Flotek Announces Q4 And Full-Year 2020 Results
Flotek Industries (NYSE: FTK) reported its fourth quarter and full-year results for 2020, revealing a consolidated revenue of $12.1 million, down 5% from Q3 and 38% year-over-year. The company faced a loss from continuing operations of $17.7 million, although this was an improvement from a $36.9 million loss in Q4 2019. Adjusted EBITDA loss narrowed to $6.8 million from $8.5 million. Flotek's cost-cutting initiatives reduced expenses by 40.4%. The company invested in its business and launched new products to capture growth opportunities, particularly in ESG and digital analytics.
- Adjusted EBITDA loss narrowed to $6.8 million in Q4 2020, improving from $8.5 million loss in Q4 2019.
- Cost-cutting initiatives reduced annualized expenses by approximately 40.4%.
- Expansion into new product lines, such as Flotek Protekol™ for cleaning and sanitizing.
- Data Analytics segment sales improved 91.8% sequentially to $1.3 million.
- Consolidated revenue fell 38% year-over-year to $12.1 million in Q4 2020.
- Loss from continuing operations increased to $136.5 million for the full year 2020, up from $76.1 million in 2019.
- Chemistry Technologies segment sales decreased 10.2% sequentially to $10.8 million.
HOUSTON, March 16, 2021 /PRNewswire/ -- Flotek Industries, Inc. ("Flotek" or the "Company") (NYSE: FTK) today announced results for the fourth quarter and full-year ended December 31, 2020.
"We faced extraordinary challenges in 2020, but we remained focused and opportunistic in the face of a global pandemic and an extremely volatile macro-environment. While we continue to face challenges of lower global demand and industry pressures impacting both segments, we have improved our operational efficiencies and found new ways to create, diversify, and grow profitable revenue, resulting in improved adjusted EBITDA on approximately half the revenue year-over-year," said John W. Gibson, Jr., Chairman, President, and Chief Executive Officer.
"It was a transformational year for Flotek for multiple reasons. Flotek made investments in the business to create a strong foundation for 2021 and beyond. Through our acquisition of JP3, we diversified our revenue stream across the hydrocarbon value chain and are well-positioned to capture long-term growth as early adopters of the digital transformation of chemistry. Second, with the launch of our cleaning and sanitizing product lines, we leveraged our existing supply chain, facilities, and chemistries to generate margin-accretive revenue. Finally, we have enhanced our focus on ESG and are well positioned to partner with customers seeking to improve their ESG performance with our products and services that help to improve the safety, reliability, and efficiency of their operations. Looking ahead, we seek to grow our energy-focused products and services internationally, increase the domestic market share of our products as the energy market recovers in the latter half of 2021 and expand our ESG-related product offerings."
Fourth Quarter and Full-Year 2020 Financial Results
- Consolidated Revenues: Flotek generated fourth quarter 2020 consolidated revenue of
$12.1 million , down5.0% from$12.7 million in the third quarter, and below$19.5 million in the fourth quarter last year. The decline continues to be driven by volatility in the macro-environment for U.S. onshore drilling and completion activity, further impacted by global economic events, as well as concerns related to COVID-19 pressuring productivity and customer demand across the oil and gas market. - Loss from Continuing Operations: The Company reported a loss from continuing operations for the fourth quarter 2020 of
$17.7 million , or a loss of$0.30 per diluted share, compared to a loss from continuing operations in the fourth quarter 2019 of$36.9 million , or a loss of$0.64 per diluted share. - Terpene Agreement: The loss from continuing operations includes a loss of
$9.4 million in the fourth quarter related to the Company's amended terpene agreement due to adjustments to the Company's expected usage of terpene. - Consolidated Operating Expenses: Consolidated operating expenses (excluding depreciation and amortization) were
$24.3 million in the fourth quarter 2020, which contributed to a42.6% decline from$42.4 million in the same period last year. The decline was driven by a reduction in overall compensation spending, lower discretionary spending, including professional fees, partially offset by one-time severance charges and discretionary bonuses. - Corporate, General, & Administrative Expenses: Corporate general and administrative expenses for the fourth quarter of 2020 were
$3.7 million compared to$9.0 million for the fourth quarter of 2019. - Adjusted EBITDA: Adjusted EBITDA for the fourth quarter 2020 was a loss of
$6.8 million , which narrowed from the loss of$8.5 million during the fourth quarter of 2019, driven by headcount and expense reductions in freight, equipment rentals, and travel & entertainment. - For the full-year 2020, Flotek generated revenue of
$53.1 million , a loss from continuing operations of$136.5 million , compared to revenue of$119.4 million , a loss from continuing operations of$76.1 million for the full-year 2019. - Full-year 2020 adjusted EBITDA loss was
$26.2 million , compared to an adjusted EBITDA loss of$33.1 million for the full-year 2019. - For the full-year 2020, the Company's cost-cutting and process improvement initiatives reduced annualized expenses by approximately
40.4% across the enterprise.
Balance Sheet and Liquidity
As of December 31, 2020, the Company had cash and equivalents of
Chemistry Technologies Segment
In the fourth quarter, sales in the Chemistry Technologies segment declined sequentially
During the fourth quarter, Flotek implemented several initiatives with the goal to be the collaborative partner of choice for chemistry technology.
Energy Chemistry
- The Company relaunched the Flotek brand to elevate its enhanced value approach.
- The Company is targeting a customer base with sustainable activity and operational programs, particularly in unconventional shale markets, whose strategic objectives align with Flotek's proven performance and value proposition of cost-effective chemistry solutions that can improve production at lower cost per barrel produced.
- Flotek deployed sustainable chemistry technologies for customer efficacy and profitability, offering cost-effective, greener and safer chemistry solutions, for companies seeking to improve their ESG performance.
Professional Chemistry
- Flotek expanded its product offerings and technologies and announced the launch of its new professional chemistries brand Flotek Protekol™, which includes a robust line of surface cleaners, degreasers, wipes, disinfectants and sanitizers.
- As the Company builds its long-term business strategy, it has partnered with Matt Lazlo as a strategic advisor. A former Clorox executive, Lazlo brings more than 25 years of experience serving in senior business, sales and marketing roles across consumer, commercial, retail, e-Commerce and industrial markets for Clorox.
- The Company executed a strategic agreement with a major global manufacturer of specialty and intermediate chemicals to produce and package EPA-registered disinfectant wipes.
Data Analytics Segment
In the fourth quarter, Data Analytics' sales improved
During the fourth quarter, Flotek continued to enhance its offerings and increase its efficiency in delivering solutions, while targeting new customers and markets to transform their businesses through real-time data and analytics. Highlights include:
- Progressed its international market entry strategy, continuing meaningful engagement with potential customers in the Middle East, Africa and Asia, and securing its first pilot in the Middle East.
- Implemented software development enhancements by accelerating Artificial Intelligence and machine learning capabilities, improving the precision of our measurement between batches of refined hydrocarbon products – reducing time, waste and money spent.
- Began streamlining the Company's sampling process to improve operational efficiencies, reduce costs to customers and increase speed to commissioning JP3's systems to customers.
Board of Directors Updates
- Kevin Brown, a director that joined the Company's Board in June 2020 following the acquisition of JP3, passed away unexpectedly in January. Harsha Agadi has been appointed to the Audit Committee to replace Mr. Brown.
- Flotek has created the Risk and Sustainability Committee, a new committee designated to oversee risk, which will be chaired by director Mike Fucci.
- Director Michelle M. Adams will not stand for re-election at the 2021 annual meeting of stockholders of the Company, due to outside demands on her time and her schedule.
- The Board has engaged Heidrick & Struggles to conduct the search for a replacement director.
Conference Call Details
Flotek will host a conference call on Tuesday, March 16, 2021, at 4:00 pm CDT (5:00 p.m. EDT) to discuss its fourth quarter and full-year operating results ended December 31, 2020. To participate in the call, participants should dial 844-835-9986 approximately five minutes prior to the start of the call. The call can also be accessed from Flotek's website at www.flotekind.com.
About Flotek Industries, Inc.
Flotek Industries, Inc. is a technology-driven, specialty chemistry and data company that serves customers across industrial, commercial and consumer markets. Flotek's Chemistry Technologies segment develops, manufactures, packages, distributes, delivers, and markets high-quality sanitizers and disinfectants for commercial, governmental and personal consumer use. Additionally, Flotek empowers the energy industry to maximize the value of their hydrocarbon streams and improve return on invested capital through its real-time data platforms and chemistry technologies. Flotek serves downstream, midstream and upstream customers, both domestic and international. Flotek is a publicly traded company headquartered in Houston, Texas, and its common shares are traded on the New York Stock Exchange under the ticker symbol "FTK." For additional information, please visit Flotek's web site at www.flotekind.com.
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) | |||
December 31, 2020 | December 31, 2019 | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | 38,660 | $ 100,575 | |
Restricted cash | 664 | 663 | |
Accounts receivable, net of allowance for doubtful accounts of | |||
and | 11,764 | 15,638 | |
Inventories, net | 11,837 | 23,210 | |
Income taxes receivable | 403 | 631 | |
Other current assets | 3,127 | 13,191 | |
Total current assets | 66,455 | 153,908 | |
Property and equipment, net | 9,087 | 39,829 | |
Operating lease right-of-use assets | 2,320 | 16,388 | |
Goodwill | 8,092 | — | |
Deferred tax assets, net | 223 | 152 | |
Other intangible assets, net | - | 20,323 | |
Other long-term assets | 33 | — | |
TOTAL ASSETS | $ 86,210 | $ 230,600 | |
LIABILITIES AND STOCKHOLDERS' & EQUITY | |||
Current liabilities: | |||
Accounts payable | $ 5,787 | $ 16,231 | |
Accrued liabilities | 18,275 | 24,552 | |
Income taxes payable | 21 | — | |
Interest payable | 34 | — | |
Current portion of operating lease liabilities | 636 | 486 | |
Current portion of finance lease liabilities | 60 | 55 | |
Current portion of long-term debt | 4,048 | — | |
Total current liabilities | 28,861 | 41,324 | |
Deferred revenue, long-term | 117 | — | |
Long-term operating lease liabilities | 8,348 | 16,973 | |
Long-term finance lease liabilities | 96 | 158 | |
Long-term debt | 1,617 | — | |
Deferred tax liabilities, net | - | 116 | |
Total liabilities | 39,039 | 58,571 | |
Stockholders' Equity: | |||
Preferred stock, | |||
and outstanding | — | — | |
Common stock, | |||
shares issued and 73,088,494 shares outstanding at December 31, 2020; | |||
63,656,897 shares issued and 59,511,416 shares outstanding at December 31, 2019 | 8 | 6 | |
Additional paid-in capital | 359,721 | 347,564 | |
Accumulated other comprehensive (loss) income | (19) | 181 | |
Accumulated deficit | (278,688) | (142,238) | |
Treasury stock, at cost; 5,580,920 and 4,145,481 shares at December 31, 2020 | |||
and 2019, respectively | (33,851) | (33,484) | |
Total stockholders' equity | 47,171 | 172,029 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 86,210 | $ 230,600 | |
(1) Results of the Company's Consumer and Industrial Chemistry Technologies ("CICT") segment are presented as discontinued operations | |||
Flotek Industries, Inc. | |||||||||
Unaudited Condensed Consolidated Statements of Operations | |||||||||
(in thousands, except per share data) | |||||||||
Three Months Ended | Twelve Months Ended | ||||||||
12/31/2020 | 12/31/2019 | 9/30/2020 | 12/31/2020 | 12/31/2019 | |||||
Revenue | $ 12,106 | $ 19,526 | $ 12,739 | $ 53,141 | $ 119,353 | ||||
Costs and expenses: | |||||||||
Operating expenses (excluding depreciation and amortization) | 24,327 | 42,389 | 29,466 | 88,266 | 148,100 | ||||
Corporate general and administrative | 3,744 | 8,955 | 2,679 | 16,311 | 27,975 | ||||
Depreciation and amortization | 235 | 2,028 | 518 | 3,412 | 8,465 | ||||
Research and development | 1,540 | 2,205 | 1,480 | 7,213 | 8,863 | ||||
(Gain) loss on disposal of long-lived assets | (2) | 354 | (37) | (94) | 1,450 | ||||
Impairment of fixed and long-lived assets | - | - | 12,521 | 69,975 | - | ||||
Impairment of goodwill | - | - | 11,706 | 11,706 | - | ||||
Total costs and expenses | 29,844 | 55,931 | 58,333 | 196,789 | 194,853 | ||||
Loss from operations | (17,738) | (36,405) | (45,594) | (143,648) | (75,500) | ||||
Other (expense) income: | |||||||||
Gain on lease termination | - | - | - | 576 | - | ||||
Interest expense | (20) | (4) | (19) | (60) | (2,019) | ||||
Other income (expense), net | 179 | 469 | 291 | 503 | 1,708 | ||||
Total other income (expense) | 159 | 465 | 272 | 1,019 | (311) | ||||
Loss before income taxes | (17,579) | (35,940) | (45,322) | (142,629) | (75,811) | ||||
Income tax benefit (expense) | (102) | (956) | 81 | 6,179 | (262) | ||||
Loss from continuing operations | (17,681) | (36,896) | (45,241) | (136,450) | (76,073) | ||||
Income (loss) from discontinued operations, net of tax | - | (2,425) | - | - | 42,158 | ||||
Net loss | (17,681) | (39,321) | (45,241) | (136,450) | (33,915) | ||||
Basic and diluted earnings (loss) per common share: | |||||||||
Continuing operations | $ (0.30) | $ (0.64) | $ (0.66) | $ (2.00) | $ (1.29) | ||||
Discontinued operations, net of tax | - | (0.04) | - | - | 0.72 | ||||
Basic and diluted earnings (loss) per common share | $ (0.30) | $ (0.68) | $ (0.66) | $ (2.00) | $ (0.57) | ||||
Weighted average common shares: | |||||||||
Weighted average common shares used in computing basic and diluted | 59,058 | 58,403 | 68,217 | 68,312 | 58,750 | ||||
(1) Results of the Company's Consumer and Industrial Chemistry Technologies ("CICT") segment are presented as discontinued operations for all periods. | |||||||||
FLOTEK INDUSTRIES, INC. | |||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(in thousands) | |||
Years ended December 31, | |||
2020 | 2019 | ||
Cash flows from operating activities: | |||
Net loss | $ (136,450) | $ (33,915) | |
Income from discontinued operations, net of tax | - | 42,158 | |
Loss from continuing operations | (136,450) | (76,073) | |
Adjustments to reconcile loss from continuing operations to net cash | |||
Change in fair value of contingent consideration | 2,716 | - | |
Depreciation and amortization | 3,412 | 8,465 | |
Amortization of deferred financing costs | - | 1,428 | |
Provision for doubtful accounts | 652 | 512 | |
Provision for excess and obsolete inventory | 12,261 | 5,659 | |
Impairment of fixed assets | 30,178 | - | |
(Gain) loss on sale of assets | (561) | 1,450 | |
Impairment of goodwill | 11,706 | - | |
Impairment of right-of-use assets | 7,434 | - | |
Impairment of intangible assets | 32,363 | - | |
Stock compensation expense | 3,044 | 4,235 | |
Deferred income tax (benefit) provision | (187) | 18,307 | |
Reduction in tax benefit related to stock-based awards | - | 24 | |
Non-cash lease expense | 356 | 740 | |
Changes in current assets and liabilities: | |||
Accounts receivable, net | 3,556 | 20,993 | |
Inventories | 3,955 | (727) | |
Income taxes receivable | 182 | 2,546 | |
Other current assets | 1,026 | 2,579 | |
Other long-term assets | (16) | 3,286 | |
Accounts payable | (12,323) | 1,131 | |
Accrued liabilities | (11,260) | 908 | |
Income taxes payable | 84 | - | |
Interest payable | 34 | (8) | |
Net cash used in operating activities | (47,838) | (4,545) | |
Cash flows from investing activities: | |||
Capital expenditures | (1,425) | (2,411) | |
Proceeds from sale of businesses | 9,907 | 155,498 | |
Proceeds from sale of assets | 109 | 240 | |
Payments for acquisition, net of cash acquired | (26,284) | - | |
Purchase of patents and other intangible assets | (8) | (614) | |
Net cash (used in) provided by investing activities | (17,701) | 152,713 | |
Cash flows from financing activities: | |||
Borrowings on revolving credit facility | - | 42,984 | |
Repayments on revolving credit facility | - | (92,715) | |
Payment for contingent consideration | (1,200) | - | |
Proceeds from Paycheck Protection Program loan | 4,788 | - | |
Payments for finance leases | (70) | (51) | |
Purchase of treasury stock | (253) | (247) | |
Proceeds from sale of common stock | 462 | 35 | |
Net cash provided by (used in) financing activities | 3,727 | (49,994) | |
Discontinued operations: | |||
Net cash used in operating activities | - | (322) | |
Net cash provided by investing activities | - | 337 | |
Net cash flows provided by discontinued operations | - | 15 | |
Effect of changes in exchange rates on cash and cash equivalents | (102) | 5 | |
Net change in cash, cash equivalents and restricted cash | (61,914) | 98,194 | |
Cash, cash equivalents at beginning of period | 100,575 | 3,044 | |
Restricted cash at the beginning of the period | 663 | 663 | |
Cash and cash equivalents and restricted cash at beginning of period | 101,238 | 3,707 | |
Cash and Cas equivalents at end of period | 38,660 | 100,575 | |
Restricted cash at the end of period | 664 | 663 | |
Cash, cash equivalents and restricted cash at end of period | $ 39,324 | $ 101,238 | |
Flotek Industries, Inc. | |||||||||||||||
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings | |||||||||||||||
(in thousands) | |||||||||||||||
GAAP Loss from Continuing Operations and Reconciliation to Adjusted EBITDA (Non-GAAP) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
12/31/2020 | 12/31/2019 | 9/30/2020 | 12/31/2020 | 12/31/2019 | |||||||||||
Loss from Continuing Operations (GAAP) | $ (17,681) | $ (36,896) | $ (45,241) | $ (136,450) | $ (76,073) | ||||||||||
Interest Expense | 20 | 4 | 19 | 60 | 2,019 | ||||||||||
Interest Income | (10) | (405) | (206) | (473) | (1,888) | ||||||||||
Income Tax Benefit (Expense) | 102 | 956 | (81) | (6,179) | 262 | ||||||||||
Depreciation and Amortization | 235 | 2,028 | 518 | 3,412 | 8,465 | ||||||||||
Impairment of Fixed and Long Lived Assets | - | - | 12,521 | 69,975 | - | ||||||||||
Impairment of Goodwill | - | - | 11,706 | 11,706 | - | ||||||||||
EBITDA (Non-GAAP) | $ (17,334) | $ (34,313) | $ (20,764) | $ (57,949) | $ (67,215) | ||||||||||
Stock Compensation Expense | 833 | 1,409 | 690 | 3,045 | 4,235 | ||||||||||
Severance and Retirement | 334 | 3,753 | 749 | 3,848 | 6,503 | ||||||||||
Inventory Write-Down | 9,436 | 20,188 | 9,565 | 21,294 | 20,188 | ||||||||||
M&A Transaction Costs | (371) | - | 3,219 | 3,346 | - | ||||||||||
Inventory Step-Up | 108 | - | 81 | 344 | - | ||||||||||
Shareholder-Related Activities | - | - | - | - | 646 | ||||||||||
(Gain) loss on Disposal of Assets | (2) | 355 | (37) | (94) | 1,450 | ||||||||||
Gain on Lease Termination | - | - | - | (576) | - | ||||||||||
Operations Related Contract | - | - | - | - | 500 | ||||||||||
COVID-19 Related Costs | 202 | - | - | 202 | - | ||||||||||
Discontinued Legal Fees | 2 | 132 | 14 | 338 | 578 | ||||||||||
Adjusted EBITDA (Non-GAAP) | $ (6,792) | $ (8,476) | $ (6,483) | $ (26,202) | $ (33,115) | ||||||||||
(1) Management believes that adjusted EBITDA for the three and twelve months ended December 31, 2020 and December 31, 2019, and the three months ended December 31, 2020, is useful to investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods. Management views the 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 operational goals. | |||||||||||||||
(2) Results of the Company's Consumer and Industrial Chemistry Technologies ("CICT") segment are presented as discontinued operations for all periods. | |||||||||||||||
(3) Prior periods presented for 2019 have been adjusted to reflect revisions to results determined not to be material to those prior periods. | |||||||||||||||
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SOURCE Flotek Industries, Inc.
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