Flotek Announces Third Quarter 2021 Results
Flotek Industries reported a third quarter revenue of $10.2 million, up 10.9% from the prior quarter but down 20.1% year-over-year. The increase in revenue is attributed to customer growth, with a 34% rise in revenue from non-core customers, despite losing two major clients. Operating expenses decreased significantly to $5.4 million due to a settlement related to the ADM lawsuit. The company achieved a net income of $0.5 million, a notable turn from a prior loss. Flotek's liquidity improved with cash equivalents of $20.5 million and extended loan maturity to 2025.
- 11% quarter-over-quarter revenue growth in Q3 2021.
- 34% revenue increase from new or non-core customers.
- Net income of $0.5 million in Q3 2021, reversing the previous quarter's loss.
- Significant reduction in operating expenses to $5.4 million due to lawsuit settlement.
- 20.1% year-over-year revenue decline, primarily from loss of major customers.
- 22.4% decrease in Chemistry Technologies segment sales compared to the previous year.
- Adjusted EBITDA loss of $6.3 million.
HOUSTON, Nov. 8, 2021 /PRNewswire/ -- Flotek Industries, Inc. ("Flotek" or the "Company") (NYSE: FTK) today announced third quarter results for the three months ended September 30, 2021.
John W. Gibson, Jr., Chairman, President, and Chief Executive Officer, stated, "I'm pleased to report that our revenues for the third quarter are up approximately
"We executed our sales team realignment during the third quarter, adding eight new sales professionals supporting the energy chemistry business and three new professionals for the data analytics business. These sales professionals are all experienced with proven track records. Supporting our Professional Chemistry activities, we also successfully secured three contract manufacturing and toll blending agreements with U.S based suppliers, entered into manufacturing representation agreements with four agencies providing coverage in 48 states with over 150 sales representatives, and extended our product line with 18 private label options for distribution and re-distribution groups."
"I'm pleased to announce the commercialization of Flotek's ESG scorecard assessment service, which analyzes the full well cycle chemical utilization to support our customer's ESG reporting goals, operational efficiencies, and enterprise risk management. Our ESG scorecard further demonstrates our commitment to engaging with the industry to highlight the strategic benefits of green chemistry solutions."
"We also continue to focus on improving our liquidity. In August, we completed a lease agreement for our Monahans facility, converting it into a more marketable, income generating property. We have also applied for forgiveness of our Paycheck Protection Program ("PPP") loans and have received an extension of the loan maturity date from April 15, 2022 to April 15, 2025. Finally, we continue to clear legacy matters through our settlement with ADM, which eliminates a sizeable cash commitment."
Third Quarter Financial Results
- Consolidated Revenues: Flotek generated third quarter 2021 consolidated revenue of
$10.2 million , down20.1% from$12.7 million in the third quarter 2020, but up10.9% versus$9.2 million in the second quarter 2021. The year-over-year decrease in revenue was primarily due to the loss of two major energy customers that were purchased by non-customers during the second quarter of 2021, and nominal decreases in international sales, offset by certain current and returning customer revenue increases during the current quarter that did not have prior year comparable activities. - Consolidated Operating Expenses: Consolidated operating expenses (excluding depreciation and amortization) were
$5.4 million in the third quarter 2021, a55.4% decrease from$12.1 million in the second quarter 2021. The decrease was primarily driven by the ADM lawsuit settlement and related net benefit of$7.6 million . Consolidated operating expenses for the nine months ended September 30, 2021 decreased$32.6 million , or51.0% versus the same period of 2020. The year-to-date decrease was primarily due to reduced cost of sales due to lower sales during 2021 and the net benefit of$7.6 million to operating expenses related to the ADM lawsuit settlement. - Corporate General & Administrative Expenses (CG&A): CG&A expenses for the third quarter of 2021 were consistent with the same comparable period last year at
$2.7 million and were7.0% less than the CG&A expenses of$2.9 million for the second quarter of 2021. The declines were primarily driven by the reversal of bonus accruals in the third quarter of 2021. - Net Income: The Company recorded net income for the third quarter of
$0.5 million , or an income of$0.01 per basic/diluted share, compared to a loss of$6.5 million , or$0.09 per basic/diluted share in the second quarter 2021. The increase was primarily driven by the ADM lawsuit settlement and the related net benefit. Year-over-year improvement is mainly due to no impairments during 2021 compared to the$24.2 million and$81.7 million impairments recorded in the three and nine months ended September 30, 2020 and the ADM lawsuit settlement and related net benefit. - Adjusted EBITDA: Adjusted EBITDA for the third quarter 2021 was a loss of
$6.3 million , a6.0% improvement on the$6.7 million loss in the second quarter of 2021 and a2.8% improvement on the$6.5 million loss during the same period of the prior year.
Balance Sheet and Liquidity
As of September 30, 2021, the Company had cash and equivalents of
Chemistry Technologies Segment: Energy Chemistry and Professional Chemistry
In the third quarter 2021, sales in the Chemistry Technologies segment declined
Highlights from the quarter include:
Energy Chemistry
- Revenue improved
28.2% quarter on quarter, outpacing the market and indicating market share growth. - Revenue generated from new or non-core accounts grew
34% while the total number of customers grew by22% quarter on quarter, demonstrating the continued emphasis on improving customer acquisitions and revenue diversification. - Secured a pilot project with a major international service company to deliver a four-well trial of Flotek's proprietary slick water hydraulic fracturing fluid system to a major national oil company in the Middle East.
- Executed a five-year service contract extension at our Material Translogistics facility in Raceland, LA with one of the world's top oilfield services providers while expanding that business through the impact of Hurricane Ida.
- Successfully entered into an adjacent energy market with revenue generation in geothermal drilling and cementing operations.
- Entered into early negotiations with key suppliers to secure future purchase prices and material allocation volumes with our top product lines for 2022 as we focus on continued growth.
- Commercialized our ESG scorecard assessment service offering that analyzes the full well cycle chemical utilization and identifies opportunities to support customer's ESG reporting goals, operational efficiencies, and enterprise risk management.
Professional Chemistry
- Signed three contract manufacturing and toll blending agreements with U.S based suppliers.
- Gained sales force expansion via manufacturing representation agreements with four agencies providing coverage in 48 states with over 150 sales representatives.
- Extended our product line with 18 private label options for distribution and re-distribution groups.
- Added revenue from the agricultural adjacent market with our green solvents and adjuvant applications.
Data Analytics Segment
In the third quarter 2021, Data Analytics' sales decreased from the second quarter 2021 by
Highlights include:
- Developed a new line of Verax analyzers for the international market obtained the necessary certifications for usage in hazardous locations internationally.
- Launched the Advanced Interface Detection Algorithm system, or AIDA, a new patent-pending application that uses advanced machine learning algorithms to enable pipeline operators to cut batches using real time detection of batch interfaces without the need for additional sampling or chemometric modeling.
Conference Call Details
Flotek will host a conference call on Tuesday, November 9, 2021, at 9:00 am CST (10:00 a.m. EST) to discuss its third quarter results for the three months ended September 30, 2021. Participants may access the call through Flotek's website at www.flotekind.com under "Webcasts'' or by telephone at 1-844-835-9986 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.
About Flotek Industries, Inc.
Flotek Industries, Inc. creates solutions to reduce the environmental impact of energy on air, water, land and people. A technology-driven, specialty green chemistry and data company, Flotek helps customers across industrial, commercial, and consumer markets improve their Environmental, Social, and Governance performance. Flotek's Chemistry Technologies segment develops, manufactures, packages, distributes. delivers, and markets high-quality cleaning, disinfecting and sanitizing products for commercial, governmental and personal consumer use. Additionally, Flotek empowers the energy industry to maximize tile value of their hydrocarbon streams and improve return on invested capital through its real-time data platforms and green 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 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 tile 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 dale 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) | |||
September 30, 2021 | December 31, 2020 | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 20,527 | $ 38,660 | |
Restricted cash | 40 | 664 | |
Accounts receivable, net of allowance for doubtful accounts of | |||
and | 11,560 | 11,764 | |
Inventories, net | 8,818 | 11,837 | |
Income taxes receivable | 55 | 403 | |
Other current assets | 4,811 | 3,127 | |
Assets held for sale | 545 | - | |
Total current assets | 46,356 | 66,455 | |
Property and equipment, net | 7,769 | 9,087 | |
Operating lease right-of-use assets | 2,099 | 2,320 | |
Goodwill | 8,092 | 8,092 | |
Deferred tax assets, net | 209 | 223 | |
Other long-term assets | 29 | 33 | |
TOTAL ASSETS | $ 64,554 | $ 86,210 | |
LIABILITIES AND STOCKHOLDERS' & EQUITY | |||
Current liabilities: | |||
Accounts payable | $ 5,224 | $ 5,787 | |
Accrued liabilities | 10,465 | 18,275 | |
Income taxes payable | 38 | 21 | |
Interest payable | 70 | 34 | |
Current portion of operating lease liabilities | 586 | 636 | |
Current portion of finance lease liabilities | 48 | 60 | |
Current portion of long-term debt | 1,336 | 4,048 | |
Total current liabilities | 17,767 | 28,861 | |
Deferred revenue, long-term | 100 | 117 | |
Long-term operating lease liabilities | 7,888 | 8,348 | |
Long-term finance lease liabilities | 64 | 96 | |
Long-term debt | 3,452 | 1,617 | |
TOTAL LIABILITIES | 29,271 | 39,039 | |
Stockholders' Equity: | |||
Preferred stock, | |||
and outstanding | - | - | |
Common stock, | |||
shares issued and 69,316,933 shares outstanding at September 30, 2021; | - | - | |
78,669,414 shares issued and 73,088,494 shares outstanding at December 31, 2020 | 8 | 8 | |
Additional paid-in capital | 362,174 | 359,721 | |
Accumulated other comprehensive income (loss) | 51 | (19) | |
Accumulated deficit | (293,025) | (278,688) | |
Treasury stock, at cost; 5,648,721 and 5,580,920 shares at September 30, 2021 | - | - | |
and December 31, 2020, respectively | (33,925) | (33,851) | |
Total stockholders' equity | 35,283 | 47,171 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 64,554 | $ 86,210 | |
Flotek Industries, Inc. Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share data) | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
9/30/2021 | 9/30/2020 | 6/30/2021 | 9/30/2021 | 9/30/2020 | |||||
Revenue | |||||||||
Revenue from external customers | $ 8,847 | $ 12,739 | $ 9,165 | $ 29,782 | $ 41,035 | ||||
Revenue from related party | 1,332 | - | - | 1,332 | - | ||||
Total revenues | 10,179 | 12,739 | 9,165 | 31,114 | 41,035 | ||||
Costs and expenses: | |||||||||
Operating expenses (excluding depreciation and amortization) | 5,418 | 29,466 | 12,110 | 31,330 | 63,939 | ||||
Corporate general and administrative | 2,696 | 2,679 | 2,868 | 9,925 | 12,568 | ||||
Depreciation and amortization | 233 | 518 | 253 | 793 | 3,177 | ||||
Research and development | 1,186 | 1,480 | 1,466 | 4,194 | 5,673 | ||||
Loss (gain) on disposal of long-lived assets | 14 | (37) | (71) | (55) | (92) | ||||
Impairment of goodwill | - | 11,706 | - | - | 11,706 | ||||
Impairment of fixed, long-lived and intangible assets | - | 12,521 | - | - | 69,975 | ||||
Total costs and expenses | 9,547 | 58,333 | 16,626 | 46,187 | 166,946 | ||||
Income (loss) from operations | 632 | (45,594) | (7,461) | (15,073) | (125,911) | ||||
Other (expense) income: | |||||||||
Paycheck protection plan loan forgiveness | - | - | 881 | 881 | - | ||||
Gain on lease termination | - | - | - | - | 576 | ||||
Interest expense | (18) | (19) | (17) | (53) | (40) | ||||
Other (expense) income, net | (102) | 291 | 72 | (62) | 322 | ||||
Total other (expense) income, net | (120) | 272 | 936 | 766 | 858 | ||||
Income (loss) before income taxes | 512 | (45,322) | (6,525) | (14,307) | (125,053) | ||||
Income tax (expense) benefit | (3) | 81 | (21) | (30) | 6,282 | ||||
Net income (loss) | 509 | (45,241) | (6,546) | (14,337) | (118,771) | ||||
Income (loss) per common share: | |||||||||
Basic | $ 0.01 | $ (0.66) | $ (0.09) | $ (0.21) | $ (1.75) | ||||
Diluted | $ 0.01 | $ (0.66) | $ (0.09) | $ (0.21) | $ (1.75) | ||||
Weighted average common shares: | |||||||||
Weighted average common shares used in computing basic income (loss) per common share | 69,324 | 68,217 | 69,531 | 68,665 | 68,063 | ||||
Weighted average common shares used in computing diluted income (loss) per common share | 70,176 | 68,217 | 69,531 | 68,665 | 68,063 | ||||
Flotek Industries, Inc. | ||||
Unaudited Condensed Consolidated Statements of Cash Flows | ||||
(in thousands) | ||||
Nine months ended September 30, | ||||
2021 | 2020 | |||
Cash flows from operating activities: | ||||
Net loss | $ (14,337) | $ (118,771) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Change in fair value of contingent consideration | (701) | 3,200 | ||
Depreciation and amortization | 793 | 3,177 | ||
Provision for doubtful accounts | (42) | 494 | ||
Inventory purchase commitment settlement | (7,633) | - | ||
Provision for excess and obsolete inventory | 687 | 10,465 | ||
Impairment of goodwill | - | 11,706 | ||
Impairment of right-of-use assets | - | 7,434 | ||
Impairment of fixed assets | - | 30,178 | ||
Impairment of intangible assets | - | 32,363 | ||
Gain on sale of assets | (55) | (668) | ||
Non-cash lease expense | 221 | 299 | ||
Stock compensation expense | 2,710 | 2,208 | ||
Deferred income tax provision (benefit) | 13 | (199) | ||
Paycheck protection plan loan forgiveness | (881) | - | ||
Changes in current assets and liabilities: | ||||
Accounts receivable, net | 111 | 4,714 | ||
Inventories, net | 2,330 | 3,186 | ||
Income taxes receivable | 405 | (140) | ||
Other current assets | (2,237) | 823 | ||
Other long-term assets | 541 | (16) | ||
Accounts payable | (604) | (11,906) | ||
Accrued liabilities | 414 | (17,689) | ||
Income taxes payable | (53) | 25 | ||
Interest payable | 36 | 22 | ||
Net cash used in operating activities | (18,282) | (39,095) | ||
Cash flows from investing activities: | ||||
Capital expenditures | (31) | (836) | ||
Proceeds from sale of business | - | 9,907 | ||
Proceeds from sale of assets | 74 | 86 | ||
Purchase of JP3, net of cash acquired | - | (26,284) | ||
Abandonment of patents and other intangible assets | - | (8) | ||
Net cash provided by (used in) by investing activities | 43 | (17,135) | ||
Cash flows from financing activities: | ||||
Proceeds from paycheck protection plan loan | - | 4,788 | ||
Payments to tax authorities for shares withheld from employees | (161) | (123) | ||
(Payments) proceeds from sale of common stock | (246) | 416 | ||
Payments for finance leases | (44) | (152) | ||
Net cash (used in) provided by financing activities | (451) | 4,929 | ||
Effect of changes in exchange rates on cash and cash equivalents | (67) | (80) | ||
Net change in cash, cash equivalents and restricted cash | (18,757) | (51,381) | ||
Cash and cash equivalents at beginning of period | 38,660 | 100,575 | ||
Restricted cash at beginning of period | 664 | 663 | ||
Cash and cash equivalents and restricted cash at beginning of period | 39,324 | 101,238 | ||
Cash and cash equivalents at end of period | 20,527 | 49,193 | ||
Restricted cash at the end of period | 40 | 664 | ||
Cash, cash equivalents and restricted cash at end of period | $ 20,567 | $ 49,857 | ||
Flotek Industries, Inc. | |||||||||||||
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings | |||||||||||||
(in thousands) | |||||||||||||
GAAP Income (Loss) from Operations and Reconciliation to Adjusted EBITDA (Non-GAAP) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
9/30/2021 | 9/30/2020 | 6/30/2021 | 9/30/2021 | 9/30/2020 | |||||||||
Income (Loss) from Operations (GAAP) | $ 509 | $ (45,241) | $ (6,546) | $ (14,337) | $ (118,771) | ||||||||
Interest Expense | 18 | 19 | 17 | 53 | 40 | ||||||||
Interest Income | (1) | (206) | (3) | (9) | (463) | ||||||||
Income Tax Benefit (Expense) | 3 | (81) | 21 | 30 | (6,282) | ||||||||
Depreciation and Amortization | 233 | 518 | 253 | 793 | 3,177 | ||||||||
Impairment of Goodwill | - | 11,706 | - | - | 11,706 | ||||||||
Impairment of Fixed and Long Lived Assets | - | 12,521 | - | - | 69,975 | ||||||||
EBITDA (Non-GAAP) | $ 762 | $ (20,764) | $ (6,258) | $ (13,470) | $ (40,618) | ||||||||
Stock Compensation Expense | 960 | 690 | 969 | 2,710 | 2,208 | ||||||||
Severance and Retirement | 11 | 749 | 946 | 991 | 3,514 | ||||||||
Inventory Write-Down | - | 9,565 | - | - | 11,033 | ||||||||
Inventory Purchase Commitment Settlement | (7,633) | - | - | (7,633) | 825 | ||||||||
M&A Transaction Costs | (401) | 3,219 | 100 | (458) | 3,717 | ||||||||
Inventory Step-Up | (78) | 81 | 32 | 2 | 236 | ||||||||
(Gain) loss on Disposal of Assets | 14 | (37) | (71) | (55) | (92) | ||||||||
Gain on Lease Termination | - | - | - | - | (576) | ||||||||
PPP Loan Forgiveness | - | - | (881) | (881) | - | ||||||||
Employee Retention Credit | (927) | - | (1,923) | (2,851) | - | ||||||||
Non-Recurring Professional Fees | 993 | 14 | 388 | 2,046 | 336 | ||||||||
Winter Storm (Natural Disaster) | - | - | - | 199 | - | ||||||||
Adjusted EBITDA (Non-GAAP) | $ (6,299) | $ (6,483) | $ (6,698) | $ 19,400 | $ 19,417 | ||||||||
(1) Management believes that adjusted EBITDA for the three and nine months ended September 30, 2021 and September 30, 2020, and the three months ended June 30, 2021, 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. | |||||||||||||
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SOURCE Flotek Industries, Inc.
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