yeah so you know when you it's interesting uh we've seen a little bit of a transition on how we look at the market we used to

always just track it to potentially to the number of FRAC fleets. But now we've started adding some dimensions to it through some of the databases that we've linked inside of our AI monitoring systems around total footage drill, total footage completed, service intensity of the current fleets to where we're getting doing where, say, these 200 fleets are completing what 250 did 18 months ago, right? So we're trying to get a little bit better feel on that. But when you look at our ability to perform, I think what it comes into is the longer sales cycle it took us to get into what we call the prescriptive chemistry management and moving into the predictive chemistry management that we're doing to where we're not only able to prescribe the best chemistry that minimizes formation damage and enhances the producibility that well in the first 24 months comparison to the peer groups, when you really compare that to our total cost of ownership, environmental cost of ownership, and well improvements, we deliver significant ROI. And we've done enough projects now where this is really taking hold with a big piece of the customer base. There's no doubt the transactional nature of North American business is always going to put some commoditization pricing pressure. Our economy of scale has also allowed us to compete in some of those areas, but we always keep our mind on we want to be a part of that value-add business. And I think that our focus at doing that and this growth in the market share has helped contribute to the improvement in well performance here in North America over the past two years because at the end of, you know, 22, everybody's saying all these wells are just going to start to decline. In reality, they've outperformed in the past two years. And I think it has something to do with our, you know, customized interactive nature that we have with the customer base at North. looking at microfluidics, looking at sharing all the 20,000 wells we've completed below and having real transparent conversations with our customers to deliver the best well that we possibly can. And I think that's really worked well in North America. And I think that's going to continue as you're seeing this consolidation as, you know, the capital disciplines stay there and they want maximum return on these investments. And that's right in the wheelhouse of what we do here at Flowtech.

Thank you. I'll turn it back.

Thank you. Once again, ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. Next is a follow-up from Donald Crist. Please go ahead, Donald.

Thanks for letting me back in. Bon, just one for you. Should we expect working capital to unwind in the first quarter like it did last year? And secondarily, as you build out the data analytics, What kind of CapEx do you think that's going to require? I mean, I would assume that it's not big dollars, but you are going to be spending more in 25 than you did in 24 on the data analytics side, right?

Yeah, so, excuse me, on the first one, yes, we do expect... a tailwind, if you will, from working capital. As you know, we've got the short ball payment that accrues throughout the year, and it relieves itself, if you will, in the first quarter. So you'd expect a pretty significant reduction in AR in 1Q as we settle that OSP. As it relates to data analytics, yeah, I think this year we will spend more than we have in the past. It's not a huge amount of money when you factor in the fact that you know, we're going to collect this OSP and we'll have capital to build out that inventory. Now, I don't want to give you a specific number, but I would expect our capex to be higher than it has been historically in 2025.

All right. I appreciate it. I'll turn it back.

Thanks. Thank you. And at this time, I would like to turn the call back over to Mr. Ezell. Please go ahead, sir.

Yeah, so wrapping up today, we want to thank everyone for the time, and we look forward to continuing to execute the corporate strategy here at Flowtech, and we'll talk to you on the next call. Thank you again for joining us today.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we ask that you please disconnect your lines.