Flotek Industries, Inc.

Good morning, ladies and gentlemen. Welcome to Flutec Industries' second quarter 2025 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, August 6, 2025. I would now like to turn the conference over to Michael Crutelli, Director of Finance and Investment Relations, please go ahead.

Thank you, and good morning. We are thrilled to have you with us for Flowtech's second quarter 2025 earnings conference call. Today, I'm joined by Ryan Ezell, Chief Executive Officer, and Bon Clement, Chief Financial Officer. We will start with prepared remarks covering our business operations and financial performance. Following that, we will open up the floor for questions. Yesterday, we announced our second quarter 2025 results and an 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 may include forward-looking statements, which include our projections or expectations for future events. 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 those projected in forward-looking statements. We advise listeners to review our earnings release and most recent 10 and 10 violence for a more complete description of risk factors that could cause actual results to materially differ from those projected in forward-looking statements. 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 second quarter of 2025 operational and financial results. Throughout the quarter, the sector continued to face dynamic geopolitical and macroeconomic challenges that have generated volatility within the commodities market. Despite these headwinds, the Flowtech team demonstrated a resilient focus on executing our corporate strategy, driving transformation, and delivering our sixth consecutive quarter of revenue and gross profit growth alongside our 11th consecutive quarter of adjusted EBITDA improvement. As a result, Flowtech continued its track record of increasing market share in both of our complementary business segments as we remain unwavering in our commitment to excellence and value creation for our shareholders and customers throughout the convergence of innovative data and chemistry solutions. With that, I'd like to touch on some key highlights for the quarter referenced in slide 5 that Bob 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 to accelerate Flowtech's strategic expansion into the energy infrastructure sector. Twenty-six were operating at the end of July, and all 30 are expected to be operating by January 1, 2026. We continue to build our revenue backlog in the data analytics segment by securing a multi-year contract estimated to deliver $156 million in revenue while providing substantial earnings growth and free cash flow for the segment. Total revenue during the quarter rose 26% versus the second quarter of 2024, highlighted by 189% increase in data analytics revenue, our strongest quarter ever. and a 38% increase in external chemistry revenue. Gross profit climbed 57% versus the second quarter of 2024, with the second quarter of 2025 gross profit margin rising to 25%. Net income totaled $1.8 million. However, excluding $4.2 million in asset acquisition expenses, adjusted net income totaled $6 million. which is a 202% improvement versus the second quarter of 2024 and more than a 10% improvement sequentially. And adjusted EBITDA was up 113% versus the second quarter of 2024 and up more than 20% sequentially. And above all, these milestones were achieved with zero lost time incidents in the field of operations. I also want to spotlight our MTI facility in Raceland, Louisiana, which has remarkably maintained a 10-year record with no portion recordables. During that period, MTI has moved over 350 million pounds of dry products and 5.3 million gallons of liquid products, such an extraordinary feat. So we want to thank all of our employees for 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 data and chemistry solutions that meet our customer-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 9 of the Investor Earnings Day. Today, I want to spotlight the remarkable progress in our data analytics segment, which saw service revenues increase 452% in the second quarter of 2025 versus the second quarter of 2024, elevating gross profit to 63% in the second quarter of 2025 versus 30% in the same quarter a year ago. This transformational growth in data-driven service revenue is empowered by three upstream technology applications. power generation, custody transfer, and flare monitoring, all of which are fueling significant advancements for our organization while generating recurring revenue backlog. 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 that 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 11, in April of 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 and mobile energy services data center, and grid power generation infrastructure. In connection with the asset acquisition, we also secured a six-year contract anchoring an estimated $156 million in recurring revenue backlog while generating improvements in annual operating income and boosting free cash flow. At the heart of PowerTech is our VARACS analyzer, which goes beyond data collection to deliver custody transfer grade measurements. It provides precise BTU, volume reporting for royalties, invoicing, and performance guarantees. Complementing this, our patented ESD trailers actively remove liquids and contaminants, conditioning high 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 PowerTech is about more than just technology. It's about control. Operators interact seamlessly 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 all 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 and end-to-end encryption, full audit trails, and compliant custody transfer record keeping. Building on this success, we've also taken delivery of our first Smart Filtration Skid, a minimal footprint unit that integrates custody transfer analyzers to remove liquids, monitor BTU and emissions, and auto-divert out-of-spec gas. Focused on expanding our external customer base, we expect field deployment in the third quarter of 2025 with a potential capital expenditure payback in less than three months. Finally, over 35 data analytics patents position Flowtech as a leader across the natural gas value chain. We're considering our capabilities for advanced fuel blending. zero emissions analytics, custody transfer gate flow cell measurements, wireless ESD actuation, and secure edge-to-cloud data transmission, we deliver unmatched monitoring, control, and safety for field gas operations. Now, let's transition to slide 12, where we'll dive into our second upstream application, custody transfer. This January of 2025, a leading EMP partner has been piloting this solution in multiple basins. At a single pilot site, we pinpointed an annual customer opportunity of up to $3.5 million. This highlights the significant value the solution creates. Currently, nine of the custody transfer locations are now fully commercial, converting to recurring monthly revenue. Six additional locations are expected to convert to recurring monthly revenue in the third quarter of 2025, with further expansion expected. Additionally, we are actively pursuing opportunities with other domestic operators and targeted NOCs in the Middle East. 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. By monitoring hydrocarbon quality and composition in real time and taking the measurements every five seconds, we've successfully unlocked a new market for FlowTac. Let's move to our third upstream application, the VeriCal Flare Monitoring Solution. We continue to see operational demand in the second quarter of 2025, realizing nearly $1 million in revenue. We're navigating through the rapidly changing regulatory landscape and partnering with operators and flare developers to deliver value that goes beyond compliance, unlocking new efficiencies and environmental benefits for our clients. It's clear that our transformational strategy to grow the data analytics segment through upstream applications is gaining traction. But what is most important is what it means for our stakeholders and investors. Our DASH-driven strategy ensures predictable recurring revenue and cash flow, delivering stability and long-term value. Our proprietary data technologies and superior measurement accuracy enables velocity and decision control that establish a high barrier to entry. secure client loyalty, and support our value-based service model. And long-term, high-margin subscriptions position Flowtech for sustained growth and margin expansion, driving significant shareholder value over time. Now, lastly, our chemistry technology segment continues to deliver robust performance driven by the differentiation of our prescriptive chemistry management services and our expanding international presence, as shown on slide 13. Slide 14 underscores the resilient performance of our chemistry segment, with second quarter 2025 revenue surging 38% year over year, despite a 24% decline in average active frack fleets during the same period. While we anticipate potential commodity price volatility in the second half of 2025, we view this as a strategic opportunity to further expand our market share by accelerating the adoption of our prescriptive chemistry management solutions and enhancing asset values for our customers. It's evident that our chemistry team has executed our strategy flawlessly, despite the near to medium-term headwinds. While uncertainties around activity levels in the second half of 2025 persist due to the macro factors that could affect the completion chemistry market, 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 position us to deliver 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 Bon to provide key financial highlights.