Flotek Industries, Inc. Q4 FY2025 earnings call

Good morning, everyone. Flowtech saw North American operators maintain cautious posture in Q4. The company achieved third consecutive year of significant gross profit and adjusted EBITDA improvement. Data analytics segment had highest ever quarterly and annual revenue in 2025. PowerTech evolved into comprehensive fuel management platform with VARACS analyzer, cloud-based portal for monitoring. Chemistry technology segment delivered 25% increase in total revenue for full year 2025 compared to 2024, excluding OSP payments

Data analytics segment: Q4 2025 service revenues up 381% y-o-y, gross profit in Q4 2025 was 73%; upstream revenues increased from $2.1 million in 2024 to over $21 million in 2025, gross profits from $1.2 million in 2024 to $18.4 million in 2025. Chemistry technology segment: Full year 2025 total revenue up 25% compared to 2024, excluding OSP payments

Powertech revenues in 2026 expected to be north of $27 million, an approximate 70% increase from 2025. Effective tax rate expected to normalize closer to 21% going forward. Confident data analytics segment will exceed 50% in gross profit contribution in 2026

Geopolitical and macroeconomic challenges inject uncertainty in the market. Ongoing conflicts in the Eastern Hemisphere pose operational and supply chain risks for international operations. Potential near-term commodity price volatility affects chemistry segment

Q: Good morning, guys. I was curious to start on the power services side and congrats on the recent contract win there. Outside of that opportunity, can you just touch right on the current pipeline of opportunities that you guys are working through? Just kind of curious at the maturity level of those conversations, what stage we're at and how you're kind of viewing other opportunities potentially going into the fold here for the rest of the year.

A: Yeah, Jeff, I'll be glad to provide a little bit of color on that because we're pretty excited about the advancements that may not. I'll kind of refer back to some of the comments I made on our end of quarter call at Q3 was we set up our power tech advancement of our business development units around three major steps. One is proving the validation of the measurement. then moving to levels of various control and integration. And then, therefore, the final thing we do is full distribution and conditioning. I'm proud to say that we've moved into seven new customers successfully on the measurement side with executed POs and successful field trials. And now we're moving into longer-term duration contracts and looking at placing our new advanced NGS or smart skids as well as ESD We have right now ongoing about six different operations in the field on top of our most recent announcement on the industrialized infrastructure component for utilities. So it's going really, really well. We've also begun – we've kind of brought forward what we're looking at on capital spend at building new pieces of equipment to go out to locations. And so from that standpoint, I think, you know, we're still on track to hit that run rate of doubling the size of the fleet by the end of the year, if not maybe a little bit sooner on those opportunities. And I think that, you know, I think the unique capabilities of our technology in some of these harsh conditions is opening up some unique pathways for us to hit some of these really stranded, you know, disaster relief power locations. And that's been an interesting opportunity for us to unlock here at Flowtech.

Q: Good morning, Jerry. I wanted to touch upon An area that I think you mentioned in your prepared remarks, your systems can communicate directly with the engines. I think it offers a unique ability to improve engine flow, efficiency, life of the engine. I think you're working with some important engine and turbine manufacturers. Can you go into a little bit more detail of what's happening on that front? and how that opportunity could emerge a little bit further in 26 and 27.

A: Yeah, you know, Jerry, this is a really kind of exciting platform for us when we look at applications inside of PowerTech. Without, you know, dropping any, you know, specific names, but I will say the majority of the OEMs that we're working with are the nameplate companies that you see on the majority of these power gen sites, particularly on the reciprocating engine side. But essentially, what we have is, whether you're using a VARX or an EXPECT unit, is that because most of these engines like to see a gas quality measurement once a day or once every few days just to see that if they're in an operating realm where they set set points for potential adjustment. Our capabilities allow data to be fed directly to the OEM engine every five seconds. And so this allows a closing in of set points, operational efficiency, to where they really get tuned and dialed in to the best operational parameters to not only improve fuel efficiencies and emission standards, but also reduce R&M costs for the engines. And so, for us, you know, there's potential for one unit to feed multiple engines, or we reduce it down to a simplified version of our expect units per engine. These projects have been solely focused on engine optimization and improving the overall performance. And we will still be able to independently run our gas conditioning upstream, you know, up from that to where we condition the gas prior to coming to the engine. So technically it's a separate revenue stream. We've got projects with four different OEMs on that at various levels that The longest-standing one has been in the works and research for about 18 months, and it's progressed pretty far down the road into advanced field trials. And we're hoping to have a little bit more clarity on what a potential long-term relationship looks like there and what that may come like here in 2026. We referenced some of these in a recent social media post with some of the success of the testing here at Flowtech. So we're excited about that, and I do believe those will start to be monetized here probably by mid-year, not the back half of the year, as a potential addition onto a lot of these reciprocating engine operations