FLOTEK INDUSTRIES, INC. INVESTOR PRESENTATION
November 2020
Forward Looking Statements
Certain statements set forth in this presentation constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Flotek
Industries, Inc.'s business, financial condition, results of operations and prospects. Words such as will, continue,
expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward- looking statements in this press release. Although forward-looking statements in this presentation reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Further information about the risks and uncertainties that may impact the Company are set forth in the Company's most recent filing with the Securities and Exchange Commission on Form 10-K (including, without
limitation, in the "Risk Factors" section thereof), and in the Company's other SEC filings and publicly available
documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this presentation.
2
Meet the New Flotek
John W. Gibson, Jr. | Chairman, President & CEO
Michael Borton | Ryan Ezell, Ph.D. | TengBeng Koid |
CFO | President | President |
Chemical Technologies | Global Business |
Nick Bigney | James Silas, Ph.D. | Danielle Allen |
SVP, General Counsel & | SVP, Research & | SVP, Chief of Staff |
Corporate Secretary | Innovation |
New management team
Building entrepreneurial culture with commitment to customer success
Unrelenting focus on delivering shareholder value
Enhanced Board of Directors with focus on governance
3
Flotek's Profile
SUMMARY METRICS
NYSE: FTK
Market Cap: $193.24 million
Cash: $49.9 million
Debt: $5.7 million*
TTM Revenue: $60.561 million
Portfolio of 164 patent assets and growing
As of 9/30/2020
*The Company received a $4.8 million loan and JP3 received a $0.9 million loan, both pursuant to the Paycheck Protection Program (PPP) administered by the U.S. Small Business Administration as part of the "CARES" Act."
Flotek Industries, Inc. is a technology- driven, specialty chemistry and data company that serves customers across industrial, commercial and consumer markets.
Mission: Apply our knowledge and passion for chemistry to
empower value creation for all of our stakeholders.
4
Chemistry as a Common Platform
Utilizing same assets, supply chain, logistics, R&D to unique buyers and markets - flexibility to deploy to most attractive market opportunities.
Consumer &
Industrial
CHEMISTRY
Data
Analytics
Energy
5
Flotek's Business Segments
Chemistry Technologies
Energy Chemistry
Provides specialty chemicals and logistics solutions to oil & gas producers that improve asset performance and economics.
Sanitizer & Disinfectants
Delivers high-quality sanitizing and disinfecting products that meet the demands across a variety of consumer and industrial applications.
Data Analytics
Flotek's innovative, real-time data platforms combine the energy industry's only field-deployable, inline optical analyzer with proprietary cloud visualization and analytics, to optimize processing efficiencies and valuation of natural gas, crude oil and refined fuels.
6
Continued Execution against Long-Term Strategic
Growth Objectives
We have adapted our business while focusing on executing against our strategy. Building a strong foundation for 2021 and beyond.
- Reduce dependence on rig count
- Expand new product lines that create a greater amount of backlog and/or annual recurring revenue (ARR)
- Further differentiate offering from competitors
- Enhance capability to provide digital transformation of chemistry
- Strengthen market share for our current product lines
7
Flotek Operations
Global footprint with significant international opportunities across business segments.
Flotek Operations
Flotek Research
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Chemistry Technologies: Energy Chemistry
Transformed business offering unique solution to meet the needs of oil and gas market today and the future
Flotek's energy chemistry business offers a unique
and valuable solution in the marketplace
- Delivering cost-effective chemistry solutions
- Designing and implementing optimized chemistries
- Helping operators increase production at lower cost per barrel produced
2020: A transformative year for our Energy Chemistry segment
- Drove down our operational costs
- Renegotiated logistics and supplier contracts
- Accelerated efficiencies in our business processes
GROWTH OPPORTUNITIES
Focused on reintroducing Flotek to the market and building stronger relationships with our active and successful customers to expand our global
market share.
International opportunities driving upside, particularly in the Middle East. Recently named NOC chemical partner-of-choice for coiled tubing stimulation.
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Chemistry Technologies: Sanitizer & Disinfectant Business
Leverages Flotek's existing specialty chemistries and diversifies business and revenue stream
Q1 2020
Q2 2020 | Q3 2020 |
- Began initially as community support initiative.
- Flotek produced and donated sanitizers for local communities in response to the global pandemic.
- Leveraging the same chemistries, facilities, capabilities as energy chemistries.
- Launched FDA-quality surface & hand sanitizers for industrial and consumer applications.
- Minimal capital investment to capture long-term, high growth opportunity.
- Expansion of product line: FDA-andEPA-registered Janitorial & Sanitizing product portfolio
- Actively selling FDA-andEPA-registered janitorial and sanitizer products into multiple markets. Customers include: hospitals, hospitality & travel, food services, sports & entertainment, e- commerce.
- Recently installed packaging line for greater efficiency, lower costs, accelerated order fulfillment.
GROWTH OPPORTUNITIES
Advance Flotek's position as a top-selling,high-quality sanitizer and disinfectant manufacturer
Growth opportunities in the janitorial sanitizer market (JanSan) and contract manufacturing for white label distribution.
Expanded portfolio includes disinfectant wipes and sprays, surface cleaners and degreasers, and manufacturing partnerships with emerging technologies in the JanSan industry.
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Flotek Chemistry Capability
Domestic Blend Facilities
3M+
gal/mo.
combined
PRODUCTS MADE IN THE USA
M A R LO W, OK
capacity*
WA L L E R , TX
90,000 sqft warehouse | Full liquid blending and | 38,000 sqft warehouse |
(heated and ambient bulk storage tanks) | QA/QC capabilities | (heated and ambient bulk storage tanks) |
Liquid blending and QAQC capabilities
ISO Certified | FDA 503BcGMP | USP 795 Pharmaceutical Compounding of | EPA Establishment No: 84892-OK-1 |
Facilities | non-sterile preparations | FDA/NDC Labeler Code: 74208 | |
*Manufacturing capacities are on 8 hr shift basis; two shifts are available for liquid/gel | |||
Manufacturing capacities are for wipes are approximately 2.0M 80 count canisters/month |
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Data Analytics
Diversifying Flotek's Business across all Segments of the Hydrocarbon Value Chain
JP3's technologies are helping Flotek customers accelerate the industry's digital transformation by providing the real-time data
The Need for Real-Time Data in the Modern Age of Oil & Gas Digitalization
One Technology Platform - Wide Range of Applications
necessary to manage crude oil and natural gas processing.
Upstream
Low-cost,real-time analysis of subsurface production flow. Enables evaluation of crude's value at the wellhead enables new contract pricing structures between producer and refiner based on actual composition rather than outdated API Gravity proxy
Midstream
Gas process plants running Automated Process Control systems require real-time liquids composition for plant balancing and give-away reduction
Downstream
Refineries can custom-blend crudes from multiple day tanks or supply pipelines to craft optimized feedstock in real time instead of running blind
Distribution
Refined fuel terminals and pipelines can be optimized to reduce or eliminate transmix of fuels in common pipelines and significantly increase profits
GROWTH OPPORTUNITIES
• Actively shifting business model to | • Leveraging Joint Data Service Solution |
subscription-based contracts with recurring | collaborative agreement with Phillips 66: |
revenue | - Optimize transmix. |
• Gaining positive momentum in international | - Targeting refined fuel producers, transporters & |
markets, with focus on Middle East, Asia & Africa | distribution terminal operations. |
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Differentiating Through Research & Innovation
Driving innovation in:
- Specialty chemical formulations
- FDA & EPA regulatory guidance
- Data analytics
- Basin & reservoir specialization
- Technical support & QA/QC
- New technology projects and future generation products and services
164
patent assets
Renewed Focus on ESG
Environmental focus
- Patented Complex nano-fluid® chemistry technologies built upon naturally sustainable and non-toxic citrus oil from orange peels to improve well performance and productivity.
- Performance chemistries delivering more efficient acreage development and lower capital intensity.
- JP3 technologies provide opportunity to measure greenhouse gases and enable customers to achieve and quantify ESG performance goals.
Safety
- TRIR 1.03, exceeds comparable industry safety statistics.
Community investment
- Donated thousands of gallons of hand sanitizer to local communities, including first responders, hospitals, schools, homeless shelters and senior residential communities during 1H 2020.
Flotek is strongly committed to excellence in protecting the environment, health, safety and security of our employees and those who live and work in close proximity to our worksites.
Flotek operations worldwide comply with all local requirements and implement additional standards to protect the environment, health, safety and security of our operations.
Our safety, health and environmental goals are designed to sustain our drive to zero incidents - relentlessly and responsibly. We constantly emphasize the importance of monitoring the safety, security and environmental impact of our jobsites. Through our day-to-day due diligence, Flotek strives to be recognized as one of the industry's best performers.
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Third Quarter 2020 Highlights
Financials
Consolidated revenue was up 43.5% versus second quarter of 2020, with improvement from energy chemistry.
Increased international sales in the UAE by 70% YOY.
Lowered expenses notably at JP3 with a 35% reduction in headcount in addition to decreasing other operating costs.
Healthy balance sheet of $49 million of cash at the end of third quarter with a low debt level of roughly $5.7 million.
Business
Expanded Flotek's existing hand sanitizer line to include disinfectants and surface cleaners and offering a full product offering for the JanSan Community.
Rationalized a large portion of inventory and streamlined product portfolio, reducing SKUs by 35% within the Chemistry Technologies segment, reducing inventory carrying costs by $1.3 million.
Continued collaborative agreement between JP3 and Phillips 66.
Leadership
Appointed Mike Fucci to Flotek's Board to Directors, adding expertise on human capital, diversity & inclusion and business transformation to Flotek board.
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Adapting to an Evolving Environment and Well Positioned for the Future
Flotek's differentiated business model is positioned to capture growth on profitability
Expanding International
Leveraging Flotek's international market
access, the growth opportunities are large.
- Energy Chemistry Technologies
- Opportunities in Middle East, Africa & Asia.
- Chemical partner-of-choice for coil tubing stimulation for NOC in Middle East.
- Data Analytics/JP3
- Expanding from domestic-only offering to international markets, with a focus on Middle East, Africa & Asia.
Diversifying Portfolio
- Diversification of business through development of sanitizer and disinfectant business in second quarter 2020.
- Acquisition of JP3 acquisition in second quarter 2020 provides customer diversification downstream, midstream, and upstream markets.
Unlocking Digital Transformation
- Digital transformation
- Through JP3, helping customers accelerate their digital transformation through real-time composition of valuation data necessary to manage crude oil and natural gas processing in the digital age.
- Recurring revenue
- JP3 is transitioning to a subscription based, SaaS business model, yielding a higher margin and a recurring revenue stream which mitigates risks in volatile commodity markets.
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Investment Highlights
Leading developer of specialty, performance chemistry
Differentiated portfolio
Strong R&D capabilities, world- class research & innovation center
Attractive market dynamics
Disciplined approach to growth and profitability
- Managing expenses
- Inventory rationalization
- Pivoting business operations
Runway of growth internationally
Empowering digital transformation
Healthy balance sheet
Recent Financials
Unaudited Condensed
Consolidated
Statement of Operations
(in thousands, except share data)
(in thousands, except per share data) | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
9/30/2020 | 9/30/2019 | 6/30/2020 | 9/30/2020 | 9/30/2019 | ||||||||||
Revenue | $ | 12,739 | $ | 21,879 | $ | 8,880 | $ | 41,035 | $ | 99,827 | ||||
Costs and expenses: | ||||||||||||||
Operating expenses (excluding depreciation and amortization) | 29,466 | 23,622 | 11,632 | 63,939 | 105,711 | |||||||||
Corporate general and administrative | 2,679 | 5,685 | 5,395 | 12,568 | 19,020 | |||||||||
Depreciation and amortization | 518 | 2,058 | 468 | 3,177 | 6,437 | |||||||||
Research and development | 1,480 | 2,297 | 1,638 | 5,673 | 6,658 | |||||||||
(Gain) loss on disposal of long-lived assets | (37) | 3 | (22) | (92) | 1,096 | |||||||||
Impairment of goodwill | 11,706 | - | - | 11,706 | - | |||||||||
Impairment of fixed and long-lived assets | 12,521 | - | - | 69,975 | - | |||||||||
Total costs and expenses | 58,333 | 33,665 | 19,111 | 166,946 | 138,922 | |||||||||
Loss from operations | (45,594) | (11,786) | (10,231) | (125,911) | (39,095) | |||||||||
Other (expense) income: | ||||||||||||||
Gain on Lease Termination | - | - | 576 | 576 | - | |||||||||
Interest expense | (19) | (1) | (16) | (40) | (2,014) | |||||||||
Other income, net | 291 | 436 | 78 | 322 | 1,238 | |||||||||
Total other income (expense), net | 272 | 435 | 638 | 858 | (776) | |||||||||
Loss before income taxes | (45,322) | (11,351) | (9,593) | (125,053) | (39,871) | |||||||||
Income tax benefit | 81 | 191 | 32 | 6,282 | 694 | |||||||||
Loss from continuing operations | (45,241) | (11,160) | (9,561) | (118,771) | (39,177) | |||||||||
Income from discontinued operations, net of tax | - | 117 | - | - | 44,583 | |||||||||
Net (loss) income | (45,241) | (11,043) | (9,561) | (118,771) | 5,406 | |||||||||
Basic earnings (loss) per common share: | ||||||||||||||
Continuing operations | $ | (0.66) | $ | (0.19) | $ | (0.14) | $ | (1.75) | $ | (0.67) | ||||
Discontinued operations, net of tax | - | - | - | - | 0.76 | |||||||||
Basic earnings (loss) per common share | $ | (0.66) | $ | (0.19) | $ | (0.14) | $ | (1.75) | $ | 0.09 | ||||
Diluted earnings (loss) per common share: | ||||||||||||||
Continuing operations | $ | (0.66) | $ | (0.19) | $ | (0.14) | $ | (1.75) | $ | (0.67) | ||||
Discontinued operations, net of tax | - | - | - | - | 0.76 | |||||||||
Diluted earnings (loss) per common share | $ | (0.66) | $ | (0.19) | $ | (0.14) | $ | (1.75) | $ | 0.09 | ||||
Weighted average common shares: | ||||||||||||||
Weighted average common shares used in computing basic earnings | 68,217 | 58,608 | 66,035 | 68,063 | 58,491 | |||||||||
(loss) per common share | ||||||||||||||
Weighted average common shares used in computing diluted earnings | 68,217 | 58,608 | 66,035 | 68,063 | 58,491 | |||||||||
(loss) per common share | ||||||||||||||
- Results of the Company's Consumer and Industrial Chemistry Technologies ("CICT") segment are presented as discontinued operations for all periods.
- Prior periods presented for 2019 have been adjusted to reflect revisions to results determined not to be material to those prior periods.
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Disclaimer
Flotek Industries Inc. published this content on 16 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 November 2020 15:50:00 UTC
