Q4 2024 Flotek Industries Inc Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to Flotek Industries' fourth quarter and fourth year 2024 earnings conference call. At this time, note that all lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you require immediate assistance, please press star zero for an operator.

Good morning, ladies and gentlemen, and welcome to the Flotek industries fourth quarter, two and full year 2024 earnings conference call. At this time note that all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session and if at any time. During this call you require me to the system piece first.

Zero for an operator also note that the call is being recorded on Tuesday March 11 2025.

Operator: Also note that the call is being recorded on Tuesday, March 11, 2025.

Michael Critelli: And now I would like to turn the conference over to Michael Critelli, Director of Finance and Visitor Relations. Please go ahead. Thank you, and good morning everyone. We appreciate your participation in Flotek's fourth quarter and full year 2024 earnings conference call. Joining me on the call today are Ryan Ezell, Chief Executive Officer, and Bon Clement, Chief Financial Officer.

And I would like to turn the conference over to Mike Daly Director of Finance Investor Relations. Please go ahead Sir.

Mike Daly: Thank you and good morning, everyone. We appreciate your participation in flow Tech's fourth quarter and full year 2024 earnings conference call. Joining me on the call today are Ryan Israel, Chief Executive Officer, and Bond call net Chief Financial Officer.

Michael Critelli: First, we will provide prepared remarks concerning our business operations and financial results for fourth quarter and full year 2024. Following that, we will open up the call for any questions you have. Flotek's fourth quarter and full year 2024 financial and operating results press release. was issued yesterday afternoon. We also posted an updated 2024 earnings presentation that we will be referencing on today's call. These can all be found on the investor relations section of our website.

Mike Daly: First we will provide prepared remarks concerning our business operations and financial results for the fourth quarter and full year 2024.

Mike Daly: Following that we will open up the call for any questions you have.

Mike Daly: Flotek 's fourth quarter, and full year, 'twenty 'twenty, four financial and operating results press release.

Mike Daly: It was issued yesterday afternoon. We also posted an updated 'twenty 'twenty four earnings presentation that we will be referencing on today's call.

Mike Daly: These can all be found on the Investor Relations section of our web site.

Michael Critelli: In addition, today's call is being webcast and a replay will be available on our website following the conclusion of this call. Please note that the comments made on today's call regarding projections or expectations for future 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 our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Please refer to the reconciliations provided in the earnings press release and investor presentation as management will be discussing non-GAAP metrics on this call.

Mike Daly: In addition, today's call is being webcast and a replay will be available on our website. Following the conclusion of this call.

Mike Daly: Please note that the comments made on today's call regarding projections or expectations for future 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.

Mike Daly: From our current expectations, we advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC.

Mike Daly: Please refer to the reconciliations provided in the earnings press release, and Investor presentation as management will be discussing non-GAAP metrics on this call.

Ryan Ezell: With that, I will turn the call over to our CEO, Ryan Ezell. Thank you, Mike, and good morning. We appreciate everyone's interest in Flotek and for joining us today as we discuss our fourth quarter and full year 2024 operational and financial results. The closing months of the year brought industry-wide challenges, but the Flotek team remained steadfast on the execution of our corporate strategy, delivering the strongest quarter since 2017. I'm proud of the organization's laser focus on elevating our performance to increase market share and profitability growth in both of our complementary business segments in the face of such market headwinds.

Ryan Israel: With that I'll turn the call over to our CEO Ryan as though.

Ryan Israel: Thank you Mike and good morning, we appreciate everyone's interest in Flotek and for joining US today as we discuss our fourth quarter and full year 2020 for operational and financial results.

Ryan Israel: The closing most of the year, but industry wide challenges, but the flotek team remains steadfast on the execution of our corporate strategy delivering the strongest quarter since 2017.

Ryan Israel: I'm proud of the organization is laser focus on elevating our performance to increase market share and profitability growth in both of our complementary business segments in the face of such market headwinds.

Ryan Ezell: We remain unwavering in our commitment to create value for shareholders through continuous improvement of our processes, market share expansion, and innovative products and services, and maintaining the trend of delivering strong results that outpace the market as we head into 2025.

Ryan Israel: We remain unwavering in our commitment to create value for shareholders through continuous improvement of our processes market share expansion.

Ryan Israel: Innovative products and services and maintaining the trend of delivering strong results that outpaced the market as we head into 2025.

Ryan Ezell: With that, I'd like to turn to slide five and touch on some key highlights for the quarter and the year that Bond will discuss in detail in just a moment. With a backdrop of weaker North American oilfield service activity, Q4 2024 total revenues rose 20 percent versus Q4 of 2023. This is led by a 21 percent jump in external customer revenue, highlighting our ability to execute and the continued progress we've made in capturing market share through the deployment of differentiated chemistry and data solutions. This is quite an accomplishment considering the fact that the active frack fleet counts declined over 25 percent from the peak of the first quarter of 2024.

With that I'd like to turn to slide five ill touch on some key highlights for the quarter and the year. The bond will discussed in detail in just a moment.

Ryan Israel: With a backdrop of weaker North American oil field service activity Q4, 2024, total revenues rose, 20% versus Q4 of 2023. This.

Ryan Israel: This is led by a 21% jump in external customer revenue.

Ryan Israel: Our ability to execute and the continued progress we've made in capturing market share through the deployment of differentiated chemistry and data solutions. This is quite an accomplishment considering the fact that the active frac fleet counts declined over 25% from the peak of the first quarter of 2024.

Ryan Ezell: It's also important to note that our Q4 external customer revenue was the highest in the last five years, with our international timbership business making its largest quarterly contribution in the last 10 years. Our data analytics service revenue grew 124% versus Q4 2023 and 44% versus the full year of 2023. Additionally, we completed the development of three new products within our data analytics segment in the second half of 2024, which results in opening access to a future total addressable market of more than $500 million. These include our new EXPECT custody transfer units, Raman measurement devices, and VeriCal analyzers for flare monitoring.

Ryan Israel: It's also important to note that our Q4 external customer revenue was the highest in the last five years with our international Cambridgeshire business, making its largest quarterly contribution in the last 10 years.

Ryan Israel: Our data analytics service revenue grew 124% versus Q4 2023.

Ryan Israel: 44% versus the full year of 2023.

Ryan Israel: Additionally, we completed the development of three new products within our data analytics segment in the second half of 2024, which results in opening access to a future total addressable market of more than $500 million. These.

These include our new expect expect custody transfer units Robin measurement devices, and Vera cow analyzers for FLIR monitoring.

Ryan Ezell: In Q4 2024, net income was $4.4 million, and adjusted EBITDA was $7 million, up 111% and 78% respectively, versus Q4 2023. Full year 2024 adjusted EBITDA reached $20.3 million, up $18.8 million from 2023, and being the highest since 2017. This exceeded our guidance of $18.5 million by 10%. Flotek's 2024 stock performance ranked in the top three out of all Oatville service stocks. Delivering on our commitment to enhancing shareholder value, we saw a 140% improvement in our stock price.

Ryan Israel: In Q4, 2024, net income was $4 4 million and adjusted EBITDA was $7 million up 111%, 78%, respectively versus Q4 2023.

Ryan Israel: Full year 2024, adjusted EBITDA reached $20 3 million up $18 8 million from 2023 and being the highest since 2017.

Ryan Israel: This exceeded our guidance of $18 5 million about 10%.

Ryan Israel: <unk> 2020 for stock performance ranked in the top three out of all opioid service stocks delivering on our commitment to enhancing shareholder value, we saw a 140% improvement in our stock price.

Ryan Ezell: And most importantly, all of these achievements were accomplished with zero lost time incidents in the field of operations. And I'd like to take a moment to thank our employees for their hard work and commitment to safety and service quality in achieving these outstanding results. I continue to be excited about the future of Flotek as we expand our position as a technology leader, driving innovation and delivering differentiated chemistry and data solutions that are tailored to our customers' needs. We strive to create solutions for future challenges that impact our industry, leveraging chemistry as the common value creation platform.

Ryan Israel: And most importantly, all of these achievements were accomplished with zero lost time incidents in the field of operations now.

Ryan Israel: Now I'd like to take a moment to thank our employees for their hard work and commitment to safety and service quality and achieving these outstanding results.

Ryan Israel: I continue to be excited about the future of Flotek as we expand our position as a technology leader driving innovation and delivering differentiated chemistry and data solutions that are tailored to our customers' needs.

Ryan Israel: We strive to create solutions for future challenges that impact our industry leveraging chemistry as the common value creation platform.

Ryan Ezell: Flotek will remain at the forefront of novel and multidisciplinary advancements as we bring new technologies to the market through the convergence of data and chemistry solutions. Flotek is creating unique products and services to expand our addressable market through the application of real-time data and predictive chemical management that improves the ultimate recovery of hydrocarbons from each asset while providing a level of transparency never achieved in the energy and infrastructure segment.

Ryan Israel: Flotek will remain at the forefront of novel and multi disciplinary advancements as we bring new technologies to the market through the convergence of data and chemistry solutions.

Ryan Israel: Flotek is creating unique products and services to expand our addressable market through the application of real time data a predictive chemical management that improves the ultimate recovery of hydrocarbons from each asset while providing a level of transparency never achieved in energy and infrastructure segments.

Ryan Ezell: As we move into 2025, we're excited about three of our upstream data analytics applications. The first is our VeriCal flare monitoring solution. In Q4 2024, we grew the number of VeriCal units to 13 in rental service and sold an additional two units. These numbers exceeded the expectations provided on our call in October, despite fourth quarter flare monitoring revenues being impacted by the delayed EPA update. The majority of FLAIR application revenues to date continue to be through rental and service contracts, which imply a recurring revenue stream that generated over $1.3 million in the final five months of 2024.

Ryan Israel: As we move into 2025, we are excited about three of our upstream data analytics applications.

Ryan Israel: The first is our very cow flare monitoring solution.

Ryan Israel: In Q4 2024, we grew the number of bear Cal units to 13 and rental service and sold an additional two units.

Ryan Israel: These numbers exceeded the expectations provided on our call in October despite fourth quarter flare monitoring revenues being impacted by the delayed EPA update.

Ryan Israel: The majority of flare application revenues to date continue to be through rental service contracts, which imply a recurring revenue stream that generated over $1 $3 million in the final five months of 2024.

Ryan Ezell: The second is our EXPECT custody transfer solution. Our upstream custody transfer use cases continue to expand into field trials with a total of 14 committed units in the fourth quarter of 2024. This is 27% higher than what was discussed in last quarter's earnings call. Our ability to monitor hydrocarbon quality and composition in real time with the measurements taken every five seconds will create an emerging market for Flotek in 2025. This revolutionary application creates an elevated level of transparency and enterprise risk minimization for producing wells that's never been achieved in the oil and gas industry to date.

Ryan Israel: The second is our expect custody transfer solution.

Ryan Israel: Our upstream custody transfer use cases continue to expand into field trials with a total of 14 committed units in the fourth quarter of 2024.

Ryan Israel: This is 27% higher than what was discussed in last quarter's earnings call.

Ryan Israel: Our ability to monitor hydrocarbon quality or composition of real time with the measurement is taken every five seconds will create an emerging market for flotek in 2025.

Ryan Israel: This revolutionary application creates an elevated level of transparency and enterprise risk minimization for producing wells, that's never been achieved in the oil and gas industry to date.

Ryan Ezell: And the third is our power generation solutions. In Q4 of 2024, we expanded to 15 active power generation units deployed, with nine more already committed for a 2025 delivery date. With 100% of these units committed to monthly subscriptions, these assets support our Measure More strategy focused on data as a service revenue models. Our technology provides mobile power generation customers with unmatched real-time gas quality and volume visibility. protecting high-value equipment while displacing diesel and or CNG with lower-cost fuel gas and simplifying the royalty payment process. Leveraging these unique technologies provides significant opportunities to expand Flotek's presence in the energy infrastructure space.

Ryan Israel: And the third is our power generation solutions in Q4 of 2024, we expanded to 15 active power generation units deployed with nine more already committed for 2025 delivery date.

Ryan Israel: With 100% of these units committed to monthly subscriptions. These assets support our measure more strategy focused on data as a service revenue models.

Ryan Israel: Our technology provides mobile power generation customers with unmatched real time gas quality and volume visibility.

Ryan Israel: Protecting high value equipment, while displacing diesel <unk> with lower cost field gas.

Ryan Israel: Is simplifying the royalty payment process leveraging these unique technology provides significant opportunities to expand <unk> presence in the energy infrastructure space.

Ryan Ezell: And finally, we expect the continued expansion of our data-as-a-service model with the launch of our next-generation near-infrared, Raman, and aqueous measurement systems, unlocking significant upstream and downstream market opportunity. to support further growth.

Ryan Israel: And finally, we expect the continued expansion of our data as a service model with the launch of our next generation narrow for Red Robin and aqueous measurement systems, unlocking significant upstream and downstream market opportunities.

Ryan Israel: To support further growth.

Ryan Ezell: As we look forward, the demand for oil and gas is expected to expand for the next decade with further requirements needed through 2045. For the first time in nearly two decades, the demand for electricity in the U.S. is expected to climb 15 percent by 2030, with natural gas expected to provide the bulk of the incremental demand. We expect the overall expansion of the global economy to continue to create substantial demand for all forms of energy, which will increase service intensity within the targeted sector. As we look at 2025, and although the first quarter has historically posed difficulties for revenue growth, given customer operating schedule and weather slowdowns, we're currently cautiously optimistic about sustaining our profitability momentum into the early months of 2025.

Ryan Israel: As we look forward the demand for oil and gas is expected to expand for the next decade with further requirements needed through 2045.

Ryan Israel: For the first time in nearly two decades the demand for electricity in the U S is expected to cloud, 15% by 2030 with natural gas expected to provide the bulk of the incremental demand.

Ryan Israel: We expect the overall expansion of the global economy to continue to create sustainable demand for all forms of energy, which will increased service intensity within the targeted sectors.

Ryan Israel: As we look at 2025 and although the first quarter has historically caused difficulties for revenue growth became a customer operating schedule and weather slowdowns.

Ryan Israel: We're currently cautiously optimistic about sustaining our profitability momentum into the early months of 2025.

Ryan Ezell: We are confident that our expanding suite of services positions us to deliver unique and superior solutions to a variety of the industry's most challenging problems while maximizing our customers' value chain.

Ryan Israel: We are confident that our expanding suite of services positions us to deliver a unique or superior solutions to a variety of the industry's most challenging problems, while maximizing our customers' value chain.

Bon Clement: Now, I'll turn the call over to Von to provide key financial highlights. Thanks, Ryan. Yesterday afternoon, we reported our strongest quarter since the fourth quarter of 2017. As shown on slide five of the presentation we posted yesterday, we increased revenue, net income, and adjusted EBITDA in every quarter during 2024.

Ryan Israel: Now I'll turn the call over to buy to provide key financial highlights.

Speaker Change: Thanks, Ryan yesterday afternoon, we reported our strongest quarter since the fourth quarter of 2017.

Speaker Change: As shown on slide five of the presentation, we posted yesterday, we increased revenue net income and adjusted EBITDA in every quarter during 2024.

Bon Clement: Last year was a remarkable year in terms of consistent growth and execution, culminating with an outstanding fourth quarter, which included the following highlights. It was our highest quarterly adjusted EBITDA in seven years. It was the first quarter with over $50 million in revenue since the second quarter of 2023. Our external customer chemistry revenue increased 50% sequentially. International revenues during the fourth quarter increased nearly 300% sequentially and exceeded the total from the first nine months of the year. And finally, roughly two-thirds of our data analytics revenue was derived from service contracts.

Speaker Change: Last year was a remarkable year in terms of consistent growth and execution, culminating with an outstanding fourth quarter, which included the following highlights it was our highest quarterly adjusted EBITDA in seven years. It was the first quarter with over $50 million in revenue since the second quarter of 2023.

Speaker Change: Our external customer chemistry revenue increased 50% sequentially.

Speaker Change: International revenues during the fourth quarter increased nearly 300% sequentially and exceeded the total from the first nine months of the year.

And finally, roughly two thirds of our data analytics revenue was derived from service contracts.

Bon Clement: As it relates to revenue, we inserted a new table into the press release to aid in quantifying components of revenue by segment. For our chemistry revenue, we segregated into related party versus external customers. And for the data analytics segment, we separated product versus service revenue. During the quarter, we grew total chemistry revenues 18% versus 4Q23. As compared to the year ago quarter, we increased external customer chemistry revenue by 17% and related party chemistry revenue by 19%. As Ryan mentioned, the fourth quarter for external chemistry was very strong as we posted a 50% increase versus the third quarter of 2024.

Speaker Change: As it relates to revenue, we inserted a new table into the press release to aid in quantifying components of revenue by segment for our chemistry revenue, we segregated into related party versus external customers and for the data analytics segment, we separated product versus service revenues during.

Speaker Change: During the quarter, we grew total chemistry revenues, 18% versus <unk> 2003 as.

Speaker Change: As compared to the year ago quarter, we increased external customer Kimberly revenue by 17% and related party chemistry revenue by 19%.

Speaker Change: As Ryan mentioned, the fourth quarter for extra chemistry was very strong as we posted a 50% increase versus the third quarter of 2024.

Bon Clement: For data analytics, we grew revenue 74% versus the fourth quarter of 2023, which included 124% increase in service revenue as compared to the year ago quarter. Our fourth quarter 2024 service revenue of 1.6 million was the highest quarterly amount recorded since we acquired the business in 2020. Slide 10 of the presentation shows our success in growing service revenue over the last four years. For 2024, service revenue made up 46 percent of total data analytics revenue versus only 35 percent in 2023. Fourth quarter gross profit increased 35% sequentially, representing a 600 basis point improvement as a percentage of revenue.

Speaker Change: For data analytics, we grew revenue, 74% versus the fourth quarter of 2023, which included 124% increase in service revenue as compared to the year ago quarter.

Speaker Change: Our fourth quarter 2024 service revenue of $1 6 million was the highest quarterly amount recorded since we acquired the business in 2020.

Speaker Change: Slide 10 of the presentation shows our success in growing service revenue over the last four years for 2024 service revenue made up 46% of total data analytics revenue versus only 35% in 2023.

Speaker Change: Fourth quarter gross profit increased 35% sequentially, representing a 600 basis point improvement as a percentage of revenue.

Bon Clement: Sequential margin improvement was driven by the significant jump in external customer chemistry revenues, the 67% sequential increase in data analytics service revenue, and an increase attributable to the order shortfall penalty under our long-term supply agreement. As shown on slide four, during 2024, gross profit margin totaled 21%, handily beating 2023 gross margin of 13%. On the SG&A front, 2024 SG&A costs declined 11%, or approximately $3 million, compared to last year, and SG&A was down 17% from 2023 when factoring in non-cash stock compensation costs.

Speaker Change: Sequential margin improvement was driven by the significant jump in external customer chemistry revenues, the 67% sequential increase in data analytics service revenue and an increase attributable to the order shortfall penalty under a long term supply agreement.

Speaker Change: As shown on slide four during 2024 gross gross profit margin totaled 21% handily, beating 2023 gross margin of 13%.

Speaker Change: On the SG&A front 2020 for SG&A cost declined 11% or approximately $3 million compared to last year and SG&A was down 17% from 2023, when factoring in noncash stock compensation costs.

Bon Clement: Fourth quarter SG&A was up sequentially due to higher bonus accrual as well as higher stock comp costs associated with our annual grant made in October, but we do expect quarterly SG&A to trend back down in the first quarter. Net income for 2024 totaled $10.5 million or $0.34 per diluted share. During 2023, we reported a net loss of approximately $10 million or a net loss of $0.10 per share after backing out non-cash gains that were realized during 2023. For the quarter, our earnings per share total $0.14. That's a 75% increase from the third quarter of 2024.

Speaker Change: Fourth quarter, SG&A was up sequentially due to higher bonus accrual as well as higher stock comp costs associated with our annual grants made in October, but we do expect quarterly SG&A to trend back down in the first quarter.

Speaker Change: Net income for 2024 totaled $10 5 million or <unk> 34 per diluted share.

Speaker Change: During 2023, we reported a net loss of approximately $10 million or a net loss of <unk> 10 per share after backing out non cash gains that were realized during 2023.

Speaker Change: For the quarter our earnings per share totaled 14 sets, that's a 75% increase from the third quarter of 2024.

Bon Clement: As shown on slide six in the presentation, during the fourth quarter, we continued our streak of up and to the right with respect to adjusted EBITDA. The fourth quarter represented the ninth consecutive quarter of improvement. Fourth quarter adjusted EBITDA was up 46% sequentially. As Ryan mentioned, as it relates to our guidance on annual adjusted EBITDA, the $20.3 million we posted for 2024 easily exceeded the top end of our guidance range of $18.5 million.

Speaker Change: As shown on slide six in the presentation during the fourth quarter. We continued our streak of up into the right with respect to adjusted EBITDA. The fourth quarter represented the ninth consecutive quarter of improvement.

Fourth quarter, adjusted EBITDA was up 46% sequentially.

Speaker Change: As Ryan mentioned as it relates to our guidance on annual adjusted EBITDA of $20 3 million, we posted for 2024 easily exceeded the top end of our guidance range of $18 5 million.

Bon Clement: Regarding 2025 guidance, consistent with our practice in 2024 and 2023, we expect to issue guidance in connection with our first quarter results. Touching on the balance sheet, at year-end, we had $4.8 million drawn under our ABL. Currently, we have nothing drawn on our ABL. Our current year-end debt to adjusted EBITDA totaled 0.2X versus year-end 2023 of 5X. This significant improvement was driven by the over 1200% increase in adjusted EBITDA versus 2023.

Speaker Change: Regarding 2025 guidance consistent with our practice in 2024 and 2023, we expect to issue guidance in connection with our first quarter results.

Speaker Change: Touching on the balance sheet at year end, we had $4 8 million drawn under our ABL currently we have nothing drawn on our ABL.

Our current year end debt to adjusted EBITDA totalled <unk> versus year end 2023 of five X.

This significant improvement was driven by the over 200% increase in adjusted EBITDA versus 2023.

Bon Clement: In closing, we obviously set a very high bar with respect to our fourth quarter results. As we turn the focus to 2025, we look forward to continuing the operational and financial momentum we have established over the last several quarters.

Speaker Change: In closing, we obviously set a very high bar with respect our fourth quarter results as we turned our focus to 2025, we look forward to continuing the operational and financial momentum we have established over the last several quarters with that I'll turn the call back to Ryan for closing comments.

Ryan Ezell: With that, I'll turn the call back to Ryan for closing comments.

Ryan Ezell: Thanks, bye. Our 2024 results delivered significant profitability, product innovation, and shareholder value. We are still in the early innings of Flotek's transformation as we continue to grow and maximize return on investment for our customers and shareholders. There is no other company better positioned in our industry to provide the required technologies to address the unique challenges of the energy and infrastructure sector. I'm proud of the progress we have made and I'm confident in our ability to execute going forward. And as I stated at the start of the call, there has never been a more exciting time to be part of Flotek.

Ryan Israel: Thanks, Bob.

Speaker Change: Our 2024 results delivered significant profitability.

Speaker Change: Innovation is shareholder value.

Speaker Change: We are still in the early inning innings of Flotek transformation as we continue to grow and maximize return on investment for our customers and shareholders.

Speaker Change: There is no other company better positioned in our industry to provide the required technologies to address the unique challenges of the energy and infrastructure sectors.

Speaker Change: Proud of the progress we have made and I'm confident in our ability to execute going forward.

Speaker Change: And as I stated at the start of the call. There has never been a more exciting time to be part of Flotek.

Ryan Ezell: The management team and I are optimistic about the future growth potential in both our chemistry and data analytics segments, and we believe that Flotek represents a compelling investment opportunity for current and potential shareholders.

Speaker Change: The management team and are optimistic about the future growth potential in both our chemistry and data analytics segments, and we believe that Flotek represents a compelling investment opportunity for current and potential shareholders.

Ryan Ezell: We appreciate the continued support of all of our stakeholders and we hope that you share our excitement regarding the future of Flotek and we look forward to reporting further progress.

Speaker Change: We appreciate the continued support of all of our stakeholders and we hope that you share our excitement regarding the future of Flotek and we look forward to reporting further progress.

Operator: Operator, we are now ready to take questions. Thanks Ladies and gentlemen, if you do have any questions, please press star followed by 1 on your touch-tone phone. You will then hear a prompt that your hand has been raised. If you wish to decline from the process, please press star followed by 2. And if you're using a speakerphone, we ask that you please lift the handset first before pressing any. Please go ahead and press star 1 now if you have any questions.

Speaker Change: Operator, we're now ready to take questions.

Speaker Change: Thank you, Sir ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone.

Speaker Change: And here a prompt that Johan has been raised should you wish to decline from the process. Please press star followed by two and if you're using to speak we ask that you. Please lift the handset first before pressing any Keith please.

Speaker Change: Please go ahead and Crestar one now if you have any questions.

Jeff Grampp: First will be Jeff Grampp at Alliance Global Partners. Please go ahead, Jeff. Ryan, you mentioned International was a big contributor to the strong revenue in Q4. I was curious to kind of dig into that a bit more, if you could kind of, I guess, share what you think drove that inflection, because I know that's been a big area of focus and investment for you guys. And also just curious, a sense of materiality there, like, can you share how much revenue was International in Q4 or any other metrics would be helpful? Thanks.

Jeff: First will be Jeff <unk> Alliance Global partners. Please go ahead Jeff.

Speaker Change: Morning, guys.

Speaker Change: Brian You mentioned international was a big contributor to the strong revenue in Q4 was curious to kind of dig into that a bit more if you could kind of I guess share of what you think drove that inflection because I know that's been a big area of focus and investment for you guys.

Speaker Change: And also just curious a sense of materiality there like can you share how much revenue was international in Q4 or any other metrics that would be helpful. Thanks.

Ryan Ezell: Yeah, so I'll kind of talk a little bit around the strategy component there, and then I'll let Bond comment on the numbers and how they hit, right? So, but basically, you're dead on spot. We've been working for a number of months on expanding and stabilizing our international business because as you start to see fluctuation in the North American market, having an international presence really helps add stability and air under the wings to keep us running in a profitable manner. The big turns there are that growth of what we had mentioned is we have only one of two slick water fracturing systems approved in Saudi Arabia.

Speaker Change: Yes so.

Speaker Change: Talk a little bit around the strategy component, there and then I'll, let Bob comment on the numbers and how they hit right. So, but basically you're dead on spot. We've been we've been working for a number of months on expanding stabilizing our international business because as you start to see fluctuation in North American market have an international presence really helps add stability there.

Speaker Change: The wings to keep us run it in a profitable manner.

Speaker Change: The Big turns there are net growth of what we had mentioned as we have only one or two.

Speaker Change: Slick water fracturing systems are proven in Saudi Arabia.

Ryan Ezell: We made some significant sales in that part, and we're seeing those continue into 2025. We also turned the curve and we look at some of the conventional asset stimulation and support work that we're doing for ADNOC and UAE and additional business in Oman. But the big driving factor was in UAE and Saudi with the level of work that's going on there on the fracturing side. So, Jeff, in terms of the numbers, international chemistry was about four and a half million dollars in the fourth quarter. For the year, we did about 9.2 million with about 7.4 of that in the UAE, like Ryan mentioned.

Speaker Change: We made some significant sales in that part and we're seeing those continue into 2025. We also turned the curve and we look at some of the conventional asset stimulation and support work that we're doing for Amdocs and UAE and additional business in Oman, but the big driving factor was in UAE, Saudi with the level of work is going on there on the Frac.

Speaker Change: <unk>.

Speaker Change: So Jeff in terms of the numbers International chemistry was about $4 $5 million in the fourth quarter.

Speaker Change: For the year, we did about $9 2 million with about seven four of that in the UAE like Ryan mentioned, so overall international revenues were up about 20% 2024 versus 2023.

Ryan Ezell: So overall, international revenues were up about 20 percent, 2024 versus 2023. Great, that's really helpful. As a follow-up, staying on the international side, is it fair to assume these are a bit higher margins? I guess I'm just kind of inferring that based on the performance in Q4. Wondering, you know, to the extent that the international side outpaces the growth of the company, does that bias margins higher, or how should we think about that? So I would think that definitely we look at the conventional cementing sales and the conventional asset simulation jobs. Those are what we consider to be value-add technologies, and they represent high margins.

Speaker Change: Great that's really helpful.

Speaker Change: A follow up staying on the international side.

Speaker Change: Is it fair to assume these are a bit higher margins.

Speaker Change: I guess I'm, just kind of inferring that based on the performance in Q4.

Speaker Change: Wondering to the extent that.

Speaker Change: The international side Outpaces the growth of the company does that.

Speaker Change: <unk> margins higher or how should we think about that.

Speaker Change: So I would think that definitely we look at the conventional cementing sales and a conventional asset stimulation jobs. Those are what we consider to be value add technologies.

Speaker Change: They represent high margins we.

Ryan Ezell: We do sell, in the Saudi though, there is one component of the friction reducers that I would say, in comparison to North America friction reducing margins, they're actually pretty good, but not anything of real significance because, as you know, friction reducers are moved as a commodity. So the majority of that strong margin comes from the specialty products that move along with those different programs. Okay, great.

Speaker Change: We do sell into Saudi though there is one component of the.

Speaker Change: Friction reducers that I would say in comparison to north American friction reducing margins are actually pretty good.

Speaker Change: But not.

Speaker Change: But not anything of real significance because as you know friction reducers are often moved as a commodity so the majority of that strong margins comes from the specialty products that move along with those different programs.

Speaker Change: Okay great.

Ryan Ezell: And for my follow up, with respect to EPA regulations and rules and some of those changes in uncertainty there, can you update us on what you guys are hearing from customers or how the business development funnel is looking? I mean, it still looks like there's still pretty good adoption and you guys have a lot of different products and services you're rolling out, but you know, how are operators or customers responding to some of the dynamics there? You know, it's been interesting, because there's no doubt when you look at government-regulated activity, there's been a few, you know, the response in the original regulations that rolled out in May of 24, delayed almost until, like, December 20, right, for their comment period.

Speaker Change: And my follow up with respect to EPA regulations and rules and some of those.

Speaker Change: Changes in uncertainty there can you update us on what you guys are hearing from customers or how the business development funnel is looking.

Speaker Change: I mean, it still looks like there is still pretty good adoption and you guys have a lot of different products and services are rolling out but.

Speaker Change: How how our operators our customers responding to some of the dynamics there.

Speaker Change: It's been interesting because there's no doubt when you look at government regulated.

Speaker Change: Activity Theres been a few there.

Speaker Change: Response in the original regulations that rolled out in May of 'twenty four delayed almost until December 'twenty right for their comment period.

Ryan Ezell: And so that slowed some of the activity. But I will tell you, some of the major players that's committed to the flare monitoring have continued to grow and expand into multiple basins, right? And that's where you're seeing this service uptick. And the continued growth, we're adding an additional five VeriCal units already in the quarter into the current fleet of what we've got doing call-off monitoring. And we suspect that when you look at Quad OB and Quad OC, that those will probably stay around in terms of flare monitoring. You did see a rollback by Congress around the methane tax, which doesn't necessarily impact directly to the flare monitoring.

Speaker Change: So that slowed some of the activity, but I will tell you some of the major players is committed to the player monetary.

Speaker Change: Continuing to grow and expand into multiple basins, right and Thats, where youre seeing this service uptake and the continued growth we're adding an additional.

Speaker Change: <unk> five <unk> units are already in the quarter into the current fleet of what we've got.

Speaker Change: Call off monitoring.

Speaker Change: We suspect that when you look at Quad Ob and Quad O see that those are probably stay around in terms of fire monitoring.

Speaker Change: You did see a rollback.

Speaker Change: Congress around the methane tax.

Speaker Change: Which doesn't necessarily impact directly to the player monitoring.

Ryan Ezell: But it does lower some of the bureaucracy around potential penalties to the operators. But as of right now, there's still a good bit of growth room, we think, on the continued monitoring of new wells and some of the prior existing, what we call, assisted wells for the flare monitoring going forward. And a lot of the big, I would say, EPA operators are putting this into their sustainability programs irrespective of what the EPA may make any other final decisions on that. Yeah, I agree. That makes a lot of sense, Ryan. I appreciate those details. I'll let someone else hop in.

Speaker Change: But it does lower some of the bureaucracy around potential penalties to the to the operators, but as of right now.

Speaker Change: A good bit of growth room, we think on the continued monitoring of new wells and some of the prior existing what we call our assisted wells for the flare monitoring going forward.

Speaker Change: And a lot of the big I would say E&P operators are putting us in their sustainability programs irrespective of what the EPA may make a any other final decisions on that.

Speaker Change: Yes, I agree that that makes a lot of sense around I appreciate those details to what someone else out there.

Ryan Ezell: Thanks. Thank you.

Speaker Change: Thank you next question will be from Doug Christopher Johnson Rice. Please go ahead.

Donald Crist: Next question will be from Donald Crist at Johnson Rice. Please go ahead, Donald. Morning, guys. Hope y'all doing well this morning. Given the international exposure on the on the chemicals and the growth there, are you expecting a pullback like we did last year in the first quarter? I know it was a little bit lumpy.

Speaker Change: Good morning, guys hope, you're all doing well this morning.

Speaker Change: Given the international exposure on the on the chemicals and the growth. There are you expecting a pullback like we did last year in the first quarter I know it was a little bit lumpy do you think those the Saudi approval for the slick water fracs actually smoothed out.

Ryan Ezell: Do you think those you know the the Saudi approval for the slick water fracts actually smooths that out some or do you still think it pulls back a little bit in the first quarter just from normal seasonality? I think that, you know, there's no doubt that the assistance from the international business will help smooth out that lumpiness in Q1. There's no doubt about that. I still think we do see, well, some of our bigger customers, in North America specific, there's still a little bit of seasonality that we see January and February, but we have started to see that activity pick up.

Speaker Change: Some are or do you still think you pulled back a little bit in the first quarter just from normal seasonality.

Speaker Change: I think that there is no doubt that the assistance from the international business will help smooth out that lumpiness in Q1.

Speaker Change: Theres no doubt about that I still think we do see with some of our bigger customers are in North America specific there's still a little bit of a seasonality that we see January February but we have started to see that activity pick up.

Ryan Ezell: But in comparison to past Q1s, I think we're going to see that smooth out a little bit this year is to our optimism about it. You know, we're already in March and we feel like that's going to be a little bit better performance relative to our past Q1.

Speaker Change: But in comparison to two paths.

Speaker Change: Q1 is I think we're going to see that smooth out a little bit this year that would kind of makes it to your optimism about it.

Speaker Change: Where we're already in March and we feel we feel like that's going to be a little bit better performance relative to our past Q1.

Ryan Ezell: Okay, that's really good color.

Speaker Change: Okay.

Donald Crist: And on the data analytics side, I mean, obviously, you got a lot of different products that that are highlighted in the presentation, would it be possible for you to kind of walk through? I mean, we know the Vericals are for flares, but can you talk about the other two? And kind of what their end uses primary end uses?

Speaker Change: That's really good color.

Speaker Change: On the data analytics side, I mean, obviously, you've got a lot of different products that are highlighted in the presentation would it be possible for you to kind of walk through I mean, we know the <unk> perf layers, but can you talk about the other two.

Speaker Change: And kind of what their end use is primary end users.

Ryan Ezell: Sure. So the first one, let's talk about the XPECT custody transfer solution. So the XPECT unit is a third generation of our near-infrared monitoring technology that serves two purposes as far as one is it significantly brought down manufacturing costs that allowed us to put a unit that we could deploy at thousands of different well locations in the U.S. and it makes it cost effective for full-time monitoring year-round of these flows where we look at these custody transfer solutions, we look at composition of BTU quality 24 hours a day. That has, you know, we have talked about in Q3 about maybe having 11 sites running.

Speaker Change: Sure. So first of all let's talk about the <unk>.

Speaker Change: Expect custody transfer solution so.

Speaker Change: They expect unit is a third generation over a near for Red monitoring technology.

Speaker Change: It served two purposes as far as what is a significantly brought down manufacturing costs that allowed us to put a unit that we can deploy had thousands of different well locations.

Speaker Change: And in the U S and it makes it cost effective for full time monitoring year round of these flows where we look at the custody transfer solutions. We look at composition of Btu quality 24 hours a day.

Speaker Change: That has we had talked about in Q3 about maybe having 11 sites running.

Ryan Ezell: In Q4, we actually exceeded that and got up to 14 and that's continuing to grow in Q1. So it's a very exciting piece and what you see there is, you know, traditionally speaking, when a well is flowing, they're taking one composite sample every, you know, six to nine months and then the operator and resource owner is compensated based on that net heating value and or BTU content or compositional breakdown. And what we see when we monitor and we're taking a measurement every five seconds, you're seeing consistent fluctuations throughout the date on the BTU values as well as the hydrocarbon composition which could potentially leave money on the table either for the person who's buying and or the person who's receiving benefits, right?

Speaker Change: In Q4, we actually exceeded that and got up to 14 and Thats continuing to grow in Q1.

Speaker Change: So it's a very exciting piece and what you see there is traditionally speaking when one of wells flowing theyre, taking one composite sample.

Speaker Change: Every six to nine months and then they are the operator and resource owner is compensated based on that net heating value and or Btu quite container composition of breakdown and what we see when we monitor and we're taking a measured but every five seconds, you're seeing consistent fluctuations throughout the day on the btu values as well as the hydrocarbon.

Speaker Change: Composition, which could potentially.

Speaker Change: Leave money on the table either for the person, who is buying and where the person who's receiving.

Ryan Ezell: And so when you look at hundreds of thousands of wells, this is a massive opportunity here for flow tech in the future and it offers up a level of transparency that's never been seen inside of the, I'll say, you know, the crude and gas trading markets in terms of gas quality. And it's also a big driver that translates into what we do into the power generation as well because when we have units that are located, whether it be in an expect unit or a barracks unit at power gen locations, they're doing the same thing. We're monitoring net heating value or BTU quality, one, to look at fuel consumption and to protect the engines from over-rev and the fires, and then two, it allows for proper pay on the resource owners from the co-mingling aspects when you bring gas together at these sites.

Speaker Change: Benefits right.

Speaker Change: So when you look at hundreds of thousands of well. This is a massive opportunity here for flotek in the future and it offers up a level of transparency that has never been seen in inside of the I'll say that the crude and <unk>.

Speaker Change: Gas trading markets in terms of gas quality.

Speaker Change: And it's also a big driver of that translates into what we do into the power generation as well because when we have units that are located whether it be in and expect unit or a <unk> unit a power Gen locations, they're doing the same thing where monetary net heating value btu quality, one to look at fuel consumption.

Speaker Change: To protect the engines from over Rev into fires and then two it allows for proper pay on the resource owners from the commingling aspects when you bring gas together <unk> sites and so these are phenomenal opportunities when you start to see that.

Ryan Ezell: And so these are phenomenal opportunities when you start to see the requirements for mobile power gen and the protection of those where you're running AI data centers, you're looking at infrastructure on the industrial side, you're looking at rig power, you're looking at frack power, gas compression or whichever, it's a really large market. And those are some of the target areas for the new technologies.

Speaker Change: Requirements for lower power Gen and the protection of those where they're running AI data centers, you're looking at it infrastructure on the industrial side Youre looking at rig power, you're looking at Frac power gas.

Speaker Change: Gas compression whichever is a really large market and those are some of the target areas for the new technologies.

Ryan Ezell: The final one I'll mention is our new Raman technology where we have an exclusive agreement to bring Bruker's Raman technology to the field. We actually have three of those in the field running now. We look for some continued sales for those in Q1. And they do a lot of things similar to what our original VAREX unit does in the, I would say, midstream to downstream component. We look at vapor pressure monitoring, flashpoint detection, refined fuels, and things of that nature. And they can actually see certain points, depending on levels of aromatics, different pieces you see, they offer some unique advantages.

Speaker Change: The final what I'll mention is our new Robyn technology, where we have exclusive agreement to bring brokers.

Speaker Change: Raw material allergy to the field.

Speaker Change: We actually have.

Speaker Change: Three of those in the field running now.

Speaker Change: Look for some continued sales for those in Q1 and they do a lot of things similar.

Speaker Change: To what our original bear actually than it does in the I'll say midstream to downstream component, we look at vapor pressure monetary flashpoint detection refined fuels and things of that nature and they can actually see certain points.

Speaker Change: And at all levels of aromatics different pieces, you see they offer some unique advantages and it just as part of our complete measure more strategy to add weapons into our Arsenal to continue to grow this data as a service business.

Ryan Ezell: And it just is part of our complete measure more strategy to add weapons into our arsenal to continue to grow this data as a service business.

Speaker Change: Okay.

Ryan Ezell: It was a lot of color and I appreciate all that. One final one for me, I mean obviously you have 14 of these units committed to pilot locations. What is the general term of those pilot programs and do you expect, I mean obviously it's dependent on results of the pilot program, but you know, when do you think that more broad acceptance of this could happen? I mean is that a three month pilot program or six month or a year? Just curious on that. So most of them, what we have is, we've been, the biggest pilot program we have is spread out down over three particular basins, one in Mexico, one in Texas, and one up in the north, up near the D.J.

Speaker Change: Yes.

A lot of color and I appreciate all that one final one for me I mean, obviously you have 14 of these units committed the pilot locations what is the general term.

Speaker Change: Are those pilot programs and do you expect I mean, obviously, it's dependent on results of the pilot program, but when do you think that that more broad.

Speaker Change: Acceptance of this good could happen I mean is that a three month pilot program or six months or a year just curious on that.

Speaker Change: So most of them what we have is we've been the biggest pilot program. We have is spread out Dod over.

Speaker Change: Three particular basins.

Speaker Change: And in Mexico, and one in Texas, and one up in the north of near the D. J.

Ryan Ezell: and Powder River. And so what we do there is we install the units, we'll go walk there as we do the installing of the units, and we've allowed them to have a 45-day monitoring period to see how the equipment works. See the data that value is going to provide, and at the end of the 45 days, they kick into a multiple-year type service revenue contract, where they pay a monthly rental rate for the data and the service of having the unit there. And so those, some of the units, I'd say the first installation, which was the first four or five, will come on live for generating revenue at the very end of this quarter, and then another four, and then another four, because there'll be 20 total in that big pilot program.

Speaker Change: River and so what we do there is we install the units will go walk areas. We did install the units and we've allowed them to have a 45 day monitoring period to just see how the equivalent worse.

Speaker Change: See the data that value is going to provide and at the end of the 45 days they kick into a multiple year type service revenue contract, where they pay a monthly rental rate for the data and the service of having the unit there.

Speaker Change: And so those some of the units I'd say the first installation, which was the first four five will come all laugh for generating revenue at the very end of this quarter and then another four and then another four because there'll be an a b 20 total in that Big pilot program.

Ryan Ezell: And so they'll actually start, we'll actually start to generate revenue in this segment in the second quarter of 25.

Speaker Change: I will actually start will actually start to generate revenue in this segment in the second quarter at 25.

Donald Crist: I appreciate the call and I'll turn it back.

Speaker Change: I appreciate the color I'll turn it back.

Speaker Change: Yes.

Jerry Sweeney: Next question will be from Jerry Sweeney at Roth Capital. Please go ahead, Jerry. Good morning. Ryan Bond. Mike, thanks for taking my call. So, I apologize, I'm balancing a couple of things here, so if this was asked. I just want to stay on the data analytics side. Obviously, you're rolling it out.

Speaker Change: Thank you next question will be from Gerry Sweeney of Roth Capital. Please go ahead Gerry.

Ryan Bond: Good morning, Ryan Bond, Mike Thanks for taking my call.

Speaker Change: Yes.

Speaker Change: So I apologize bouncing a couple of things here.

Speaker Change: If this was asked or touched upon I apologize in advance, but just wanted to stay on the data analytics side. Obviously you are rolling it out.

Ryan Ezell: The subscription side is great, but maybe what are some of the key milestones we should keep an eye on for this year as you roll it out? Maybe development, maybe what you're targeting. You know, I don't, you know, we're, you know, we're always conservative, Jerry. You've got no-throw period on the guys we give on that. I'm sorry, I had to ask. In terms of, but when I look at it in generalities, in terms of operation, you know, you look at, we were running 1314 full rental flare units in Q4. We've got an additional five built and to the fleet.

Speaker Change: The subscription side is great, but maybe what are some of the key milestones we should keep an eye on for this year as you've rolled out maybe development, maybe what youre targeting.

Speaker Change: Longer term for units in the field et cetera.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: We're always concerned with Jerry you got notice over the period on the guidance. We gave on that I'm, sorry, I had to add in terms of Bob.

Speaker Change: Yeah.

Speaker Change: But when I look at it generalities in terms of operation you know you look at we were running.

Speaker Change: 13, 14 full rental player units in Q4, we've got additional five built adding to the fleet. So we're going to continue to make.

Ryan Ezell: So we're going to continue to make probably double-digit increases in those as we go out for the flare monitoring. I do believe that, you know, we're going to start to see a solid, you know, access to that or should I say acceptance of that by the market and the growth there just because it's being a regulatory body. I think that as we get past these these larger use cases with custody transfer and we're able to put some of the data out for fully on these large-scale value-add projects for custody transfer, we will start to see that start to accelerate in the back half of the year.

Speaker Change: Probably double digit increases in those as we go out for the player monetary.

Speaker Change: I do believe that they're going to we're going to start to see.

Speaker Change: Our solid you know.

Speaker Change: Access to that or should I say.

Speaker Change: <unk> of that by the market and the growth there.

Speaker Change: Just because it's been a regulatory bottle body.

Speaker Change: I think that as we get past these.

Speaker Change: These larger use cases with custody transfer and we're able to.

Speaker Change: <unk> put some of the data out for fully owned these large scale value add projects for custody transfer we will start to see that start to accelerate in the back half of the year.

Ryan Ezell: And, you know, those are hard to put a number on because those projects can come 25 to 30 units at a time, right, in terms of big deployment because there's so many wells. And so we're a little cautious on that number yet because, you know, you could miss a mark, plus or minus, but we do think we're going to see consistent movement there.

Speaker Change: And those are hard to put a number on because those projects come 25 to 30 units at a time right in terms of big deployment, because theres. So many wells.

Speaker Change: So we're a little cautious on that number yet because you could miss the mark plus or modest, but we do think we're going to see consistent movement there.

Ryan Ezell: And then we talked about we're going to be adding an additional, at minimum, 9 to 10 power gen uses in a solution. That business is really exciting. It's starting to take off because we're not only diversifying the customer base, but also the way we do the applications, whether it's in compression, frac power, we're looking at electricity for grid support, electricity, I mean, gas monitoring going to AI data centers. You've seen a lot of those coming to Texas. So there's a lot of unique opportunities there. And I think, you know, we're going to continue to probably add a little bit more color and numbers around those when we get to the Q1 numbers and we put some guidance out.

Speaker Change: And then we talked about we're going to be adding an additional.

Speaker Change: Minimum of nine to 10 power Gen uses air solution that business.

Speaker Change: Really exciting they are starting to take off because we're not only diversifying the customer base, but also the way we do the applications, where they're seeing compression fracked.

Speaker Change: <unk> power, where you are.

Speaker Change: Looking at electricity for grid support electric gas monitoring go into AI data Center, you see a lot of those come into Texas.

Speaker Change: So theres a lot of unique opportunities there and I think we're going to continue to probably add a little bit more color or numbers around those as we get to the Q1 numbers when we put some guidance out.

Ryan Ezell: Now, that's fair. That's actually good detail, and I apologize. Yeah, that's all right. Bob will yell at me later.

Speaker Change: No that's fair that's actually a good detail.

Speaker Change: That doesn't mean, they necessarily put you on the spot there.

Speaker Change: Alright.

Speaker Change: Todd will yell at me later.

Ryan Ezell: Natural gas, natural gas, natural gas demand feels as though it's picking up, you know, lots of talking to next year LNG exports. You know, you did mention international on the chemistry side, but just curious, you know, maybe looking a little bit out onto the playing field for this year, next year in North America. You know, what are you thinking on that front, and, you know, how beneficial? Prescriptive chemistry would that be if natural gas? You know, we've talked a lot about this last year. We were seeing a lot of the frack activity leave or migrate away from these gas-heavy basins.

Speaker Change: Natural gas.

Speaker Change: Natural gas.

Speaker Change: Natural gas demand feels as though it's picking up lots of talk into next year LNG exports.

Speaker Change: You did mentioned international on the chemistry side, but just curious.

Speaker Change: Maybe looking a little bit out onto the playing field for this year next year in North America.

Speaker Change: U S land.

Speaker Change: What are you thinking on that front.

Speaker Change: How beneficial to chemistry.

Prescriptive chemistry or would that be if natural gas stays elevated drilling picks up.

Speaker Change: We've talked a lot about.

Speaker Change: A lot about this last year that we were seeing a lot of the frac activity leave or migrate away from these gas basins.

Ryan Ezell: What I can tell you is that our unique partnership with ProFrac works very well in a majority of the gas basins. In particular, you look at the Haynesville, their proximity of materials and operations, everything works very well. And traditionally, we see a great uptick in revenue per fleet in the Haynesville just due to the higher pressures and temperatures you see on the frack and the complex systems that they run. So I think, as we mentioned earlier, we're a great hedge in our chemistry technologies in a strong natural gas environment. You also look at what all our measurement technologies can do when producing natural gas, the LNG exports and everything like that.

Speaker Change: What I can tell you is that our unique our unique partnership with with pro Frac.

Speaker Change: Works very well in a majority of the gas basis, particularly you look at the Haynesville.

Speaker Change: Their proximity of materials and operations everything works very well and traditionally we.

Speaker Change: We see a great uptick in revenue per fleet in the Haynesville, just due to the higher pressures and temperatures you see on the Frac of the car and the complex systems that they run.

Speaker Change: So I think as we mentioned earlier, we are a great haze in our Cambridge technologies, and a strong natural gas environment.

You also look at.

Speaker Change: What all our measurement technologies can do when producing natural gas LNG exports everything like that I think this.

Ryan Ezell: I think this plays into the wheelhouse and the value chain of what Flotek can add in these gas basins. And when you start moving in, pipelining and doing liquid natural gas exports. And, you know, these markets where you've seen the consolidation. and you're looking at the return on invested capital, this is the wheelhouse and the strength of what Flotek does and putting its proprietary technologies, providing transparency and performance operations, whether in chemistry or data analytics, and I think this plays well into our long-term strategy. I appreciate it. And thanks for all the color. I really do.

Speaker Change: This plays into the wheelhouse in the value chain of what Flotek can add.

Speaker Change: In these gas basins.

Speaker Change: <unk> start moving in pipeline and doing the comex euro gas exports.

Speaker Change: And these markets, where you have seen in consolidation.

Speaker Change: And Youre looking at the return on invested capital. This is the wheelhouse and the strength of what Flotek does putting us proprietary technologies, providing transparency and performance operations, where their chemistry or data analytics and I think this plays well into our long term strategy.

Speaker Change: Got it I appreciate it and thanks for all the color I really do appreciate it. Thank you.

Operator: Thanks, Gerard. Once again, ladies and gentlemen, a reminder to please press star followed by 1 if you have any questions.

Speaker Change: Yeah. Thanks, Jerry.

Speaker Change: Once again, ladies and gentlemen, as a reminder to please press star followed by one if you have any questions.

Josh Jayne: Next is Josh Jayne at Daniel Energy Partners. Please go ahead, Josh. Thanks. Good morning. I wanted to follow up on that last question quickly. You talked about revenue per fleet being higher in some of the gassy areas.

Josh: Josh team at Daniel Energy Partners. Please go ahead Josh.

Josh: Thanks, Good morning, I wanted to follow up on that last question quickly.

Josh: You talked about revenue per fleet being higher than some of the density areas. So would that mean that in the chemistry business that margins would be higher in the event that we saw a lot more spending towards that's directed activity over the course of 2025 and 2026 versus just oily areas.

Ryan Ezell: So would that mean that in the chemistry business that margins would be higher in the event that we saw a lot more spending go towards gas directed activity over the course of 2025 and 2026 versus just oily areas? So, you know, that's a that's a unique question in that there's two things we consider. One is when you look at, let's say, for instance, the Haynesville, there's more advanced technology just due to temperature and pressure and whether you're running a hybrid crosslink system combined with slick water and the different additives you need to stabilize that well from scale control, etc.

Josh: So that's a that's a unique question and there's two things that we consider one is when you look at let's say versus the Haynesville. There is more advanced technologies is due to temperature pressure and whether youre running a hybrid cross link system combined with slick water and the different additives you need to stabilize that will from <unk>.

Josh: We'll control et cetera.

Ryan Ezell: And traditionally speaking, the higher-end technologies that's required in there are usually what we call value-add technologies, right? And so, you know, most of the way we look at margins is all just based on product mix and not total revenue. And so, but no doubt, in a lot of these gas areas, we typically run a different or better surfactant choices. We run a better scale and different, I would say, value-add items, which helps out our product mix usually a little bit the better margin side than a less complex system that we use in West Texas, which traditionally will be slick water driven with a little biocide, you know, because it definitely plays into our higher-end technology performance standard.

Josh: And traditionally speaking the higher end technologies as required are using what we call value add technologies right.

Josh: And so you know.

Josh: Most of the way we look at margins is all just based on product mix and not total revenue.

Josh: So, but no doubt and a lot of these these are gas areas, we typically run.

Josh: A different or better surfactant choices, we run better scale and different.

Josh: I will say value add items, which helps out our product mix, usually a little bit to the better margin side, then a less complex system that we use in west, Texas, which traditionally will be slick water driven with a little biased.

Josh: But because it definitely plays into our hiring in technology performance standards.

Ryan Ezell: Okay, thanks. And then just on the oil side, there's obviously been a lot of volatility to start this year from the commodity price. Maybe you could just speak to, in North America, what you're seeing from your customer budget standpoint. Do you think that budgets potentially could change based on how oil has been acting this year, or do you think budgets are pretty much locked for the year? Maybe just a comment on that in North America outlook. You know, and, you know, this is always a little bit of a look into a really smoky crystal ball for us, right?

Speaker Change: Okay. Thanks, and then just on the oil side, there's obviously been a lot of a lot of volatility to start this year from the commodity price maybe you could just speak to North America.

Speaker Change: What youre seeing from your customer budget standpoint, do you think that but it's potentially could change based on how oil is that in this year or do you think budgets are pretty much locked for the year, maybe just a comment on that in North America outlook.

Speaker Change: You know.

Speaker Change: This is always a.

Speaker Change: A little bit of a look into a really smoky crystal ball for us right.

Ryan Ezell: Being on the services side here is that all in all, when you look at the potential impact at the macro level from what we're going to see from OPEC Plus, some of the larger, I would say, deepwater operations in Guyana, some of the base operations you're seeing out of the North Sea, they're going to be providing incremental supply into a market that's probably not accepting it as fast as what we would like to see. So I think we're going to see a little bit of a glut that's going to put downward pressure on the liquid hydrocarbons.

Speaker Change: On the services side here.

Speaker Change: All in all when you look at the potential impact at the macro level, what we're going to see from OPEC plus some of the larger.

I would say deepwater operations in Guyana, some of that base.

Speaker Change: Base operations, you'll see that in the north sea theyre going to be providing incremental supply into a market, that's probably not accepting it as fast as what we'd like to see so I think we're going to see a little bit of a glut, that's going to put downward pressure on the liquid hydrocarbons.

Ryan Ezell: On the opposite side of that, I do think that the potential for LNG exports, what we're going to see on the power gen side of business stuff is really going to create a relatively bullish natural gas market in the back half of the year, rolling in 26. So hopefully that'll kind of help to balance each other out. I do think that the level of diversification that we put into our revenue streams on the chemistry side with international, our ability to operate in gas basins and our stabilization in the liquid components will add some insulation for us combined with our largest supply agreement with our largest customer.

Speaker Change: On the opposite side of that I do think that the potential for LNG exports, what we're going to see how the power Gen side of business stuff is really going to create a relatively bullish natural gas market in the back half of the year Rolling in 2006, so hopefully that'll kind of help too.

Speaker Change: Balance each other out I do think that the level of diversification that we put into our revenue streams on the chemistry side with international our ability to operate in gas basins, and our stabilization and the liquid components will add.

Speaker Change: Some insulation for us combined with our large supply agreement with our largest customer.

Ryan Ezell: And then you couple up with the data analytics business, I think that puts us in a position to continue to perform in 2025 overall.

Speaker Change: And then you couple up with the data analytics business I think that puts us in a position to continue to perform in 2025 overall.

Ryan Ezell: Okay, thank you. And maybe just one more follow-up for my last question. Could you speak to, again, the growth from the external customer base, even if you strip out international, you know, given what's happened, you know, throughout North America from a rig count and frack crew perspective has been pretty, it's been pretty significant on a year-over-year basis, just looking at what the company has done. Could you speak to why you've been so successful? For the customers who aren't using your chemistry technology today, where the opportunities are, and maybe just speak to the total addressable market.

Speaker Change: Okay. Thank you and maybe just one more follow up for my for my last question.

Speaker Change: Could you speak to again the growth from the external customer base.

Speaker Change: And if you strip out international given what's happened.

Speaker Change: North America from a rig count and Frac crew perspective has been pretty.

Speaker Change: It's been pretty significant on a year over year basis, just looking at what the company has done could you speak to why you've been so successful.

Speaker Change: For the customers, who arent using your chemistry technology today, where the opportunities are and maybe just.

Speaker Change: The total addressable market.

Ryan Ezell: how much opportunity there is still for that business to grow in North America would be Yeah, so you know, it's interesting. We've seen a little bit of a transition on how we look at the market. We used to always just track it to potentially to the number of fracked fleets, but now we've started adding some dimensions to it through some of the databases that we've linked inside of our AI monitoring systems around total footage drilled, total footage completed, service intensity of the current fleets to where we're getting a do and where, say, these 200 fleets are completing what 250 did 18 months ago, right?

Speaker Change: How how much opportunity there is still for that business to grow.

Speaker Change: In North America would be great. Thanks.

Speaker Change: Yes.

Speaker Change: It's interesting we've seen a little bit of a transition or how we look at the market. We used to always just track it to potentially to the number of Frac fleets, but now we started add some dimension to it.

Speaker Change: There are some of the databases that we've linked inside of our monitoring.

Speaker Change: <unk> monitoring systems around total footage drilled total footage completed service intensity of the current fleets to where we're getting a due into wire say. These 203 fleets are completing what 250 did 18 months ago right. So we're trying to get a little bit better better feel on that but when you look at our ability to perform I think when it comes in.

Ryan Ezell: So we're trying to get a little bit better feel on that. But when you look at our ability to perform, I think what it comes into is the longer sales cycle it took us to get into what we call the prescriptive chemistry management and moving into the predictive chemistry management that we're doing to where we're not only able to prescribe the best chemistry that minimizes formation damage and enhances the producibility that well in the first 24 months comparison to the peer groups, when you really compare that to our total cost of ownership, environmental cost of ownership, and well improvements, we deliver significant ROI, and we've done enough projects now where this is really taking hold with a big piece of the customer base.

Speaker Change: Two is.

The longer sales cycle, it took us to get into what we call the prescriptive chemistry management and moving into the predictive Cambridgeshire management that we're doing to where we're not only able to prescribe.

Speaker Change: <unk> chemistry that minimize this formation damage and enhances the produce ability that well in the first 24 months comparison to peer groups.

Speaker Change: When you really compare that to our total cost of ownership environmental cost of ownership and well improvements we deliver significant ROI and we've done enough projects now where this has really taken hold with a big piece of the customer base.

Ryan Ezell: There's no doubt the transactional nature of the North American business is always going to put some commoditization pricing pressure. Our economy of scale has also allowed us to compete in some of those areas, but we always keep our mind on we want to be a part of that value-add business. I think that our focus in doing that and its growth in the market share has helped contribute to the improvement in well performance here in North America over the past two years because 22 everybody's saying all these wells are just going to start to decline. In reality, they've outperformed in the past two years.

Speaker Change: There's no doubt the transactional nature of <unk>.

Speaker Change: North American business is always going to put some commoditization pricing pressure our economy of scale has also allowed us to compete in some of those areas, but we always keep our mind on we want to be a part of their value add business.

Speaker Change: And I think that our focus at doing that and as growth in our market share has helped contribute to the improvement in well performance here in North America over the past few years because it didn't.

Speaker Change: 22, everybody is saying all of these wells are just going to start to decline in reality they've outperformed in the past two years and I think it has something to do with our.

Ryan Ezell: I think it has something to do with our customized interactive nature that we have with the customer base at looking at microfluidics, looking at sharing all the 20,000 wells we've completed below and having real transparent conversations with our customers to deliver the best well that we possibly can. I think that's really worked well in North America. I think that's going to continue as you're seeing this consolidation as the capital disciplines stay there and they want maximum return on these investments.

Speaker Change: Customized interactive.

Speaker Change: Nature that we have with the customer base at looking at Microfluidics looking at share and all the <unk> out of the wells, we've completed below and having real transparent conversations with our customers deliver the best well, we possibly can and I think that's really worked well in North America land and I think that's going to continue as you've seen this consolidation has the <unk>.

Speaker Change: Disciplined stay there and they wont maximum return on these investments and that's right in the wheelhouse of what we do here at Flotek.

Ryan Ezell: That's right in the wheelhouse of what we do here at Flowtech.

Ryan Ezell: Thank you, I'll turn it back.

Speaker Change: Thank you I'll turn it back.

Operator: Thank you.

Speaker Change: Thank you once again, ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone.

Operator: Once again, ladies and gentlemen, if you do have any questions, please press star followed by 1 on your touchtone phone.

Donald Crist: Next is a follow-up from Donald Crist. Please go ahead, Donald. Thanks for letting me back in.

Speaker Change: Next is a follow up from Donald Crest. Please go ahead Donald.

Donald Crest: Alright, Thanks for letting me back in bond just one for you should.

Bon Clement: Bon, just one for you. Should we expect working capital to unwind in the first quarter like it did last year? Secondarily, as you build out the data analytics, what kind of CapEx do you think that's going to require? I would assume that it's not big dollars, but you are going to be spending more in 25 than you did in 24 on the data analytics side, right? Yeah, so, excuse me, on the first one, yes, we do expect a tailwind, if you will, from working capital. As you know, we've got the shortfall payment that accrues throughout the year and it relieves itself, if you will, in the first quarter.

Speaker Change: Should we expect working capital to unwind in the first quarter like it did.

Donald Crest: Last year and secondarily.

Donald Crest: As you build out the data analytics.

Donald Crest: What kind of Capex do you think that's going to require I mean, I would assume that its not big dollars, but you are going to be spending more in.

Donald Crest: 25, then you did 24 on the data analytics side right.

Donald Crest: Yeah. So excuse me on the first one yes, we do expect.

Donald Crest: A tailwind if you will from working capital as you know we've got the.

Donald Crest: The shortfall payment that did accrues throughout the year and it it relieves itself. If you will in the first quarter, so you'd expect a pretty significant reduction in <unk>.

Bon Clement: So, you'd expect a pretty significant reduction in AR and 1Q as we settle that OSP. As it relates to data analytics, yeah, I think this year we will spend more than we have in the past. It's not a huge amount of money when you factor in the fact that, you know, we're going to collect this OSP and we'll have capital to build out that inventory. Now, I don't want to give you a specific number, but I would expect our CAPEX to be higher than it has been historically in 2025. All right, I appreciate it. I'll turn it back.

Donald Crest: <unk>.

Donald Crest: As we sell settle that OSP as it relates to data analytics, yes, I think this year, we will spend more than we have in the past, it's not a huge amount of money when you factor in the fact that.

Donald Crest: We're going to collect this OSP and we will have capital to build out that inventory and I don't want to give you a specific number but I would expect our capex to be higher than it has been historically in 2025.

Speaker Change: Alright, I appreciate it I'll turn it back thanks.

Bon Clement: Thanks.

Operator: Thank you.

Ryan Ezell: And at this time, I would like to turn the call back over to Mr. Ezell. Please go ahead.

Donald Crest: Thank you.

Etzel: And at this time I would like to turn the call back over to Mr. Etzel. Please go ahead Sir.

Ryan Ezell: Yeah, so wrapping up today, we want to thank everyone for the time and we look forward to continuing to execute the corporate strategy here at Flotek and we'll talk to you on the next call. Thank you again for joining us today. Thank you, sir.

Speaker Change: Yes, so wrapping up today I want to thank everyone for the time and we look forward to continuing to execute our corporate strategy here at Flotek and we'll talk to you on our next call. Thank you again for joining us today.

Speaker Change: Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we ask that you. Please disconnect your lines.

Operator: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we ask that you please disconnect your line.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.