HOUSTON, Aug. 5, 2020 /PRNewswire/ -- Flotek
Industries, Inc. ("Flotek" or the "Company") (NYSE: FTK) today
announced results for the three months and full year ended
June 30, 2020. As a result of the
Company's recent acquisition of JP3 in May, Flotek is presenting
its results as two reported segments: Chemistry Technologies and
Data Analytics.
John W. Gibson, Jr., Chairman,
President, and Chief Executive Officer, stated: "The oil and gas
market is experiencing unprecedented disruption. We continue to
face challenges related to the oversupply of crude oil and the
global health crisis, which has led to a sharp reduction in prices
and limitations of storage capacity. As we look forward, we
continue to transform our long-term strategy and adapt to an
evolving environment. We remain focused on our digital
transformation through our recent acquisition of JP3, a leading
data and analytics technology company, which diversifies our
revenue stream and better serves our customers amidst accelerating
digital transformation in the energy industry. Our near-term growth
opportunities in our Data Analytics segment include continued
acceleration of our Data-as-a-Service (DaaS) product offerings and
expansion of our reach into international markets. Additionally,
the recent launch of our premium-grade sanitizer operations
exemplifies how we are adapting and reallocating our existing
chemistries and production capabilities to new business that will
drive greater returns."
Second Quarter Financial Results
Effective April 1, 2020, Flotek's
Energy Chemistry Technologies segment has been renamed the
Chemistry Technologies segment and also includes the Company's
recently launched sanitizer operations. Flotek's second segment,
Data Analytics, was created in conjunction with the acquisition of
JP3 Measurement, LLC ("JP3"). Second quarter results for the
Data Analytics segment only include JP3 business operations after
May 18, 2020, the date of the
acquisition, through the end of the quarter.
- Flotek generated second quarter 2020 consolidated revenue of
$8.9 million for three months ended
June 30, 2020 compared to
$34.7 million in the second quarter
2019 and declined 54.3% from $19.4
million on a sequential basis. Consolidated revenue
continues to be impacted by a volatile macro-environment for U.S.
onshore drilling and completion activity, further impacted by
global economic events, as well as concerns related to COVID-19
pressuring productivity and customer demand.
- Reported a loss from continuing operations for the second
quarter 2020 of $9.6 million, or a
loss of $0.14 per diluted share,
compared to a loss from continuing operations in the second quarter
2019 of $12.8 million, or a loss of
$0.22 per diluted share. The loss of
$9.6 million included a $0.6 million gain on lease termination related to
the termination of the corporate headquarters lease.
- Consolidated operating expenses (excluding depreciation and
amortization) were $11.6 million in
the second quarter 2020, down 69.5% from $38.1 million in the same period last year,
primarily reflecting lower fixed and variable costs.
- Corporate general and administrative expenses for the second
quarter of 2020 were $5.4 million
compared to $6.1 million for the
second quarter of 2019.
- Adjusted EBITDA for the second quarter 2020 was a loss of
$6.8 million which narrowed from the
loss of $9.4 million during the
second quarter of 2019 driven by headcount and expense reductions
in freight, equipment rentals, and travel & entertainment.
Although revenue fell sequentially by 54.3%, Flotek's progress in
cost reduction resulted in adjusted EBITDA decreasing by only 4.0%
sequentially.
The Company expects to delay the filing of its second quarter
2020 Form 10-Q, as the Company may need to make adjustments in
previously issued financial statements to the classification on the
statements of cash flows related to the sale of Florida Chemical
Company to Archer-Daniels-Midland in February 2019 and related escrow account. The
Company is working diligently to finish its review and file the
Form 10-Q by August 17, 2020.
The Company currently does not anticipate any impact from this
adjustment on its overall cash position or statement of operations
for fiscal year 2020 or prior periods.
Balance Sheet and Liquidity
As of June 30, 2020, the Company
had cash and equivalents of $59.9
million. As previously disclosed, on April 16, 2020, the Company received a
$4.8 million loan and JP3 received a
$0.9 million loan, both pursuant to
the Paycheck Protection Program administered by the United States
Small Business Administration as part of the Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act").
Additionally, in the first quarter of 2020, Flotek recorded an
income tax provision of $6.1
million pursuant to the CARES Act extended net operating loss
("NOL") carryback provisions and has a remaining NOL as of
December 31, 2019 of approximately
$49.7 million which is fully covered
by a valuation allowance.
In response to the pandemic and the volatile oil and gas market
environment, the Company has taken numerous actions over the past
two quarters to increase its financial flexibility and preserve
liquidity, including reducing headcount, decreasing compensation
for executive officers and the Board of Directors, and cutting back
discretionary spending.
Premium-Grade Sanitizer Operations
Last quarter, Flotek utilized its existing chemical production
capabilities and facilities to begin producing high-quality
sanitizers, which it initially donated to local communities,
including first responders, hospitals, schools, homeless shelters
and senior residential communities during the first half of the
year.
Driven by increased demand for high-quality sanitizer products
and long-term commercial opportunities, in the second quarter,
Flotek launched a commercial line of premium-grade, U.S. Food and
Drug Administration-registered sanitizers and disinfectants for
commercial and personal consumer use.
The new commercial product line enables Flotek to diversify its
business model, while leveraging its expertise in specialty
chemistry, ISO-certified manufacturing, supply chain management and
research, along with its historic consumer market experience.
Products, which include hand and surface sanitizers, target growth
opportunities across diverse sectors including hospitals, travel
and hospitality, food services, e-commerce and retail, sports and
entertainment and other industrial and commercial
markets.
Results for sanitizer operations are reported as a part of the
Chemistry Technologies segment.
JP3
As previously announced, in May, Flotek acquired 100% ownership
of JP3, an equipment and data company that automates real-time data
and analytics to the energy industry to maximize the value of their
hydrocarbons. The transaction was valued at $36.6 million, comprised of $25 million in cash and 11.5 million shares in
Flotek, with the potential for a $5
million earnout based on the future share price of Flotek.
In July, JP3 finalized its joint sales and marketing agreement with
Phillips 66 to launch a data service solution aimed at providing
significant savings to refined fuels producers, transporters, and
distribution of terminal operations.
Results for JP3 operations are reported in the Data Analytics
segment after May 18, 2020, the date
of the acquisition.
Leadership Updates
Flotek has announced several changes within its executive
leadership team.
- Michael E. Borton recently
joined as Chief Financial Officer (CFO). Mr. Borton was previously
CFO at Dynasty Sports and Entertainment, a data and analytics
sports and entertainment technology company, and prior served as
CFO for multiple SaaS and technology companies.
- Effective June 22, 2020, TengBeng
Koid joined in a newly created role as President of Global
Business, where he oversees domestic and international business
development strategy for both the Chemistry Technologies and Data
Analytics segments of Flotek. In this role, Mr. Koid is also
responsible for accelerating the JP3 DaaS transition and opening
doors to new markets.
- Finally, Flotek is pleased to promote Ryan Ezell, Ph. D, in a newly created role as
President of Chemistry Technologies. Previously, Dr. Ezell was
Senior Vice President of Operations of Flotek.
These leadership changes exemplify how Flotek is positioning
itself towards future growth.
Conference Call Details
Flotek will host a conference call on Thursday, August 6, 2020, at 9:00 AM CT (10:00 AM
ET) to discuss its operating results for the three months
ended June 30, 2020. To participate
in the call, participants should dial 888-390-3983 approximately
five minutes prior to the start of the call. The call can also be
accessed from Flotek's website at www.flotekind.com.
About Flotek Industries, Inc.
Flotek empowers the
energy industry to maximize the value of their hydrocarbon streams
and improve return on invested capital through data-driven
platforms and 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 Flotek's web site
at 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 the 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 date 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 Statements of Operations
|
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
|
6/30/2020
|
|
6/30/2019
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
8,880
|
|
$
34,692
|
|
$
19,416
|
|
$
28,296
|
|
$
77,949
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
Operating expenses
(excluding depreciation and amortization)
|
11,632
|
|
38,121
|
|
22,841
|
|
34,473
|
|
82,089
|
Corporate general and
administrative
|
5,395
|
|
6,054
|
|
4,493
|
|
9,888
|
|
13,335
|
Depreciation and
amortization
|
468
|
|
2,119
|
|
2,191
|
|
2,659
|
|
4,379
|
Research and
development
|
1,638
|
|
2,076
|
|
2,555
|
|
4,193
|
|
4,360
|
(Gain) loss on
disposal of long-lived assets
|
(22)
|
|
(4)
|
|
(33)
|
|
(55)
|
|
1,093
|
Impairment of fixed
and long-lived assets
|
-
|
|
-
|
|
57,454
|
|
57,454
|
|
-
|
Total costs and
expenses
|
19,111
|
|
48,366
|
|
89,501
|
|
108,612
|
|
105,256
|
Loss from
operations
|
(10,231)
|
|
(13,674)
|
|
(70,085)
|
|
(80,316)
|
|
(27,307)
|
Other (expense)
income:
|
|
|
|
|
|
|
|
|
|
Gain on Lease
Termination
|
576
|
|
-
|
|
-
|
|
576
|
|
-
|
Interest
expense
|
(16)
|
|
(16)
|
|
(4)
|
|
(20)
|
|
(2,013)
|
Other (expense)
income, net
|
78
|
|
693
|
|
(47)
|
|
31
|
|
800
|
Total other (expense)
income
|
638
|
|
677
|
|
(51)
|
|
587
|
|
(1,213)
|
Loss before income
taxes
|
(9,593)
|
|
(12,997)
|
|
(70,136)
|
|
(79,729)
|
|
(28,520)
|
Income tax
benefit
|
32
|
|
192
|
|
6,169
|
|
6,201
|
|
503
|
Loss from
continuing operations
|
(9,561)
|
|
(12,805)
|
|
(63,967)
|
|
(73,528)
|
|
(28,017)
|
Income (loss) from
discontinued operations, net of tax
|
-
|
|
(1,608)
|
|
-
|
|
-
|
|
44,466
|
Net (loss)
income
|
(9,561)
|
|
(14,413)
|
|
(63,967)
|
|
(73,528)
|
|
16,449
|
Basic earnings
(loss) per common share:
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
(0.14)
|
|
$
(0.22)
|
|
$
(1.07)
|
|
$
(1.17)
|
|
$
(0.48)
|
Discontinued
operations, net of tax
|
-
|
|
(0.03)
|
|
-
|
|
-
|
|
0.76
|
Basic earnings (loss)
per common share
|
$
(0.14)
|
|
$
(0.25)
|
|
$
(1.07)
|
|
$
(1.17)
|
|
$
0.28
|
Diluted earnings
(loss) per common share:
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
(0.14)
|
|
$
(0.22)
|
|
$
(1.07)
|
|
$
(1.17)
|
|
$
(0.48)
|
Discontinued
operations, net of tax
|
-
|
|
(0.03)
|
|
-
|
|
-
|
|
0.76
|
Diluted earnings
(loss) per common share
|
$
(0.14)
|
|
$
(0.25)
|
|
$
(1.07)
|
|
$
(1.17)
|
|
$
0.28
|
Weighted average
common shares:
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares used in computing basic earnings (loss) per common
share
|
66,035
|
|
58,608
|
|
59,836
|
|
62,828
|
|
58,491
|
Weighted average
common shares used in computing diluted earnings (loss) per common
share
|
66,035
|
|
58,608
|
|
59,836
|
|
62,828
|
|
58,491
|
|
|
|
|
|
|
|
|
|
|
(1) Results of the
Company's Consumer and Industrial Chemistry Technologies ("CICT")
segment are presented as discontinued operations for all
periods.
(2) Prior periods presented for 2019 have been adjusted to
reflect revisions to results determined not to be material to those
prior periods.
|
Flotek Industries,
Inc.
|
Unaudited
Condensed Consolidated Balance Sheets
|
(in thousands,
except share data)
|
|
|
|
|
|
June 30,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
59,926
|
|
$
100,575
|
Restricted
cash
|
664
|
|
663
|
Accounts receivable,
net of allowance for doubtful accounts of $1,383
|
|
|
|
and $1,527 at June
30, 2020 and December 31, 2019, respectively
|
8,108
|
|
15,638
|
Inventories,
net
|
23,338
|
|
23,210
|
Income taxes
receivable
|
6,846
|
|
631
|
Other current
assets
|
2,407
|
|
13,191
|
Total current
assets
|
101,289
|
|
153,908
|
Property and
equipment, net
|
8,017
|
|
39,829
|
Operating lease
right-of-use assets
|
2,422
|
|
16,388
|
Goodwill
|
17,522
|
|
—
|
Deferred tax assets,
net
|
152
|
|
152
|
Other intangible
assets, net
|
12,777
|
|
20,323
|
Other long-term
assets
|
17
|
|
—
|
TOTAL
ASSETS
|
$
142,196
|
|
$
230,600
|
LIABILITIES AND
STOCKHOLDERS' & EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
7,877
|
|
$
16,231
|
Accrued
liabilities
|
10,474
|
|
24,552
|
Income taxes
payable
|
12
|
|
—
|
Current portion of
long-term debt
|
2,527
|
|
—
|
Current portion of
operating lease liabilities
|
654
|
|
486
|
Current portion of
finance lease liabilities
|
57
|
|
55
|
Total current
liabilities
|
21,601
|
|
41,324
|
Long-term debt, less
current portion
|
3,144
|
|
—
|
Deferred revenue,
long-term
|
111
|
|
—
|
Long-term operating
lease liabilities
|
8,497
|
|
16,973
|
Long-term finance
lease liabilities
|
127
|
|
158
|
Deferred tax
liabilities, net
|
11
|
|
116
|
Total
liabilities
|
33,491
|
|
58,571
|
Stockholders'
Equity:
|
|
|
|
Preferred stock,
$0.0001 par value, 100,000 shares authorized; no shares
issued
|
|
|
|
and
outstanding
|
—
|
|
—
|
Common stock, $0.0001
par value, 140,000,000 shares authorized; 77,626,135
|
|
|
|
shares issued and
73,166,719 shares outstanding at June 30, 2020;
|
|
|
|
63,656,897
shares issued and 59,511,416 shares outstanding at
December 31, 2019
|
7
|
|
6
|
Additional paid-in
capital
|
357,980
|
|
347,564
|
Accumulated other
comprehensive income
|
51
|
|
181
|
Retained earnings
(accumulated deficit)
|
(215,767)
|
|
(142,238)
|
Treasury stock, at
cost; 4,459,416 and 4,145,481 shares at June 30, 2020
and
|
|
|
|
December 31,
2019 respectively
|
(33,566)
|
|
(33,484)
|
Total stockholders'
equity
|
108,705
|
|
172,029
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
142,196
|
|
$
230,600
|
|
|
|
|
(1) Results of the
Company's Consumer and Industrial Chemistry Technologies ("CICT")
segment are presented as discontinued operations for all
periods.
(2) Prior periods presented for 2019 have been adjusted to reflect
revisions to results determined not to be material to those prior
periods.
|
Flotek Industries,
Inc.
|
Unaudited
Reconciliation of Non-GAAP Items and Non-Cash Items Impacting
Earnings
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Loss from
Continuing Operations and Reconciliation to Adjusted EBITDA
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
|
6/30/2020
|
|
6/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
Continuing Operations (GAAP)
|
|
|
$
(9,561)
|
|
$
(12,805)
|
|
$
(63,967)
|
|
$
(73,528)
|
|
$
(28,017)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
16
|
|
16
|
|
4
|
|
20
|
|
2,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
12
|
|
(685)
|
|
(269)
|
|
(257)
|
|
(912)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
Benefit
|
|
|
(32)
|
|
(192)
|
|
(6,169)
|
|
(6,201)
|
|
(503)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
468
|
|
2,119
|
|
2,191
|
|
2,659
|
|
4,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Fixed
and Long Lived Assets
|
|
-
|
|
-
|
|
57,454
|
|
57,454
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
(Non-GAAP)
|
|
|
|
$
(9,097)
|
|
$
(11,547)
|
|
$
(10,756)
|
|
$
(19,853)
|
|
$
(23,040)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Compensation
Expense
|
|
|
1,059
|
|
1,213
|
|
462
|
|
1,521
|
|
1,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and
Retirement
|
|
|
1,227
|
|
356
|
|
1,538
|
|
2,765
|
|
2,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M&A Transaction
Costs
|
|
|
498
|
|
-
|
|
-
|
|
498
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
Step-Up
|
|
|
155
|
|
-
|
|
-
|
|
155
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder-Related
Activities
|
|
|
-
|
|
71
|
|
-
|
|
-
|
|
652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations Related
Contract Termination
|
|
-
|
|
500
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on
Disposal of Assets
|
|
|
(22)
|
|
(4)
|
|
(33)
|
|
(55)
|
|
1,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Lease
Termination
|
|
|
(576)
|
|
-
|
|
-
|
|
(576)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
Write-Down
|
|
|
-
|
|
-
|
|
1,468
|
|
1,468
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain Contract
Commitment
|
|
-
|
|
-
|
|
825
|
|
825
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(Non-GAAP)
|
|
|
|
$
(6,756)
|
|
$
(9,411)
|
|
$
(6,496)
|
|
$
(13,252)
|
|
$
(17,549)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Management
believes that adjusted EBITDA for the three and six months ended
June 30, 2020 and June 30, 2019, and the three months ended March
31, 2020, 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.
(2) Results of the Company's Consumer and Industrial Chemistry
Technologies ("CICT") segment are presented as discontinued
operations for all periods.
(3) Prior periods presented for 2019 have been adjusted to reflect
revisions to results determined not to be material to those prior
periods.
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/flotek-announces-second-quarter-2020-earnings-results-301107290.html
SOURCE Flotek Industries, Inc.