Q4 2020 Flotek Industries Inc Earnings Call
[music].
Greetings and welcome to Flotek Industries fourth quarter 2020 earnings conference call at.
At this time all participants are in a listen only mode. A question and answer session will follow management's prepared remark if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as the reminder of this conference is being recorded it is now my pleasure to introduce Danielle Allen.
Senior Vice President and Chief of staff for Flotek. Thank you you may begin.
Thank you and good afternoon, everyone. Joining me today and what you said.
On the call are do we get them, chairman and CEO, and President and Michael Morton Chief Financial Officer.
And quite president of global business and mind, you Don President of the Q3 technology.
On today's call. We will first provide prepared remarks concerned of your business and the results for the quarter all year of 2020.
Following that we will answer any questions you may have.
This morning, you really start moving out for the fourth quarter and full year of tweets Rooney, which is available on our web free.
Today's call is being webcast and a replay will also be available on the website.
Please note the any comments, we make on today's call regarding projections or the chase.
The teacher events are forward looking statements.
Forward looking statements are subject to a number of risks and uncertainties many of which are beyond our control.
These risks and uncertainties can cause actual results to differ materially from a free application.
We advise listeners to review our earnings release, and the risk factors and Scott.
And finally the S E T.
Also please refer to the reconciliation provided in the earnings press release as management May discuss non-GAAP metrics on this call with that I will turn it the Ritchie John Thanks.
Thank you Danielle and good afternoon to everyone before we dive into the corridor and the year I wanted to provide a quick.
Update following the last months severe weather the storm.
The vast majority of our employees based in Texas, Oklahoma, Louisiana, where income.
And with all of the storms, maybe without electricity and water based income.
Including myself and.
And it was truly a miserable experience wherever you want.
Right.
We did sustain damage the several of our facilities and we were unable to access it really the weak due to the damage to a fire suppression system, which has subsequently been repaired and <unk>.
And we've been impacted by the broad declaration of force.
And across the entire book chemical supply chain the.
First time, we've seen such widespread impacts of its life.
As a result, there is a rising price environment and limited supplies of certain raw materials.
We are fortunate to have trusted supplier relationship.
The strong supply chain and sourcing strategy with the help us and you can provide.
Right.
Service to our board and stuff.
And we are hopeful of supply for us against the results of the normal state with some of the weight.
And this is a.
The kind of a sample of moment here before really discussing our results I would like to give you an update on the board.
I'm deeply saddened to report the Kevin Brown of directors, who joined the board in June 2020. Following the access of J P. Three passed away unexpectedly in January.
Kevin It was a solid contributor to the board and.
And so the Arctic and I'll tell you this.
And the insights and.
And he asked me, we express our deep and bolus of Evans family and friends and we mourn his loss.
Harsha Darby was appointed to the audit the baby to replace the Kevin.
And Additionally, we just announced with our direct and Michelle Adams just notified the board she remarks.
Election, as the result of the existing time commitments outside of the Flotek Board responsibilities.
Let me tell you Michel is the superstar theres been a steadfast adviser to the board since 2017, including serving itself. Ladies here. She gave us the wise counsel of matters of cloud based technologies and the J P three of them.
And the safety strategy and business development methodology, we are fortunate to be able to continue to work with the health of that.
The months, we will miss of our presence and the board grid actually.
And we believe our careers all of the rocket ship. The C is incredibly talented and I look forward. The Washington here continue to have great achievements.
And as a result of that and we have engaged.
Patrick the struggles to initiate the search process when you do it.
And we'll keep you apprised of the progress there.
Additionally, we created a new Board committee, the risk and sustainability Committee last year two of our board of assessment process. The identified the need to have the answer of risk oversight the buildup of Australia and.
Sustainable business, while financial risk the typically overseen by the audit Committee, we have a much broader view the risk we face of the leap day, and then the future human capital.
The S E cyber security.
Hugh.
We are excited with the rest of the sustained ability maybe is going to be chaired bars aimed directly at my age.
It's gonna be of.
Really excited the envelope.
And.
And if we look back the 2020 performance I am inspired by the resilience of the peak.
Business and the industries, we serve.
The challenges of the extraordinary, but we remain focused and opportunity.
And the face of the pandemic and extremely volatile macro environment.
And my school year for multiple reasons.
First of all.
I'm proud of the leadership team, we've built and the babies countable and results oriented sales.
And the Flotek sustainably.
Second we entered the digital transformation space with the acquisition of J P. Three which further diversify the revenue stream and represents an excellent long term growth opportunity.
Third early in the year, we made a quick and nimble decision to reduce the stocks at all from improve our processes one of our business more efficiently and to protect the liquidity.
For the expanded the portfolio to flow cleaning and disinfecting and sanitizing products.
Following our philanthropic efforts and the communities where the off.
Through this business.
Some of our existing supply to existing personnel existing facility the generate margin accretive.
The all of these axes creates the focus on environmental sustainability and governance relationships and culture and we brought the size of our efforts to protect the environment health and safety and security of our operations through our goal zero incidents and no one should ever go home and.
As a result of these initiatives we've improved our adjusted EBITDA by more than 7 billion euro per year to a loss of $26 million despite revenue declining by more than half.
Now from a macro perspective, the energy industry faced and the extraordinarily challenging year across the full.
And we'll have the clothing strength.
And the oil price per AD COVID-19 demand destruction and the result, the oversupply of habit.
Subsequently capped the budget for the domestic producers.
Got a fleet of more than 40 per cent year. According to the report by interval.
And with our class of focus to accelerate free cash.
More recently with the added uncertainty of domestically related to the administration's free all new drilling on federal land and water along with the cash the likes of the Keystone XL pipeline as a part of the new climate change initiatives.
However, we are seeing really more optimistic outlook for the second half of 2021.
COVID-19 stay at home restrictions ease and more broadly vaccination of adoption rates increase and more business is open.
Although over all the capital budgets objected to the mine Black book, just 2020, where some operators activity is a crazy from the lows of two through 2020 one.
And it takes the market around activity levels with one of our key strategies and we are targeting knee and pleased with consist of programs through 2020, one focused on producing the highest mark and acreage. Many of these producers of the same spending throughout 2020.
Additionally, crude prices continued to show signs of improvement from last quarter with the U S. N is the license admin strikes and the advisor of the 2021 forecast for net.
Average price of $61 per barrel for the year.
While refinery utilization remains weak overall rates have been steadily trending upwards of 2021 and.
And one we anticipate will continue to improve the communities opened around the world.
Additionally.
We have seen broad science of the debris and gasoline demand. According to the EIA and mid January of gasoline demand and saw the largest one week increase of the June 14th 20, if the man just over 6% and even the five year average.
And the middle East the mid optimism related to strike the oil prices and increased demand for its reality stimulation chemicals and opportunities the adoption of our days of the technology.
And it'll cover that and the bids are.
And our energy chemistry business, and particularly we had a very strong here and the middle East and the 31 per se growth over 29th day, we intend to build on that day.
And we looked at the dance and market, we believe there's a permanent change occurring and the mindset of businesses and consumers.
It will create a continuous lay of the professional of chemistry.
As the world against the come back together.
The actions increased travel and business of that we believe the lamp with cleaning and sanitizing supplies will remain high as business strengthens their protocols to reestablish trust with consumers, while also maintaining vigilance against the new variance of the Corona virus, but of the merger.
And finally with increased business commitment light of DST.
And we're well positioned to partner with business the safety and to improve their ESG performance. We did this by don't think of it.
And it proved the safety reliability and efficiency of the operation.
The increase in natural gas production from the energy transition.
And deploy digital real time technologies that enable the process and operational efficiencies and minimize waste will be free process.
Furthermore, we offer greater chemistry alternative toxic chemicals used in parts of the energy production lifecycle of the day Marshall Wace has felt from the yourself and the environmental risk and.
As you can see we're excited to elevate our discussions about ESG and we look forward the telling you more throughout the year.
If you look at the quarterly.
Salt.
And just briefly for the fourth quarter.
And we just stuck with the close of the last earnings call in November we expected Q4 earnings to be down and.
Of our chemistry technologies is impacted by the year and capital budget exhaustion and the impact of the resurgence of COVID-19 owned businesses.
The consolidation of the softness in international activity and the general view that leaving after Thanksgiving with somebody back of the year was the right direction.
The predictions played out and the generally performed in line with our expectations with quarterly revenue and adjusted EBITDA slightly down from Q3, I'm pleased we saw sequential improvement and our data analytics segment in Q4, as we evolved our commercial model and executed all of the sales strategy.
Free monetizing new opportunities and ways.
So out of the back the growth of it particularly in international markets. We have achieved a significant milestone during one of our first interactive pilots with the same thank Boyd and the highlight is top of it.
Now we move on the liquidity exhausted with the.
Changes and take decisive action and guided by each pillar, the best position Flotek and the future.
Throughout the quarter, we continued to work with our suppliers to negotiate off the wall materials.
We negotiate leases and reduce the breakdown.
And our balance sheet remains among our highest priorities we have expensive options, we are evaluating and pursuing okay.
For additional details on the corner of debt it turned it over the type of boy for further discussion of our data analytics and deriving the element, we would give us the that David and the chemistry technology segment and lastly, the Mic board and he will provide a more in depth discussion of the financial results with that I am pleased the turn it over to.
And then going forward. Thank you John.
And the past quarter and remain focused on executing against our business strategy and the data and analytic pattern the.
The continuing to demonstrate the value we bring to our customers the <unk>.
And really transform their businesses to real time data and analysis.
It's the result of all of assets, we're pleased to deliver a 91, 8% increase the revenue sequentially, which was driven by new sales in North America, and maintenance and support services and <unk>.
Paul We also made progress on advancing all of international market and Japan.
As we discussed last quarter, we recently hired an executive based in the Middle East with meeting all of international business development.
We're encouraged by the meaningful engagement.
And both of the sponsors we are receiving and the Middle East Africa and Asia.
Notably we are pleased to announce the rest of kit off but international pilot, the a leading oil and gas company and the middle East, which we have begun planning for deployment.
Simultaneously, we are reading of products and systems and meet the expectations and requirements while international deployment.
We are making significant progress against key milestones while Inc.
The national deals require longer lead times and.
The accretion in this market, it's an important component to our growth strategy.
We are pleased with the schiffman of an important milestone and optimistic about the opportunities or the meet the long term.
During the quarter, we made software development and Huntsville.
All of everything all of it so intelligence and machine learning capabilities.
One of the first applications they were planning the launch in Q2.
As the use of machine learning algorithms better and improve.
And the time it takes the test batches and hence the they reduce the transmit.
Transfixed by the way is the natural mixing between hedges and back with different fuels the engine.
Chip and the common pardon.
The perfecting our downgrading of put up with the coffee.
Customers to implement our technology could potentially create millions to this reduction in terms of <unk>.
Additionally, in the fourth quarter, we are at <unk>.
Fight and opportunities to streamline of same thing per se.
Proof of our operational efficiencies reduce costs of our customers and accelerate the commissioning of our systems all.
For the past years <unk> has built a robust library with more than 30000 hydrocarbon samples.
We shall be thankful to the accuracy of our real time of hydrocarbon knowledge.
Given the expenses net of our samples and do not need to collect and many new samples.
As a result, we have streamlined our processes so that the.
Simply as needed rather than attempting to build up of library.
The result of higher profitability and greater economies.
And so we're making significant progress with simple list.
I, even know samples of central lab samples.
Samples.
During the fourth quarter, we added a number of new customers and the U S and in Canada.
New customers generally with the chase the system to try out the technology, we built nominally resolving the additional systems and the future.
Once the technology is proven India and London.
One of the new customer with Abbott and Q4 is one of the largest midstream companies and the U S and since then we have the chase for additional systems.
I'm excited about our prospects for the future as we continue to and the Huntsville offerings and keep all of which is key in delivering our solutions, while seeking new customers and markets.
J P. Three technology is changing changing and help our customers make more money and all of the safety.
Safety of the operations.
We are needed and the right direction to grow this business.
With that and then pass along the policy one is out of the household.
Technology and what the run rate.
And discussing our chemistry technology segment. The performance I'll first provide highlights of our energy chemistry technologies, followed by highlights of our professional Chemistries, which includes our newly launched EPA and FDA registered cleaning disinfecting and sanitizing product lines.
Two 2020 has been a transformative year for our energy chemistry business as we effectively drove down operational costs, renegotiated logistics and supplier contracts and accelerate efficiencies and our business processes. As a result, we have built a leaner business that can meet the needs of the oil and gas markets of today and the future.
And the fourth quarter, we began to reintroduce flotek to the market to elevate visibility of art and his value proposition. It focuses our efforts on becoming the chemistry of partner of choice and delivering operational cost efficiencies and improved well production.
We are refining our sales strategy the complement a range of domestic and international customers and include both E&P operators as well as oilfield service companies.
The group, we are targeting the customer base, where the sustainable activity and operates the program, particularly in unconventional shale markets.
The strategic objectives align with Flotek proven performance and value proposition of cost of Brexit chemistry solutions that it can improve production at lower cost per barrel produced.
And of recent example, flotek provided and independent operator of customized solution to Bruce traditional acid stimulation results of wells being brought back online and Andrews County, Texas, using its proprietary reservoir centric chemistry and.
And this remediation of the application of 20% increase and production was achieved utilizing our customized chemistry with ask the treatments versus just the acid treatments alone and.
Additionally, the 20 per cent increase and production has been sustained through time when comparing it to the Controle case of sole assets.
Execution of our value proposition and proved to be not only economically.
Having a positive return on investment, but technically it demonstrates the customized chemistry can impact every single variable of the capability of equation by increasing the efficacy of more traditional and repetitive applications that are being implemented the wedge of production cases mitigate the climb in this particular field.
The complementary started the message strategy, our energy chemistry business continues to focus on international growth opportunities, which are driving upside and the business, particularly in the middle East.
We mentioned last quarter that we were named the keiretsu partner of choice and the Middle East of about a broad range of the pull through and stimulation of Eric with the amazing the NOC true partnership and market and then as the service companies and.
And while we are and a multi stage process. We are excited to see the gross in the middle of the ball from this opportunity.
A day, our international business with more than 25 per cent of our current chemistry sales and we continue to see significant growth opportunities.
And the lastly, as John touched upon and we're focused on accelerating our UC solutions per customer advocacy and profitability.
And since 2011 Flotek has utilized its green check here with the scorecard to evaluate track and report our ESG profile and impact the products.
Our plan the Chemistries are built upon highly effective plant based solve and offer a safer sustainable alternatives. The toxic chemicals made from products and obtaining benzene toluene ethylbenzene xylene, commonly referred to as the <unk> compounds. These compounds of very health of the people soil and groundwater.
And our green of Kimpton, the solutions made a safer environment for our employees customers and the community.
The strong market opportunity to deliver cost effective environmentally friendly safer chemistry solutions that will diversify our product portfolio, while helping operators increased production at a lower cost per barrel.
Now moving to other professional cameras with product line and I wanted to take a moment to reflect on what we've seen and what has been accomplished at a rapid pace and the.
Second quarter of 2020, we launched Flotek lot of FDA quality and Sanitizers for industrial and consumer applications, which has now been expanded to more than 10 differentiated products and the janitorial sense other sector. Thus diversifying our corporate revenue stream into a rejuvenated and high growth to tip, the market and by leveraging our chemical production case.
The buildings and ISO certified facilities, we applaud our world class R&D footprint to deliver and expanding line of high quality FDA and EPA registered products that are a natural extension of our kids free technology portfolio.
And today.
I'm pleased to report on three important milestones for our chemistry of professional teams and product line.
The first being is the newly executed strategic agreement with a major global manufacturer of specialty and intermediate chemicals and.
After an extensive evaluation and audit process flow.
<unk> has been approved to produce and package E. P E and Covid enlist registered disinfectant wipes is one of a select group of sub read.
This agreement also enables flotek the build upon EPA approved formulations as part of its innovation pipeline.
Secondly, we've invested and building our channel to market the established a long term sustainable business strategy.
Partnering with the strategic adviser and former Clorox Executive Matt Laszlo, Matt brings more than 25 years of experience and has served as senior business sales and marketing roles across consumer commercial and retail E Commerce and industrial markets for us isn't price of helping us to accelerate our loans and <unk>.
Average our strength, if we build our business for the long term.
And lastly, and the fourth quarter, we're pleased to announce the launch of our new professional Chemistries brand Flotek protocol, which includes the robust line of surface cleaners, and wipes Disinfectants Green day, Greasers, and Sanitizers and and manufactured and produced and the USA and focus on application of our proprietary green chemistry the.
Jan San World.
All of you to visit our website and explore and new product offerings and call.
And we're pleased that the transformation of our chemistry technologies business, taking hold and we're improving the efficiency of the business as we meet the moving of our customers.
I'll turn the call over to Mike Burton to discuss our financial results. Thank you Ryan as John mentioned previously our fourth quarter was generally in line with our expectations, despite the difficult market environment and the third quarter and.
Q4, we faced challenges of oil globally, the main street prices impacting both segments.
And our loss of sales from last year as we manage the business more efficiently and focus on new ways to free diversify and grow profitable revenue streams.
First of all I'd like to address the fourth quarter impairment and the chemistry technology segment, we reported a loss of $9 4 million per day.
Amendment to the opinion agreement of <unk> adjusted from the company's expected usage of your pain.
The European being purchases related to a take or pay contract that was part of the 2019.
The reported chemical.
Chemical company into the ATM.
Earnings per share impact associated with your opinion is the loss of 15 cents per day.
<unk> share on a total loss of 30 cents per diluted share.
Now, let's go through the income statement and more detail during the fourth quarter consolidated revenue of $12 1 million down 5% from $12 7 million and the third book and below the 19 point by many of the revenues in the same period last year.
The decline that we saw in the fourth quarter was primarily driven by the volatility of the macro environment. The U S onshore zone.
And completion activity, which is impacted by political and economic events and foreign markets as well as product mix and the chemical technology segment.
By segment, we saw 10.
10% decline and revenue sequentially from the chemistry technology segment grew $10.8 million was closed and $18 5 million and revenue from the fourth quarter of last year.
The decline was largely due to typical fourth quarter seasonality on lower activity levels year over year as the result of ongoing multi brand with it the data analytics segment. So a 90.
And 1.8 per cent increase in sales sequentially.
Driven primarily by new sales of new pipe sales in North America.
Consolidated operating expenses were $24 3 million and the fourth quarter of 24 and a.
The $17 four per cent decline sequentially and decreased 42, 6% from last year's level of $42 4 million from the fourth quarter.
Corporate G&A declined five point to millions of $3 7 million versus 9 million and the fourth quarter last year to a reduction of overall completes and compensation spending lower discretionary spending including professional fees, partially offset by onetime severance charges and discretionary bonuses.
Other expenses were higher sequentially due to an accrual for the specialty bonus payments and this impacted adjusted EPS by less than one cent per diluted share.
Our depreciation and amortization of expenses declined $1 8 million to approximately.
235000, and the fourth quarter versus 2 million lives here.
Research and development costs were $1 5 million and the fourth were generally in line with the third quarter and down from $2 2 million from last year.
We reported a loss from continuing operations of $17 7 million or 30 cents loss per diluted share and the fourth quarter of 2020, a sharp improvement and the loss of $36 9 million or 60% loss per diluted share of lives here.
Our adjusted EBITDA for the fourth quarter was the loss of $6 8 million, which is normally better than last year's fourth quarter loss of $8 five the improvement and adjusted EBITDA is primarily due to lower and the cruise business driven by head count reductions.
As we look into 2021 and go to maximize cost efficiencies grow our topline and securing the necessary working capital to execute our growth strategy.
And doing so we intend to execute our.
Opportunities to grow our energy posted focused products and services the internet.
Increased domestic market share of a price as the energy market recoveries in the latter half of 2021 and expand our Greek and soon the ESC variety price offerings.
Yes.
Now, let's move onto the balance sheet performance, our cash position remains healthy we are focused on preserving our liquidity at the airport quarter, we had cash the birth of $38 7 million versus $49 2 million in the third quarter the bridge.
The British and refined and the four key factors that impact of our cash position operating losses.
A $2.5 million or that the business related to the acquisition of JP free capital improvements the rates of our packages and by filing of equipment for our chemistry technologies segments as well as southern the count.
And being at a combined $5 seven of their loans outstanding pursuant to the page check protection program related to the cares Act.
Last quarter we.
He called out of one of our priority was the better manage our inventory position and reduced by 35%. We have taken of small further reduction this quarter and continue to expect that SKU reduction will result in savings between the $1, one to $1 $3 million range and inventory and any thoughts.
At this point of our pass the call back to John that the funding agreements.
Thank you Mike.
Around this time last year I shared with you that I would only take one of 2020 of the company achieved breakeven the better.
We did not.
Well I certainly cannot fathom the events that lie ahead, and I made the commitment it does not change.
Our ambitions or the Gulf.
As a result of the climb the boneless and keeping with the promise make no mistake, while we didn't achieve the outcome, we set our sights all of the 2020.
And I'm very pleased with the 2020 of accomplishments and the year over year treatment of adjusted EBITDA in spite of lower revenue levels.
And I'm very grateful to have the support of our board and our management team and our employees.
And the particularly the board who recognized our leadership and our achievements in the face of the most challenging circumstances I've ever experienced in my career.
On January six of celebrated my one year anniversary of Flotek, and while I'm optimistic by nature I will admit that there were times of my optimism waiver, but it was cleaning because of the cerner to the challenge of rash with an opportunity presented itself.
And I cannot tell you how grateful I am for our customers, who have entrusted us to support them through this unprecedented gear.
There's lots of my deep appreciation for the support I received from our shareholders.
And he of whom have opened doors and resources for us as we began our business transformation and it.
It was our employees, who inspire me daily with their courage ingenuity and skill.
Fortunately I will always cherish the calls and emails of encourage book came in at just the right moment. Thank you guys with that I'd like to open it up questions.
We will now begin the question and answer session to ask the question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the pool.
To withdraw your question. Please press Star then two.
Okay.
Our first question today and will come from Daniel Burke with Johnson Rice.
Yeah, good afternoon guys.
Oh Daniel.
Let's see John maybe and maybe start with the kind of open ended one here.
Thank you all sort of addressed it but how are you thinking about cash burn rate and 'twenty, 'twenty, one and and ways to mitigate it and and.
And maybe if you can reach that crossover point cheese.
And so we're positive cash generation and of the year dances.
A great question and liquidity is probably the.
Front of mind for all of his share of the company. So I'm talking to Mike One thing to look at the last year is what are the non recurring.
And that occurred and if you tally of that all of its kind of being the 28 $30 million range of the things that we believe wont be reoccurring.
So if you subtract that from the approximate $60 million spent.
We anticipate spending about.
Somewhere around $30 million this year.
As well if we had a similar year the last.
And so we have sufficient cash to make it through 2021 and as the we consider this to be of recovery here, It's a little hard to anticipate exactly when the market is going to pick up but we think that we won't have any unusual cash expenses.
And in 2020, one and we have several initiatives underway to actually reduce the 30 million net we spent the.
The additional this year, but being a little tighter of some of the spend we are apple supply chain et cetera, So anticipate getting out of the year and good shape, we've got more of a sufficient cash and meet all of our obligations.
Okay.
And maybe maybe just to stay on and on the topic of sort of cash with regard to Turkey and you. All took the charge you took a charge and in Q4 I think your commitment to purchase turpin increases and 21 versus 'twenty.
Can you can you reassure us debt I guess after this the Q4 charge youre appropriately reserved for the level of terpene sales that are that are likely.
To be achieved and in 2021.
Yeah.
And I believe we're appropriately reserved.
And are we where are working through.
And strategies to reduce the purchases that are required after paint.
Going forward and I'll have to tell you more about that as we go forward, but we.
Theres, some things that really impact that.
Or are we have got a lot quite of lot of research and we find our products more price competitive and and better performance, even with the reduction and the use of her pain that's required.
The supply of those products, so that brings our cost of goods down and improves our margins and at the same time, we're seeing very good performance by these chemicals actually better than the higher cost price per pain from the past that reduces the demand for the turbines. So you can assume that it's an imperative for us to reduce the amount of per se.
We purchased so that were not purchasing and excess of large blocks and we are working on of solutions without problems.
Okay.
I'll ask a couple of more maybe maybe one on the J P three side.
This has been a transitional period for J P. Three as you sort of re fashion the sales model, but you know the business and 18 and 19 was running at a three $4 million quarterly revenue run rate I mean can you give us any any thoughts from the viability of getting back to that debt level of of.
Of revenue as you look to maybe the second half of 'twenty one.
And I'm pretty excited about it and probably the best natural come from the point sort of if you jump in.
Thank you John and thank you Danielle we all working.
Both international as well as domestic on the international front I think that's the lot of potential.
We're working on and that will help us drive the business.
And go to the business and recently and the future.
Domestically as well and seeing a pick up.
Okay.
Domestically, we are also seeing a pick up and.
Interaction as well so we're seeing a lot of the.
Customer meetings and interaction and in fact.
And I'll speak worked the first time.
Debt.
Yes, and I get to go through of customers' office and the policy was meeting for lunch the newspapers and so on and last year and just last week, we were the.
One of our major countries of patients. So I can see the interaction is picking up as we move through it.
While this year.
And then there's another interesting we had breakfast with volume with one of the major and others and now.
Here's a quote.
This is the second meeting in person and 13 much.
And so that gives you some idea of the challenges that the company and the whole sector faces all being able to get their sales ramped up and so it's how quickly they began to sort of having that with J P. Three we were beginning to see people take meetings now of quartz and all of the road.
And I guess.
Yes, it's probably violation of some HR Roe, but coins had to stop.
I've had one shot and we're working towards getting the shot up so that we can all get out there and visit the best person. So you know I'm.
I'm excited about getting much like the shop next week. So that we can hit the road and we're all committed to getting out and having the second ladies and from customers as soon as they open their offices and let's say it.
And I agree that sounds assets and it'll be good to get back to normal okay, and maybe maybe just the final one skimming through the the K here just.
Just I did notice of few instances of of material weaknesses identified can you can you maybe address what's.
What's going on.
There and how you addressed us thanks.
I appreciate that and he'll.
Yeah, I mean, there are material weaknesses, there and and a lot of it has to do with the internal controls and.
And I'm here to dose controls for the game here of 2020, and and we've undertaken a lot of initiatives to improve.
Our ability to.
The implement controls are meaningful.
We did change directors, we changed the audit Committee chair of.
This year, we intend to bring the internal.
Audit function and house, because we think that that'll give us a lot more oversight over that as we go forward and all of the material weaknesses that are are noted.
Things that we can remediate immediately and and test those the big complaint within 2021 and.
So and in some cases.
And it's a little frustrating because in aggregate, we have control would've really liked the loan and <unk>.
And provided the necessary. So we didn't have a specific control named the what was necessary and so we've got to go through and take the look at our roles.
But the we.
We have specific names and pro meets the requirements of the same with the emergence.
Got it.
Alright, guys I'll leave it there. Thank you for the time.
I appreciate it.
And again, if you have any further questions you can press Star then one to join our team.
Well.
Yeah. It looks like we have your next question coming from the power of Frac with noble capital market.
Hey, good afternoon John.
Actually it's a question on the professional chemistry side, you know when you look at the initiatives that you have.
I guess I'm, most interested and the product launch and.
Protocol and what can you sort of quantify the timing and revenue potential of that new product line.
The opex stab at it rounds here with me.
So we do have a full time consultants with us Thats working night, and lastly out of the came up or off.
And he would say that we have really done an outstanding job and build its revenue and the fresh the chemistry lab.
But he's a consultant and we have we've got the manufacturer who got the registration down both the F. D. A C E. We've modified our facility so that we meet all of the requirements.
With respect and we.
The foundation for really being strong and this business going forward and the one thing that we we saved per last if we did want to start selling the full we have product is the creation of the sale.
And so Ryan has been aggressively pursuing sales talent.
The more challenging that I'm out of thought and it's primarily because if you're sitting and get one of the John Kim companies.
Companies this year COVID-19 started.
And if breakthrough on the budget, so you're sitting there waiting on your part of US before you take the rest of and go on another company and so we've had a bit of a delay and bringing people on board.
And but I think that we are.
We have got multiple channels like why and I was simple no.
And I mean, the bill and had gone up I think it is the.
Part of the business that we're we're really bullish about in terms of.
And what we have or and accretive revenue stream, whereas stall and R. M D and E. P. A regulatory body functions and for US we're continuing to see the evolution of our product sales of the diversification of the channels that we're using and the majority of our customer base. What we saw at the start as kind of.
All of these triage site puts the now become repeat customers and continue to grow and evolve and that aspect and we're really excited about about the growth potential of this and we do feel that the establishment of the protocol brand is starting to translate into you know the true belief that we're going to be a continued long.
In terms of player in this market and are doing a lot of attention to us of where the growth aspect and we're excited about that.
Hey, Scott.
Too much about this but.
And one of the things I find fascinating about it is there were so many unreliable unscrupulous fly by night and this that one of the things that we have to do in order to win a contract. If we have and actually have proof of inventories. So we are going to warehouse the the camera and so and we actually have a problem.
In order to be able to ship it and they won't bear cases, because of labor ordered and democracy and that's the area. That's the.
The litigation.
Throughout this year and the lag associated with companies that made promises of doesn't deliver all of unless something we've avoided.
Great and then.
Mike You mentioned that you had to you know PPP loans outstanding.
You know wanted the.
The company and then one of corporate can you highlight.
And your process on applying for the.
The loan forgiveness with the within the cares program has that happened this year and expectation of when you might get a decision on that if you have it by per loan forgiveness.
I was just right now of filling out the forms to two of pie, it's probably going to be sometime in the next month and will be of pie and cementing our and <unk>.
<unk> and back to the SBA.
Okay.
Great. Thank you so much.
Yeah.
And our next question will come from Eric Swergold with Firestorm capital.
Good afternoon, and I've got two questions. The first one is from Mike.
Can you reiterate for me what the total want Nols are as of year end and then for Teng Bang.
Obviously, you didn't sit on your hands, even though you weren't able to travel can you talk a little bit about what your prospect looks like now and after the date of business versus what it looked like nine months ago. Obviously, you've had a lot of time to do research on who the prospective customers are.
For that non line of work for now thanks.
So we have a rough but roughly about 95 million of Nols and about half of those are under the old loss carryforward methodologies. So eat the carried some of those forward and definitely at the 80% that's sort of half of them and the other half.
Refer and they expire around 23 to 2035.
So and about 50 50 of that 95.
So I'm carry on forever and some of expiring.
2032 and 2035.
Thanks.
Yep and.
And for us on the.
The.
Domestically and then Canada, I guess, the U S and Canada, we're seeing a repeat customers coming back and fourth quarter as well as this quarter.
So that's coming on nicely internationally, where we have been doing a lot of business development assets.
In Asia.
The Southeast Asia, India, all across the middle East as well and many of the discussions that led onto a number of proposals as well. So we're quite optimistic of our international although it will still take a little bit of time, and not being able to travel and have to face to face meetings, but the suddenly very fast with the responses all across.
Thank you.
Uh huh.
Yes.
Our next question comes from John Bair, with ascend wealth advisors.
Thank you. Thank you for taking my call.
A couple of questions.
And.
As you try to transition all of them.
Barack upon developing.
And our chemistry alternatives for.
And well stimulation and so forth.
Can you.
Kind of give us an idea of what the timeline is from.
Sort of romancing of prospective client to them.
Trying the product and and testing of the show.
Assuming that day.
I want to do some trials before you.
And actually get steady and decent booking of of.
Of orders on that.
Well, John that's of Great question.
If it turns out the history of this company was it was founded on Green chemistry, and probably when people were mostly giving it lip service and weren't taking it seriously.
But with the same major independent of this morning, we covered ESG, where the the AE is really big and and they would define it and.
And as clean air and clean water.
And so.
So that's that's really an important thing to remember less and less and less on the sensor of people going to talk about climate change, but they are kind of focus on the environmental aspects of clean air clean water, which means reduced flaring and the elimination of the toxic chemicals and the Amy aspect wasn't beach production chemicals.
Or completion chemicals, etcetera, so what what about US well, we've already have those product lines and in fact, we made a sale of clean clean Green chemistry, and California are one of two big but it's indicative of the fact that we can deliver that chemistry now I think one of the challenges. We have is we really need to get more aggressive.
Oh, and the marketing of that and talking to customers about it even this morning with the.
With the customer we were meeting with one of the things that day, they told us, which I think is fascinating.
Is that they have created.
A clean air clean water and fund and so if the cost of implementing that technology exceeds what is the use the less desirable more toxic chemicals and I'll give an example, like xylene, which is significantly more carcinogenic then we can move in with the Turpin based solution.
And.
And or are other yes.
Other solutions replace that and they will actually subsidize that and older to get their own operations people to begin to deploy grain of chemistry, and so I'm I'm excited about the fact that our customers are taking it seriously and it's no longer lip service. This is an industry that I think is aggressively moving forward not and marketing but.
And and actual.
Dedication to being more environmentally.
Your bedroom, environmental stewards, and and that's happening and so I think that's kind of bode well force, but we have the market and the the chemistry. We have it's there. It's just a matter of us talking to customers blending and sending.
So sure those.
Those efforts and involve both of the.
And the.
The green chemistry, as well as monitoring and sensors that you have I mean of.
Listen to some of your presentations here recently, so I'm trying to bone up on what you all are up to but.
And so is that kind of is it kind of a package.
Deal like that or is it strictly the.
The.
The chemical products that are being.
Injected into the wells.
Okay. So we were not as well bundled and and product fast. They asked us if we really probably should be and so we've got some work to do here. It's.
Something I think will be really beneficial to the company of proposal of cash conversion and so the the questions is is.
Perfect and it is what's driving a lot of revolvers life.
When we sit down now.
With our customer with one of the first things the last.
Even though whether it be and Bloomberg and postal and I'll say you know how we go the rest of the E. S T.
The requirements of our company.
Another example.
It's now incorporated into the orphan sites.
So it's it's no longer something that is esoteric it's actually designed directly into their compensation and so our ability to improve their ability to get their bonus I think becomes a great selling half of the fantasy flotek.
And shifting gears a little bit here.
And I know you said that the two facilities you have you're running a one eight hour shift so you have capacity the <unk>.
Spanned of demand.
Dictates that.
And I'm wondering now that you've got these F D. A certification DPA certifications and so forth are you seeing any kind of meaningful.
Uptick.
And in inquiries or.
As far as product sales go to where you might have to look at the.
And the wonderful possibility of adding another shift.
And you know I wish right now we were sitting around and talking about adding another shift but.
And it's interesting we're sort of getting on the older He and spikes and so theres times, when and where we're already worked with some overtime in order to get things out and then there are soft and we do have downtime and we need a second shift right down the assets.
Oh and.
I think that's something that at the moment I started day have a second shift I would I would immediately while the report out to you guys that would tell you that we really began at the.
Momentum in the marketplace.
Okay.
Very good.
I appreciate your taking my questions and.
The best of luck of quite well.
Thank you.
Yeah.
This concludes our question and answer session I'd like to turn the call back over to John Gibson for any closing remarks.
Well as always thanks for joining the call and we really appreciate the support of all of our shareholders and.
And we've had some really locked up through the air.
And I just want to make sure you know how and for the two arc.
And most importantly, we've had some great Walt the out of employees and so we've managed to get through a tough year and then thinking we were emerging with the vaccine that is yet.
The bigger weather and so I just appreciate the debt fastest and.
And with the commitment and the loyalty of that all of our employees itself of the company and its just been the fantastic to work here and look forward to talking to you guys are at the end of the one.
Take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.