Flotek Announces Increased 2024 Guidance, Improved Revenue, and Continued Profit Growth in Connection with Third Quarter 2024 Results

Three Months Ended September 30,

Nine Months Ended September 30,

2024

2023

2024

2023

Total Revenues

$            49,742

$            47,268

$          136,267

$          145,870

Gross Profit

$              9,119

$              9,047

$            27,108

$            14,833

Adjusted Gross Profit ⁽¹⁾

$            10,695

$            10,264

$            31,421

$            18,005

Net Income

$              2,532

$              1,287

$              6,068

$            22,609

Diluted Income (Loss) Per Share

$                0.08

$                0.04

$                0.20

$               (0.18)

Adjusted EBITDA ⁽¹⁾

$              4,840

$              3,392

$            13,303

$            (2,464)

(1)

A non-GAAP financial measure. See the "Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings" section in this release for more information, including reconciliations to the most comparable GAAP measures.

(2)

A non-GAAP financial measure. See the "Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings" section in this release for more information, including reconciliations to the most comparable GAAP measures. We are unable to reconcile this forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measure without unreasonable efforts, as we are unable to predict with a reasonable degree of certainty the impact of certain items that would be expected to impact the GAAP financial measure, including, among other items, the future amortization of our contract assets, certain stock-based compensation costs and the impact of the revaluation of certain liabilities, which is based upon our future stock price. These items do not impact the non-GAAP financial measure.

FLOTEK INDUSTRIES, INC.

 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

September 30, 2024

December 31, 2023

ASSETS

Current assets:

Cash and cash equivalents

$                          4,997

$                          5,851

Restricted cash

101

102

Accounts receivable, net of allowance for credit losses of $388 and $745 at
September 30, 2024 and December 31, 2023, respectively

12,220

13,687

Accounts receivable, related party, net of allowance for credit losses of $0 at
each of September 30, 2024 and December 31, 2023, respectively

47,064

34,569

Inventories, net

12,744

12,838

Other current assets

2,687

3,564

Current contract asset

6,480

5,836

Total current assets

86,293

76,447

Long-term contract asset

63,835

68,820

Property and equipment, net

4,958

5,129

Operating lease right-of-use assets

3,759

5,030

Deferred tax assets, net

66

300

Other long-term assets

1,738

1,787

TOTAL ASSETS

$                      160,649

$                      157,513

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$                        37,395

$                        31,705

Accrued liabilities

4,115

5,890

Income taxes payable

54

45

Current portion of operating lease liabilities

1,642

2,449

Current portion of finance lease liabilities

—

22

Asset-based loan

1,426

7,492

Current portion of long-term debt

104

179

Total current liabilities

44,736

47,782

Deferred revenue, long-term

35

35

Long-term operating lease liabilities

6,871

7,676

Long-term debt

—

60

TOTAL LIABILITIES

51,642

55,553

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.0001 par value, 100,000 shares authorized; no shares issued and outstanding

—

—

Common stock, $0.0001 par value, 240,000,000 shares authorized; 30,891,597 shares issued and
29,789,476 shares outstanding at September 30, 2024; 30,772,837 shares issued and 29,664,130
shares outstanding at December 31, 2023

3

3

Additional paid-in capital

464,143

463,140

Accumulated other comprehensive income

133

127

Accumulated deficit

(320,738)

(326,806)

Treasury stock, at cost; 1,102,121 and 1,108,707 shares at September 30, 2024
and December 31, 2023, respectively

(34,534)

(34,504)

Total stockholders' equity

109,007

101,960

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$                      160,649

$                      157,513

FLOTEK INDUSTRIES, INC.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2024

2023

Revenue:

Revenue from external customers

$              16,565

$            17,806

$            47,935

$          47,278

Revenue from related party

33,177

29,462

88,332

98,592

Total revenues

49,742

47,268

136,267

145,870

Cost of goods sold

40,623

38,221

109,159

Gross profit

9,119

9,047

27,108

14,833

Operating costs and expenses:

Selling, general, and administrative

5,714

6,526

18,056

21,303

Depreciation

220

181

662

530

Research and development

462

757

1,349

2,231

Severance costs

—

2

23

(28)

Gain on sale of property and equipment

—

(38)

(34)

(38)

Gain in fair value of Contract Consideration Convertible Notes Payable

—

—

—

(29,969)

Total operating costs and expenses

6,396

7,428

20,056

Income from operations

2,723

1,619

7,052

20,804

Other income (expense):

Paycheck protection plan loan forgiveness

—

—

—

4,522

Interest expense

(256)

(160)

(842)

(2,537)

Other income, net

102

(91)

151

(82)

Total other income (expense)

(154)

(251)

(691)

1,903

Income before income taxes

2,569

1,368

6,361

22,707

Income tax expense

(37)

(81)

(293)

(98)

Net income

$                 2,532

$               1,287

$              6,068

$          22,609

Income (loss) per common share:

Basic

$                   0.09

$                 0.04

$                0.21

$               0.97

Diluted

$                   0.08

$                 0.04

$                0.20

$             (0.18)

Weighted average common shares:

Weighted average common shares used in
computing basic income (loss) per common share

29,613

29,358

29,498

23,291

Weighted average common shares used in
computing diluted income (loss) per common share

30,897

30,688

30,655

28,034

FLOTEK INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended September 30,

2024

2023

Cash flows from operating activities:

Net income

$                    6,068

$                  22,609

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Change in fair value of contingent consideration

(46)

(384)

Change in fair value of Contract Consideration Convertible Notes Payable

—

(29,969)

Amortization of convertible note issuance costs

—

83

Payment-in-kind interest expense

—

2,284

Amortization of contract asset

4,341

3,665

Depreciation

662

530

Amortization of asset-based loan origination costs

243

36

Provision for credit losses, net of recoveries

121

97

Provision for excess and obsolete inventory

626

626

Gain on sale of property and equipment

(34)

(38)

Non-cash lease expense

1,661

2,316

Stock compensation expense

915

(565)

Deferred income tax expense

233

50

Paycheck protection plan loan forgiveness

—

(4,522)

Changes in current assets and liabilities:

Accounts receivable

1,346

3,472

Accounts receivable, related party

(12,495)

(2,082)

Inventories

(532)

(776)

Other assets

849

(863)

Accounts payable

5,690

60

Accrued liabilities

(1,730)

(3,179)

Operating lease liabilities

(2,002)

(2,636)

Income taxes payable

9

(54)

Interest payable

—

(8)

Net cash provided by (used in) operating activities

5,925

(9,248)

FLOTEK INDUSTRIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(continued)

Nine Months Ended September 30,

2024

2023

Cash flows from investing activities:

Capital expenditures

(491)

(593)

Proceeds from sale of assets

34

68

Net cash used in investing activities

(457)

(525)

Cash flows from financing activities:

Payment for forfeited stock options

—

(617)

Payments on long term debt

(135)

(104)

Proceeds from asset-based loan

122,600

27,750

Payments on asset-based loan

(128,666)

(24,380)

Payment of asset-based loan origination costs

(164)

(502)

Payments to tax authorities for shares withheld from employees

(30)

(246)

Proceeds from issuance of stock

88

48

Payments for finance leases

(22)

(24)

Net cash (used in) provided by financing activities

(6,329)

1,925

Effect of changes in exchange rates on cash and cash equivalents

6

13

Net change in cash and cash equivalents and restricted cash

(855)

(7,835)

Cash and cash equivalents at the beginning of period

5,851

12,290

Restricted cash at the beginning of period

102

100

Cash and cash equivalents and restricted cash at beginning of period

5,953

12,390

Cash and cash equivalents at end of period

4,997

4,453

Restricted cash at the end of period

101

102

Cash and cash equivalents and restricted cash at end of period

$                    5,098

$                    4,555

FLOTEK INDUSTRIES, INC.

Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings

(in thousands)

Three Months Ended
September 30,

Nine Months Ended

September 30,

2024

2023

2024

2023

Gross profit

$               9,119

$               9,047

$             27,108

$             14,833

Stock compensation expense

3

2

9

(135)

Severance and retirement

—

—

9

26

Contingent liability revaluation

(19)

(61)

(46)

(384)

Amortization of contract asset

1,592

1,276

4,341

3,665

Adjusted Gross profit (Non-GAAP) ⁽¹⁾

$             10,695

$             10,264

$             31,421

$             18,005

Net income

$               2,532

$               1,287

$               6,068

$             22,609

Interest expense

256

160

842

2,537

Income tax expense

37

81

293

98

Depreciation and amortization

220

181

662

530

EBITDA (Non-GAAP) ⁽¹⁾

$               3,045

$               1,709

$               7,865

$             25,774

Stock compensation expense

272

268

915

(574)

Severance

—

2

32

(28)

Contingent liability revaluation

(19)

(61)

(46)

(384)

Gain on disposal of assets

—

(38)

(34)

(38)

PPP loan forgiveness

—

—

—

(4,522)

Contract Consideration Convertible Notes Payable revaluation adjustment

—

—

—

(29,969)

Amortization of contract asset

1,592

1,276

4,341

3,665

Non-Recurring professional fees

(50)

236

230

3,612

Adjusted EBITDA (Non-GAAP) ⁽¹⁾

$               4,840

$               3,392

$             13,303

$             (2,464)

(1)

Management believes that adjusted gross profit, EBITDA and adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023, are useful to investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods.  Management views the income and 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 financial and operational goals, excluding certain non-cash or non-recurring items.