Flotek Announces First Quarter 2024 Results Reflecting Improved Profitability
Flotek Industries, Inc. announced improved profitability in Q1 2024 with significant growth in gross profit and adjusted EBITDA. Net income increased by $10.8 million compared to Q1 2023, excluding non-cash gains. The company expects a boost in margins and adjusted EBITDA for 2024, following cost reductions in 2023. CEO Dr. Ryan Ezell highlighted positive financial trends and revenue growth in various segments, emphasizing resilience and profitability.
Significant growth in gross profit, adjusted gross profit, and adjusted EBITDA in Q1 2024.
Improved net income by $10.8 million compared to Q1 2023, excluding non-cash gains.
Anticipated substantial increase in margins and adjusted EBITDA for full year 2024.
CEO highlighted positive financial trends and revenue growth in key segments.
Decline in total revenues by 16% in Q1 2024 compared to Q1 2023.
Net income decrease from $21.3 million in Q1 2023 to $1.6 million in Q1 2024.
External chemistry customer sales declined sequentially in Q1 2024.
Insights
Flotek Industries' first quarter results exhibit a notable disparity between profitability and revenue streams. The company's gross profit margin saw an impressive uptick to 22%, a clear indication that cost-cutting measures and operational efficiencies are starting to bear fruit. This improvement is vital, as it suggests a strengthening core business model, which is important for sustainable growth.
On the other hand, the 16% decline in total revenues sparks concern. It's essential to dissect the composition of this decline. If it's predominantly due to cyclical or one-off events, it may be less worrying. However, if the revenue dip reflects a loss of market share or competitive edge, that could spell trouble for future earnings stability. An investor should weigh these contrasting aspects when considering Flotek's financial health.
From a market perspective, Flotek's sequential growth in ProFrac related revenue and the increase in data analytics segment revenues are positive signals. They reflect the company's potential to tap into niche markets with specialized services. The 27% year-over-year growth in external chemistry customer sales is another highlight, hinting at a robust product offering that resonates with the market needs.
However, the investor should be cautious. Seasonal fluctuations are normal, but the ability to smooth out these peaks and troughs will be a test of Flotek's market strategy and resilience. Revenue growth in subsequent quarters, particularly in the data analytics and external chemistry segments, will be important indicators of the company’s ability to sustain and leverage its market position.
Investors should also consider the underlying risks associated with Flotek’s financial structure. The significant year-over-year improvement in net income and the reduction in borrowings under the Asset Based Loan by 58% are definitely positives, implying a stronger balance sheet. However, the dramatic swing in net income, driven in part by non-cash gains the previous year, calls for a critical eye. Investors need to assess the quality of earnings, distinguishing between operational performance and financial engineering.
Moreover, given the industry's volatility, Flotek's forward-looking statements about margin improvements and adjusted EBITDA need to be scrutinized against industry benchmarks and economic trends. An informed investor should consider not just the numbers but the narrative behind them and the external factors that might influence future performance.
Financial Summary (in thousands, except per share amounts)
Three months ended March 31, | ||||||
2024 | 2023 | % Change | ||||
Total Revenues | $ 40,374 | $ 48,007 | (16) % | |||
Gross Profit | $ 8,821 | $ 1,880 | 369 % | |||
Adjusted Gross Profit (1) | $ 10,075 | $ 2,647 | 281 % | |||
Net Income | $ 1,562 | $ 21,343 | (93) % | |||
Diluted Income (Loss) Per Share | $ 0.05 | $ (0.12) | n/a | |||
Adjusted EBITDA (1) | $ 4,026 | $ (3,851) | n/a | |||
First Quarter 2024 Highlights
- Reported net income of
$1.6 million $21.3 million $30.6 million $10.8 million - Delivered significant year-over-year improvements in gross profit, adjusted gross profit(1) and adjusted EBITDA(1) of
$6.9 million $7.4 million $7.9 million - Realized gross profit margin and adjusted gross profit margin(1) of
22% and25% , respectively. - Achieved the 3rd consecutive quarter of net income and 11th consecutive quarter of improvement in adjusted EBITDA(1) as a percentage of revenue.
- Reduced borrowings outstanding under the Asset Based Loan by
58% (or$4.4 million
Full Year 2024 Profitability Outlook
As a result of the numerous cost reductions and efficiency gains implemented throughout 2023, the Company expects a substantial increase in margins compared to 2023. In 2023, our gross margin was
Management Commentary
Chief Executive Officer Dr. Ryan Ezell commented, "Our first quarter results continue the positive financial and operational trends that began during 2022. We achieved our third consecutive quarter of net income. Adjusted EBITDA(1) during the quarter exceeded the entire year of 2023. Using the mid-point of our guidance, we expect a nearly
During the quarter we realized
Our numerous financial improvements continue to validate the initiatives executed over the past 18 months aimed at building a resilient business that can sustain profitability through the volatility inherent in our industry."
First Quarter 2024 Financial Results
- Revenue: Flotek reported total revenues of
$40.4 million $7.6 million 16% , compared to total revenues of$48.0 million 13% increase in revenue from external customers.
Revenue from external chemistry customers during the first quarter 2024 declined by approximately$6.0 million
Revenue associated with the Company's data analytics segment increased to$1.7 million 18% improvement as compared to the fourth quarter 2023. Revenues from data analytics totaled$2.5 million - Gross Profit: The Company generated gross profit of
$8.8 million $1.9 million - Adjusted Gross Profit (Non-GAAP)(1): Flotek generated adjusted gross profit of
$10.1 million $2.6 million - Selling, General and Administrative ("SG&A") Expense: SG&A expense totaled
$6.1 million $6.5 million - Net Income and EPS: Flotek reported net income of
$1.6 million $0.05 $21.3 million $(0.12) $26.1 million $4.5 million - Adjusted EBITDA (Non-GAAP)(1): Adjusted EBITDA was
$4.0 million $3.9 million
(1) A non-GAAP financial measure. See the "Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings" section in this release for more information, including reconciliations to the most comparable GAAP measures. |
(2) A non-GAAP financial measure. See the "Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings" section in this release for more information, including reconciliations to the most comparable GAAP measures. We are unable to reconcile this forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measure without unreasonable efforts, as we are unable to predict with a reasonable degree of certainty the impact of certain items that would be expected to impact the GAAP financial measure, including, among other items, the future amortization of our contract assets, certain stock-based compensation costs and the impact of the revaluation of certain liabilities, which is based upon our future stock price. These items do not impact the non-GAAP financial measure. |
Conference Call Details
Flotek will host a conference call on May 8, 2024, at 9:00 a.m. CT (10:00 a.m. ET) to discuss its first quarter 2024 results. Participants may access the call through Flotek's website at www.flotekind.com under "News" within the Investor Relations section or by telephone toll free at 1-800-836-8184 (international toll: 1-646-357-8785) approximately five minutes prior to the start of the call. Following the conclusion of the conference call, a recording of the call will be available on the Company's website.
An updated corporate presentation that will be referenced on the call will be posted to the Investor Relations section of Flotek's website at www.flotekind.com prior to the start of the earnings conference call.
About Flotek Industries, Inc.
Flotek Industries, Inc. is an advanced technology-driven, green chemical and data analytics company providing unique and innovative completion solutions that have a proven, positive impact on sustainability and reducing the overall environmental impact of energy on air, land, water and people. Flotek has an intellectual property portfolio of over 170 patents and a global presence in more than 59 countries throughout
Flotek is based in
Forward-Looking Statements
Certain statements set forth in this press release constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Flotek Industries, Inc.'s business, financial condition, results of operations and prospects. Words such as will, continue, expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this press release. Although forward-looking statements in this press release reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Further information about the risks and uncertainties that may impact the company are set forth in the Company's most recent filing with the Securities and Exchange Commission on Form 10-K (including, without limitation, in the "Risk Factors" section thereof), and in the Company's other SEC filings and publicly available documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this press release.
FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, 2024 | December 31, 2023 | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 5,219 | $ 5,851 | |
Restricted cash | 100 | 102 | |
Accounts receivable, net of allowance for credit losses of | 10,718 | 13,687 | |
Accounts receivable, related party, net of allowance for credit losses of | 38,655 | 34,569 | |
Inventories, net | 13,871 | 12,838 | |
Other current assets | 2,686 | 3,564 | |
Current contract asset | 7,019 | 5,836 | |
Total current assets | 78,268 | 76,447 | |
Long-term contract assets | 66,369 | 68,820 | |
Property and equipment, net | 5,061 | 5,129 | |
Operating lease right-of-use assets | 4,336 | 5,030 | |
Deferred tax assets, net | 91 | 300 | |
Other long-term assets | 1,725 | 1,787 | |
TOTAL ASSETS | $ 155,850 | $ 157,513 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable | $ 35,952 | $ 31,705 | |
Accrued liabilities | 3,365 | 5,890 | |
Income taxes payable | 78 | 45 | |
Current portion of operating lease liabilities | 2,083 | 2,449 | |
Current portion of finance lease liabilities | 13 | 22 | |
Asset-based loan | 3,111 | 7,492 | |
Current portion of long-term debt | 179 | 179 | |
Total current liabilities | 44,781 | 47,782 | |
Deferred revenue, long-term | 35 | 35 | |
Long-term operating lease liabilities | 7,121 | 7,676 | |
Long-term debt | 15 | 60 | |
TOTAL LIABILITIES | 51,952 | 55,553 | |
Commitments and contingencies | |||
Stockholders' equity: | |||
Preferred stock, | — | — | |
Common stock, | 3 | 3 | |
Additional paid-in capital | 463,484 | 463,140 | |
Accumulated other comprehensive income | 169 | 127 | |
Accumulated deficit | (325,244) | (326,806) | |
Treasury stock, at cost; 1,111,707 and 1,108,707 shares at March 31, 2024 and December 31, 2023, respectively | (34,514) | (34,504) | |
Total stockholders' equity | 103,898 | 101,960 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 155,850 | $ 57,513 |
FLOTEK INDUSTRIES, INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended March 31, | ||||
2024 | 2023 | |||
Revenue: | ||||
Revenue from external customers | $ 13,180 | $ 11,652 | ||
Revenue from related party | 27,194 | 36,355 | ||
Total revenues | 40,374 | 48,007 | ||
Cost of goods sold | 31,553 | 46,127 | ||
Gross profit | 8,821 | 1,880 | ||
Operating costs and expenses: | ||||
Selling, general, and administrative | 6,084 | 6,451 | ||
Depreciation | 220 | 176 | ||
Research and development | 406 | 614 | ||
Severance costs | 3 | 2,223 | ||
Gain in fair value of Contract Consideration Convertible Notes Payable | — | (26,095) | ||
Total operating costs and expenses | 6,713 | (16,631) | ||
Income from operations | 2,108 | 18,511 | ||
Other income (expense): | ||||
Paycheck protection plan loan forgiveness | — | 4,522 | ||
Interest expense | (278) | (1,672) | ||
Other expense, net | (26) | (9) | ||
Total other income (expense), net | (304) | 2,841 | ||
Income before income taxes | 1,804 | 21,352 | ||
Income tax expense | (242) | (9) | ||
Net income | $ 1,562 | $ 21,343 | ||
Income (loss) per common share: | ||||
Basic | $ 0.05 | $ 1.30 | ||
Diluted | $ 0.05 | $ (0.12) | ||
Weighted average common shares: | ||||
Weighted average common shares used in computing basic income (loss) per common share | 29,431 | 16,468 | ||
Weighted average common shares used in computing diluted income (loss) per common share | 30,316 | 26,462 | ||
FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended March 31, | |||
2024 | 2023 | ||
Cash flows from operating activities: | |||
Net income | $ 1,562 | $ 21,343 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Change in fair value of contingent consideration | (26) | (359) | |
Change in fair value of Contract Consideration Convertible Notes Payable | — | (26,095) | |
Amortization of convertible note issuance costs | — | 83 | |
Payment-in-kind interest expense | — | 1,571 | |
Amortization of contract assets | 1,267 | 1,251 | |
Depreciation and amortization | 220 | 176 | |
Amortization of asset-based loan origination costs | 85 | — | |
Provision for credit losses, net of recoveries | 32 | 23 | |
Provision for excess and obsolete inventory | 285 | 258 | |
Non-cash lease expense | 694 | 977 | |
Stock compensation expense | 311 | (1,112) | |
Deferred income tax expense (benefit) | 209 | (6) | |
Paycheck protection plan loan forgiveness | — | (4,522) | |
Changes in current assets and liabilities: | |||
Accounts receivable | 2,937 | 3,504 | |
Accounts receivable, related party | (4,086) | (3,546) | |
Inventories | (1,318) | (441) | |
Other assets | 856 | (470) | |
Accounts payable | 4,246 | 8,554 | |
Accrued liabilities | (2,499) | 1,236 | |
Operating lease liabilities | (921) | (1,190) | |
Income taxes payable | 33 | (87) | |
Interest payable | — | (8) | |
Net cash provided by operating activities | 3,887 | 1,140 | |
FLOTEK INDUSTRIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(continued)
Three Months Ended March 31, | |||
2024 | 2023 | ||
Cash flows from investing activities: | |||
Capital expenditures | (152) | (157) | |
Net cash used in investing activities | (152) | (157) | |
Cash flows from financing activities: | |||
Payment for forfeited stock options | — | (617) | |
Payments on long term debt | (45) | (15) | |
Proceeds from asset-based loan | 38,800 | — | |
Payments on asset-based loan | (43,181) | — | |
Payments to tax authorities for shares withheld from employees | (9) | (200) | |
Proceeds from issuance of stock | 33 | 20 | |
Payments for finance leases | (9) | (6) | |
Net cash used in financing activities | (4,411) | (818) | |
Effect of changes in exchange rates on cash and cash equivalents | 42 | (21) | |
Net change in cash and cash equivalents and restricted cash | (634) | 144 | |
Cash and cash equivalents at the beginning of period | 5,851 | 12,290 | |
Restricted cash at the beginning of period | 102 | 100 | |
Cash and cash equivalents and restricted cash at beginning of period | 5,953 | 12,390 | |
Cash and cash equivalents at end of period | 5,219 | 12,433 | |
Restricted cash at the end of period | 100 | 101 | |
Cash and cash equivalents and restricted cash at end of period | $ 5,319 | $ 12,534 | |
FLOTEK INDUSTRIES, INC.
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings
(in thousands)
Three Months Ended March 31, | Twelve Months | |||||
2024 | 2023 | 2023 | ||||
Gross profit | $ 8,821 | $ 1,880 | $ 24,263 | |||
Stock compensation expense | 4 | (140) | (132) | |||
Severance and retirement | 9 | 15 | 29 | |||
Contingent liability revaluation | (26) | (359) | (527) | |||
Amortization of contract assets | 1,267 | 1,251 | 5,033 | |||
Adjusted Gross profit (Non-GAAP) (1) | $ 10,075 | $ 2,647 | $ 28,666 | |||
Net income | $ 1,562 | $ 21,343 | $ 24,713 | |||
Interest expense | 278 | 1,672 | 2,857 | |||
Income tax expense | 242 | 9 | 149 | |||
Depreciation and amortization | 220 | 176 | 734 | |||
EBITDA (Non-GAAP) (1) | $ 2,302 | $ 23,200 | $ 28,453 | |||
Stock compensation expense | 311 | (1,112) | (268) | |||
Severance and retirement | 12 | 2,238 | (17) | |||
Contingent liability revaluation | (26) | (359) | (527) | |||
Gain on disposal of assets | — | — | (38) | |||
PPP loan forgiveness | — | (4,522) | (4,522) | |||
Contract Consideration Convertible Notes Payable revaluation adjustment | — | (26,095) | (29,969) | |||
Amortization of contract assets | 1,267 | 1,251 | 5,033 | |||
Non-Recurring professional fees | 160 | 1,548 | 3,343 | |||
Adjusted EBITDA (Non-GAAP) (1) | $ 4,026 | $ (3,851) | $ 1,488 | |||
(1) Management believes that adjusted gross profit, EBITDA and adjusted EBITDA for the three months ended March 31, 2024, 2023, and 12 months ended December 31, 2023, are useful to investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods. Management views the income and expenses noted above to be outside of the Company's normal operating results. Management analyzes operating results without the impact of the above items as an indicator of performance, to identify underlying trends in the business and cash flow from continuing operations, and to establish financial and operational goals, excluding certain non-cash or non-recurring items. | ||||||
View original content to download multimedia:https://www.prnewswire.com/news-releases/flotek-announces-first-quarter-2024-results-reflecting-improved-profitability-302138751.html
SOURCE Flotek Industries, Inc.
FAQ
What were Flotek's total revenues in Q1 2024?
Flotek reported total revenues of $40.4 million in Q1 2024.
How did Flotek's net income change from Q1 2023 to Q1 2024?
Net income decreased from $21.3 million in Q1 2023 to $1.6 million in Q1 2024.
What is Flotek's stock symbol?
Flotek's stock symbol is FTK.
What is Flotek's CEO's name?
Flotek's CEO is Dr. Ryan Ezell.
What financial improvements were highlighted in Flotek's Q1 2024 results?
Flotek highlighted improvements in gross profit, adjusted gross profit, and adjusted EBITDA in Q1 2024.
