FLOTEK INDUSTRIES INC/CN/ Q3 FY2024 earnings call

• Ryan Ezell highlighted strong strategy execution, focusing on elevating performance, market share, and profitability. Data analytics grew 30%, chemistry tech up 7%. Net income was $2.5 million, adjusted EBITDA $4.8 million, both year-over-year increases. Paid down ABL debt by 81%.
• Bond Clement discussed financial highlights: total revenues $49.7M, sequential increase; net income nearly doubled, adjusted EBITDA up over 40% y-o-y. SG&A costs declined 12% y-o-y and 9% sequentially. Adjusted EBITDA guidance raised to $16.5M-$18.5M.

Total revenues for the third quarter were $49.7 million, a sequential increase of 8%. The data analytics segment revenues grew 30% in Q3, with data as a service revenue up 40% sequentially; flare monitoring comprised 25% of total quarterly segment revenues. The chemistry technology segment revenue increased 7% in Q3. The data analytics segment's gross profit was $1.2 million in Q3, an 88% increase from Q2, with a gross margin of 44%.

Adjusted EBITDA guidance for 2024 is raised to the range of $16.5 million to $18.5 million, which is a 35% midpoint increase from the initial guidance. The 2024 adjusted gross profit margin is expected to be between 20% and 22%, compared to 15% in 2023.

Forward-looking statements are subject to a number of risks and uncertainties beyond control, which can cause actual results to differ materially from current expectations. Listeners are advised to review the earnings release and risk factors discussed in filings with the SEC.

Q: Jeff Grampp asked about the flare market sales model (rental vs buy) and customer concentration.

A: Ryan Ezell responded that the preferred model is rental service agreements, with some customers looking at capital purchases. Customer base is diversifying with recent regulatory expectations supporting continued growth.

Q: Gerry Sweeney asked about data sales cycle and flare/chain custody growth.

A: Ryan Ezell and Bond Clement discussed that flare monitoring units grew from 3 to 11, with chain of custody applications also expanding. Sales cycles for flare are faster due to regulations, and both segments are showing strong growth.

Q: Josh Jayne asked about chemistry side and AR conversion.

A: Bond Clement explained that a big component of working capital build is related to the order shortfall penalty, but AR was down excluding that, and DSOs improved 12% during the quarter