Flotek Announces Third Quarter 2021 Results

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 11% compared to the second quarter. Customer growth and diversification continue to improve as revenue from new or non-core customers grew 34%, while the total number of customers grew by 22% sequentially in our energy chemistry technologies business. Additionally, our data analytics business reached two important milestones during the third quarter by obtaining international certifications for our Verax analyzers and launching a new patent-pending Advanced Interface Detection Algorithm (AIDA) application."

"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, down 20.1% from $12.7 million in the third quarter 2020, but up 10.9% 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, a 55.4% 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, or 51.0% 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 were 7.0% 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, a 6.0% improvement on the $6.7 million loss in the second quarter of 2021 and a 2.8% 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 $20.5 million which were impacted by operating losses in the quarter. Flotek also had $4.8 million of PPP loans outstanding. The Company has applied for forgiveness for its PPP loans and received an extension of the loan maturity date from April 15, 2022 to April 15, 2025, reducing the current portion of long-term debt from $4.8 million to $1.3 million as of September 30, 2021.

Chemistry Technologies Segment: Energy Chemistry and Professional Chemistry

In the third quarter 2021, sales in the Chemistry Technologies segment declined 22.4% year-over-year to $9.4 million.  The year-over-year decrease was primarily the result of decreased demand from the company's major customers and smaller operators that have not returned to the pre-pandemic levels. In addition, revenue from two major customers was lost as a result of market consolidation in the Permian basin in the second quarter.

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 by 22% 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 45.6% and grew 22.6% compared to the third quarter 2020.

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.

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SOURCE Flotek Industries, Inc.