Flotek Industries, Inc.

Good morning, ladies and gentlemen, and welcome to the Flowtech Industries first quarter 2025 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 during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 7, 2025. I would now like to turn the conference over to Michael Crotelli, Director of Finance and Investor Relations. Please go ahead.

Thank you and good morning. We're thrilled to have you with us for Flow Tech's first quarter 2025 earnings conference call. Today, I'm joined by Ryan Ezell, Chief Executive Officer, and Vaughn Clement, Chief Financial Officer. We will start with prepared remarks covering our business operations, financial performance, and the acquisition announced on April 28, 2025. Following that, we will open up the floor for questions. Yesterday, we announced our first quarter 2025 results and updated earnings presentation, both of which are available on the investor relations section of our website. This call is being webcast with a replay available on our website shortly after its conclusion. 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. 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'll 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 first quarter of 2025 operational and financial results. Despite the dynamic geopolitical and macroeconomic challenges that have injected uncertainty within the market, the Flowtech team remains steadfast at the execution of our corporate strategy This laser focus resulted in the delivery of the strongest quarter in a decade and our strategic expansion into real-time data monitoring and gas conditioning in the energy infrastructure sector. In the first quarter of 2025, Flowtech continued its track record of increasing market share and profitability growth in both of our complementary business segments as we remain unwavering in our commitment to create value for our customers and shareholders through the convergence of innovative chemistry and data solutions. With that, I'd like to touch on some key highlights for the quarter that Bon will discuss later in the call. As part of our Measure More strategy in the data analytics segment, we acquired 30 real-time gas monitoring and dual fuel optimization assets. We also secured a $160 million multi-year contract poised to drive substantial earnings growth and free cash flow for the segment. First quarter 2025 results represented the fifth consecutive quarter of growth in revenue, gross profit, net income, and adjusted EBITDA. Total revenue during the quarter rose 37% versus the first quarter of 2024, highlighted by an 88% increase in external chemistry revenue, which is our strongest quarter in the last five years, and a 57% increase in data analytics revenue. Gross profit climbed 41% versus the first quarter of 2024, with first quarter 2025 gross profit margin rising to 23%. Net income and adjusted EBITDA were up 244% and 93% respectively versus the first quarter of 2024. Most importantly, all of these achievements were accomplished with zero lost time incidents in the field of operations. I'd like to take a moment to thank our employees for all their hard work and commitment to safety and service quality in achieving these outstanding results. I remain excited about Flowtech's future as we strengthen our position as a technology leader, spearheading innovation and delivering tailored chemistry and data solutions that meet our customers' specific needs. We're committed to shaping the industry's future by leveraging chemistry as the common value creation platform. Now, let's dive into the details referencing slide five of the earnings deck. Today, I want to spotlight the remarkable progress in our data analytics segment. We're particularly energized by three upstream technology applications, power generation, custody transfer, and flare monitoring, all of which are fueling significant advancements for our organization. The first is our transformative power generation solution, which has evolved from a novel analytical approach into a game changer for the energy infrastructure sector, which we call power tech. What began as advanced analytics has grown into a comprehensive end-to-end fuel management platform, redefining performance standards and operations within the sector. Looking at slide 6, on April 8, 2025, we acquired 30 patented real-time gas monitoring and dual fuel optimization assets. This transaction instantly strengthens our presence across all U.S. basins, adding turnkey capacity for fuel valuation, conditioning, and distribution to support remote energy services, data center, and grid power generation infrastructure. This acquisition also secures a six-year contract anchoring over $160 million in recurring revenue backlog, generating over $20 million in annual operating income, and boosting free cash flow. Importantly, this $160 million is just a starting point with additional revenue opportunities embedded in this contract. Moving to slide seven, at the heart of Powertech, is our Varex analyzer, which goes beyond data collection to deliver custody transfer grade measurements. It provides precise BTU and volume reporting for royalties, invoicing, and performance guarantees. Complementing this, our patented ESD trailers actively remove liquids and contaminants, conditioning our BTU hydrocarbon feeds to meet exact turbine or engine performance specifications. Because every site and grid condition are unique we've integrated coriolis metering automated cng blending and seamless backup connections allowing operators to switch fuels or go off grid with a single button resolving major constraints to the development of data center and grid power infrastructure but power tech is about more than just technology it's about control operators interact effortlessly through an on-trailer HMI or a unified web portal that is accessible on desktop, tablet, or smartphone. Our cloud-based portal enables the monitoring of live BTU trends, H2S alerts, Coriolis flow meter readings, and automated CNG blend controls combined with custom alarm thresholds to automatically isolate off-spec hydrocarbon feeds and protect high-value turbines or engines from catastrophic damage, thus minimizing downtime and operational risk while enhancing safety. All data flows securely through our patented edge-to-cloud pipeline, ensuring zero manual intervention, end-to-end encryption, full audit trails, and compliant custody transfer record keeping. Our expanded fleet is already making an impact, monitoring and managing over 50 million cubic feet of gas daily, transferring raw feedstock into optimized, safe fuel for our customers. Building on success, we're developing a smart filtration skid, which is a minimal footprint unit that integrates custody transfer analyzers to remove liquids, monitor BTU and emissions, and auto-divert out-of-spec gas. Capturing just 10% of the roughly 500 North American field gas engines could drive 50-plus skid rentals, generating an additional $10 to $14 million in annual revenue at 70% to 80% gross margins, all backed by robust precision measurement data. Finally, our over 30 data analytics patents, combined with five new patents from this acquisition, position Flowtech as a leader across the natural gas value chain. When considering our capabilities for advanced fuel blending, zero emissions analytics, custody transfer grade flow cell measurements, wireless ESD actuation, and secure edge-to-cloud data transmission, we deliver unmatched monitoring, control, and safety for fuel gas operations. Now, let's transition to slide eight, where we'll dive into our second upstream application, custody transfer. Since January of 2025, a leading E&P partner has been piloting this solution in multiple U.S. basins, and the results so far are encouraging. At a single pilot site, we have pinpointed an annual customer opportunity of up to $3.5 million of savings, highlighting the significant value this solution creates. Considering the potential scale of this EMP operator, the enterprise value creation at this level is driving further applications with eight custody transfer pilot locations set to transition to recurring DAS revenue in the second quarter of 2025 and more conversions planned throughout the year. Additionally, we are actively pursuing opportunities with domestic operators and targeted NOCs in the Middle East. By monitoring hydrocarbon quality and composition in real time and taking measurements every five seconds, we're positioned to unlock a new market for flow tech in 2025. This groundbreaking application sets a new standard in the oil and gas industry, delivering unprecedented transparency and minimizing enterprise risk for producing wells like never before. Let's move to our third upstream application, the VeriCal Flare Monitoring Solution. In the first quarter of 2025, we saw an uptick in demand following the EPA's regulatory updates released in late December of 2024. Starting in mid-February, customer interest accelerated, and by March, VeriCast sales gained momentum. We're thrilled about the growth potential in flair monitoring as we partner with operators and flair developers to develop value that goes beyond compliance, unlocking new efficiencies and environmental benefits for our clients. It's obvious the strategy to grow our data analytics segment is gaining traction, but what is most important is what it means for our stakeholders and investors. First, our DASH-driven strategy ensures predictable recurring revenue and cash flow, delivering stability and long-term value. Second, our proprietary technologies and superior measurement accuracy establish a high barrier to entry. securing client loyalty, and supporting our value-based service model. And third, long-term high-margin subscriptions position Flowtech for sustained growth and margin expansion, driving significant shareholder value over time. Now, looking over the next decade, global energy demands are projected to expand with sustained requirements to 2045, despite the ongoing market volatility and uncertainty in the near term. For the first time in nearly two decades, U.S. electricity consumption is expected to surge by 15% by 2030, with natural gas poised to fulfill most of this additional need. We foresee continued global economic growth, fueling a strong appetite for all energy sources, heightening service intensity across this entire sector. And lastly, our chemistry technology segment continues to deliver robust quarter-over-quarter growth driven by the differentiation of our prescriptive chemistry management services and our expanding presence in the UAE, Saudi Arabia, and Argentina, as shown on slide 13. Making an even deeper observation, slide 14 validates the strong performance of the segment as revenue and profitability grew despite the historical trend of the first quarter being sequentially weaker than Q4 and overall market consolidation. It should be noted that the anticipated downward pressure on oil prices in the second half of 2025 prompted operators to accelerate first half completion activity, taking advantage of the higher prices and, in turn, increasing PCM adoption for enhancing asset value in the first half of the year. It's evident that our chemistry team has executed our strategy flawlessly, steadily capturing market share while creating value for customers. While Q2 schedules remain strong, uncertainties around activity levels in the second half of 2025 persist due to macro factors that could affect the completion chemistry market. However, we remain focused on defying these challenges, delivering differentiated chemistry and data services to provide our customers with industry-leading returns on their investment. We are confident that our expanding suite of services positions us to deliver superior solutions to a variety of industry's most challenging problems while maximizing our customers' value chain. Now I'll turn the call over to Debon to provide key financial highlights.