Flotek (FTK) Q2 2026 Earnings Call Transcript

Motley Fool Transcribing, The Motley FoolWed, August 12, 2026 at 3:06 AM UTC

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Wednesday, Aug. 5, 2026, at 10 a.m. ET

CALL PARTICIPANTS -

Chief Executive Officer - Ryan Gillis Ezell

Chief Financial Officer - J. Bond Clement

TAKEAWAYS -

Total Revenue -- $99.4 million, representing 70% growth compared to the second quarter of 2025 and the highest quarterly revenue for the company in 10 years.

Adjusted EBITDA -- $16.8 million, a 109% increase from the prior year quarter, representing an 81% increase for the first half of 2026.

Chemistry Technologies Revenue -- $80.2 million, an increase of 53% versus last year, driven by strong international sales and domestic related party revenue.

Data Analytics Revenue -- $19.2 million, growing 223% year over year and surpassing first quarter 2026 records by 85%.

Gross Profit -- $23.8 million, up 65% year over year, with the Data Analytics segment contributing 51% of total gross profit for the first time.

Net Income -- $10.0 million, or $0.26 per diluted share, compared to $1.8 million or $0.05 per diluted share in the second quarter of 2025.

International Chemistry Revenue -- $10.6 million, an increase of 172% year over year, primarily reflecting expanded operations in the Middle East.

2026 Revenue Guidance -- $340 million to $350 million, an increase from the previous range of $270 million to $290 million.

2026 Adjusted EBITDA Guidance -- $47 million to $51 million, raised from the previous range of $36 million to $41 million.

Digital Valuation Devices -- 89 units deployed or contracted for delivery as of June 30, 2026, representing a 56% increase from the 57 units reported at the end of the first quarter.

Montana Power Services Revenue -- $6 million generated in the second quarter, although guidance assumes zero revenue from this contract in the fourth quarter, pending extension negotiations.

External Data Analytics Sales -- 63% of segment revenue, up from 44% in the second quarter of 2025, driven by power services and digital valuation growth.

Puerto Rico (PREPA) Contract -- 10 years and $400 million, supporting 400 megawatts of gas power generation capacity to address emergency energy infrastructure needs.

Measurement Capacity -- 5 gigawatts of power expected to be supported via the PWRtek platform by the first quarter of 2027, including 400 megawatts from the PREPA award.

Capital Expenditures -- Management reported investing over $13 million into monitoring and distribution equipment, primarily funded through non-cash construction credits from order shortfall payments.

SG&A Expense -- $7.7 million, or 8% of revenue, compared to 12% in the second quarter of 2025, representing the lowest quarterly rate in at least a decade.

June Chemistry Revenue -- $31 million recognized during the month, which management noted represented more than 50% of total chemistry revenue for the entire first quarter of 2026.

North American Fleet Coverage -- Management expects proprietary analyzers to be deployed on more than 50% of active e-frac and gas-powered fleets by year end.

Leverage Ratio -- Less than 1x based on net debt and the midpoint of 2026 adjusted EBITDA guidance.

ABL Borrowings -- $10.4 million outstanding as of June 30, though management reported the balance was reduced to zero by the morning of the earnings call.

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RISKS -

CFO Clement stated, "Because we have not yet secured the Phase 2 extension of our Montana Power Services contract, our guidance assumes no revenue from that contract during the fourth quarter," acknowledging a potential headwind if negotiations are delayed.

CEO Ezell stated, "The ongoing situation in the Middle East will have impactful and potentially long-term implications on global supply and energy security," framing geopolitical instability as a factor in regional supply recalibration.

Flotek Industries(NYSE:FTK) reported record quarterly revenue and increased full-year 2026 guidance, driven by the expansion of its Data Analytics segment and international chemistry sales. The company transitioned its Data Analytics segment into its largest gross profit contributor and secured a 10-year utilities infrastructure contract in Puerto Rico. Management indicated that while domestic chemistry revenue was front-loaded in the second quarter, international activity and data service backlogs are expected to support growth through the remainder of the year.

CEO Ezell stated the Data Analytics segment gross profit reached $12 million and "shattered the first quarter 2026 record by 85%."

The company expects to support 5 gigawatts of power by the first quarter of 2027.

Management reported that the PREPA contract involves deploying 400 megawatts of power generation capacity to address Puerto Rico's energy crisis starting in the fourth quarter of 2026.

CFO Clement noted that June chemistry revenue of $31 million exceeded the total chemistry revenue for the entire first quarter of 2026.

CEO Ezell attributed the traction in digital valuation to "reservoir mapping or DNA fingerprinting of higher-end hydrocarbons" that validates the effectiveness of chemistry treatments.

CEO Ezell indicated that the PWRtek platform is moving toward "real-time fuel monitoring, conditioning, blending, and engine control" for behind-the-meter power operations.

INDUSTRY GLOSSARY -

PWRtek: Flotek's proprietary end-to-end fuel management and real-time analytics platform for the energy and infrastructure sectors.

E-frac: Hydraulic fracturing equipment powered by electric motors using natural gas-fired generators instead of diesel engines.

GPA 72: A measurement standard established by the Gas Processors Association for sampling and analytical methods of natural gas.

XSPCT: A real-time analyzer used for digital valuation and measurement of hydrocarbon fluids.

Smart Skid: Mobile equipment used to optimize natural gas quality through real-time blending and fuel gas conditioning.

Behind the meter: Power generation systems located on the customer's side of the electric meter, providing electricity for local use rather than for the utility grid.

DaaS: Data-as-a-Service; a business model where data is provided on demand to users regardless of their geographic or organizational separation.

PREPA: Puerto Rico Electric Power Authority; the electric utility for the Commonwealth of Puerto Rico.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to the Flotek Second Quarter 2026 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call, you require immediate assistance, please press 0 for the operator. This call is being recorded on August 5, 2026. And now I would like to turn the conference over to Mike Critelli. Please go ahead.

Mike Critelli: Thank you, and good morning. We are thrilled to have you with us for Flotek's second quarter 2026 earnings conference call. Today, I am joined by Ryan Gillis Ezell, Chief Executive Officer and J. Bond Clement, Chief Financial Officer. We will begin with prepared remarks on our operations and financial performance followed by Q&A. Yesterday, we released our second quarter results full year guidance and an investor presentation, all available on our Investor Relations website. This call is being webcast with a replay available shortly afterward. Please note that today's comments may include forward looking statements. These are subject to risks and uncertainties. That could cause actual results to differ materially from our projections.

For a full discussion of risk factors, review our earnings release and most recent SEC filings. Please also refer to the reconciliations in our earnings release and investor presentation for non GAAP measures. With that, I will turn the call over to our CEO, Ryan Gillis Ezell.

Ryan Gillis Ezell: Thank you, Mike, and good morning, everyone. We appreciate your interest in Flotek, and your participation today as we review our second quarter 2026 operational and financial results. In the second quarter, Flotek continued its transformational growth storyline through the execution of its corporate strategy. Driven by the powerful convergence of innovative real time data and chemistry solutions as shown on slide 3, Flotek has laid the foundation for a data driven growth trajectory built on diverse recurring revenue high margin services, and proprietary technologies that create value for our customers and improve returns for our shareholders.

The strategic transition of the company into a Data-as-a-Service business model continues to gain momentum while expanding the total addressable market for the company. As a result, Flotek's data analytics segment grew exponentially while our Differentiated Chemistry segment outpaced the market in a challenging environment through an unwavering commitment to safety, service quality, innovation, and total value creation. With that, I would like to touch on some key highlights for the second quarter that Bond will discuss later in the call. Company total revenue approached $100 million up 70% from the second quarter of 2025 and the strongest quarterly performance in the last 10 years.

Data analytics achieved its highest quarterly revenue in company history shattering the first quarter 2026 record by 85%. Chemistry technology revenue increased 53% with international chemistry revenue reaching 10.6 million representing 93% of full year 2025 international chemistry revenue of $11.4 million. Company gross profit climbed 65% versus the second quarter of 2025. it is impactful to note that data analytics accounted for 51% of company gross profit versus 26% in the prior year quarter marking a major milestone in Flotek's transformation as it became the largest contributing segment to gross profit.

Total company adjusted EBITDA grew 109% year over year, totaling $16.8 million On Monday, we also announced a 10-year $400 million contract award to support PREPA's 400 megawatt Puerto Rico gas power utilities project referenced on slide 4. Finally, the company its 2026 guidance with the new midpoint being 45%, 49% increases versus 2025 actuals on revenue and EBITDA, respectively. This update builds upon a multiyear trend of revenue and profitability growth as the company executes on its strategic initiatives to provide long term resiliency and profitability as shown on slide 6. Most importantly, these results were achieved with 0 lost time incidents in the field of operations.

I want to thank all of our employees for their hard work and commitment to safety and service quality in achieving these outstanding results. Now turning to the larger picture for the energy and infrastructure sector, we continue to believe that the ongoing situation in the Middle East will have impactful and potentially long term implications on global supply and energy security that will demand action. The industry continues to exhibit a shift in supply side dynamics that is recalibrating the risk profile of regional supply while fundamentally establishing a higher baseline for energy security. We expect increased investment in localized oil and gas developments while geographies that do not possess resources look to rapidly diversify energy security exposure.

All of these factors point towards a stronger commodity pricing environment for increased upstream activities. Layering in the expanding power demand driven by AI data centers, and industrial reshoring combined with the reliability issues of an aging transmission infrastructure the expectations for tailwinds within the energy sector further strengthen. Our legacy pressure pumping customers continue to capitalize on the portfolio diversification opportunity provided by the demand for remote power generation. Flotek is poised to support emerging customers with products and services that help protect their assets while optimizing their operational performance and fuel efficiency.

With multiyear waiting lists for turbines and reciprocating engines, protecting these capital intensive investments is critical along with enabling reliability standards that exceed the greater than 99% uptime requirements. Transitioning from the macro view, let's dive into details starting with slide 8. I wanna spotlight the transformational growth in our data analytics segment We saw total segment revenues up 223% year over year and second quarter 2026 service revenues exceeding total segment revenues from the year ago quarter. This strong growth is powered by our flagship upstream applications, power services and digital valuation. Both of which are generating significant contracted wins and robust recurring revenue backlog shown on slide 9.

Out of this, we saw our PREPA 10 year 400 megawatt utilities power support contract generating over $400 million per year backlog through 2036. By the first quarter of 2027, Flotek expects to support over 5 gigawatts of power through measurement or control by our proprietary Powertech platform. This further validates the demand and scalability of our innovative technologies in the behind the meter power space. We are also actively engaged in a potential phase 2 extension of the Montana power services contract. Finally, we had the successful utilization of our state of the art Smart Skid to optimize gas quality with real time blending of fuel gas and CNG for major IOC.

This is the first application of its kind. The momentum gained from these wins has expanded our expected contracted backlog to over $500 million. Our services led this growth further reinforcing our shift towards high margin, recurring revenue streams. The Powertech platform has evolved from a novel analytical approach into a transformative solution for the energy and infrastructure sector. What began as advanced analytics has grown into a comprehensive end to end fuel management platform, redefining performance standards and operations within the sector as shown on Slide 10. Our expanding portfolio of patents and field proven use cases position Flotek as a leader across the natural gas value chain.

Looking at Slide 11 and when considering the velocity of our measurement, we deliver unmatched real time fuel monitoring conditioning, blending, and engine control to optimize performance and safety for behind the meter distributed power operations. The success of Flotek's power services applications is expanding rapidly as we expect to have proprietary real time analyzers of more than 50% of the currently active North American e-frac and natural gas powered fleets by year end. Additionally, on August 3, 2026, Flotek announced its second contract within the utilities infrastructure sector seen on slide 4.

Leveraging our patented PWRtek platform Flotek entered into a 10-year agreement to support natural gas-fired grid enhancement initiatives for the Puerto Rico Electric Power Association, which is the electric utility for the Commonwealth of Puerto Rico. Under the agreement, Flotek expects to generate a revenue backlog of approximately $400 million through rental of gas fired power generation equipment together with the deployment of the company's proprietary smart conditioning and distribution systems. Flotek has partnered with Power Expectations which leads the group executing the emergency temporary power generation project. The initiative is expected to deploy 400 megawatts of natural gas fired power generation capacity to address Puerto Rico's ongoing energy crisis.

Flotek is providing its proprietary PWRtek platform including 400 megawatts of primary power generation capacity and 6 pairs of Smart Skids with advanced conditioning, real time analytics, and gas distribution systems working alongside experienced local partners for on ground execution and project management. Support equipment is expected to begin deployment in the fourth quarter of 2026 with the initial power generation equipment and conditions and distribution skids expected by the end of the first quarter of 2027. Now let's transition to Slide 13, where we will dive into our second upstream application, digital valuation. This groundbreaking use case sets a new standard in the oil and gas industry.

Delivering unprecedented transparency and minimizing enterprise risk for producing wells like never before through real time digital valuation. We believe the expect speed accuracy, durability, and qualification under the rigorous measurement standards outlined in GPA 72 will provide a significant advantage in discussions with prospective customers as we aggressively expand this manufacturing and field deployment. In March 2026, the XSPCT analyzer was named product of the year at the 2026 Analyzer Technology Conference further exemplifying its differentiated capabilities. In the first quarter of 2026, we ended the quarter with 57 digital valuation measurement devices deployed or contracted for delivery. And that number has grown 56% to 89 as of the end of the second quarter of 2026.

The execution of our transformational strategy to grow the data analytics segment through upstream applications is gaining traction. But what is most important is what it means for our stakeholders and our investors. First, our DaaS-driven strategy ensures predictable recurring revenue and cash flow. Delivering stability and long term value. Secondly, our proprietary data technologies and superior measurement accuracy enable velocity and decision control that establish a high barrier to entry. Secure client loyalty, and support our value based service model. And third, long term high margin subscriptions position Flotek for sustained growth and margin expansion. Driving significant shareholder value over time.

Now lastly, our chemistry technology segment continues to deliver robust performance driven by the differentiation of our prescriptive chemistry management services and our expanding international presence. Slide 16 highlights the resilient performance of our chemistry segment which delivered a 53% increase in total revenue for the second quarter of 2026 compared to the second quarter of 2025 despite a 5% decline in the average North American frac fleet count over the same period. According to Primary Vision data. This was the strongest quarter of chemistry sales since 2017. And exceeded our expectations as our work in the Middle East pulled forward, driving strong performance in the month of June.

International revenue totaled 10.6 million up 172% from a year ago with the company expecting continued growth in the international chemistry sales in the second half of 2026. it is evident that our chemistry team has executed our strategy flawlessly. As we move into the second half of 2026, opportunities leveraging the convergence of prescriptive chemistry management and data services moved to the forefront through high margin services that improve operator ROI. These advanced DaaS-driven services include Smart COMBAT units, real time flowback monitoring, and implementation of prescriptive geological targeting. Looking ahead, I am more confident than ever in Flotek's momentum and our ability to drive sustained profitable growth as we execute our transformative corporate strategy.

We are firmly positioning Flotek as a high growth technology leader in the energy and infrastructure sectors accelerating innovation through the powerful integration of real time data analytics and advanced chemistry solutions that are tailored precisely to our customers' evolving needs. Now I will turn the call over to J. Bond Clement to provide key financial highlights.

J. Bond Clement: Thanks, Ryan. Good morning, everyone. Clearly, this was an exceptional quarter compared to both the prior year and the first quarter. As Ryan indicated, second quarter revenue exceeded our expectations by a wide margin. I wanted to provide a little color as to how the quarter came together. Second quarter revenue growth benefited from a very strong month of chemistry business in June. We recognized nearly $31 million of chemistry revenue in June alone. For perspective, that represents more than 50% of the total chemistry revenue generated during the entire first quarter of 2026.

On the strength of our international business, our external customer chemistry revenue in just the month of June totaled $15.2 million which exceeded the external customer chemistry revenue for the entire first quarter. As a result, external chemistry revenue increased 111% sequentially and accounted for nearly 60% of the company's total second quarter revenue growth of $29 million compared with the first quarter. Our guidance builds in a more normalized pace for domestic external customer chemistry revenue in the back half of the year, as compared to the second quarter due to the transactional nature of the business.

However, in terms of international work, we have inventory shipments expected to arrive in country during August and potentially September that we believe will allow international revenues to remain strong. We expect both chemistry and data analytics segment revenue for each of the third and fourth quarters to outpace our first quarter results. Because we have not yet secured the Phase 2 extension of our Montana Power Services contract, our guidance assumes no revenue from that contract during the fourth quarter, as noted on slide 12, we are currently in extension discussions with the various parties to that agreement.

In addition, our guidance does not yet consider any financial impact in 2026 from the Puerto Rico contract announced Monday as we continue to work on initial deployment timelines. As shown on slide 6, we are estimating total revenue to range between $340 million and $350 million with adjusted EBITDA in a range of $47 million to $51 million As Ryan pointed out, the midpoints of these ranges imply significant growth in each metric as compared to 2025. Just as a reminder for everyone, our adjusted EBITDA guidance does not add back non cash amortization of contract assets. Which is expected to total approximately $9 million during 2026. Moving from guidance to quarterly results.

Total revenues for the quarter increased $41 million year over year. Aided by the strong June chemistry sales previously discussed 68% of the total revenue growth as compared to the second quarter of last year was attributable to chemistry while 32% was related to data. Chemistry segment related party revenues were up 64% from last year's quarter while external customer revenue increased 38%. As Ryan noted, international chemistry revenue totaled 10.6 million during the quarter, which is up from $4 million a year ago and up from just $1.9 million in the first quarter. Data analytics delivered another record quarter. Segment revenue represented 19% of total company revenue in the quarter, up from 10% a year ago.

As outlined on slide 9, we continue to gain momentum with external customer data analytics sales. 63% of second quarter data analytics revenue was derived from external customers, as compared to 44% in the year ago quarter. The increase in externally derived revenues was driven by our Montana Power Services contract that contributed nearly $6 million in revenue during the quarter as well as a $2.5 million sequential increase in our upstream power services business that continues to expand to external customers. Looking forward to 2027, we expect the project in Puerto Rico will increase the percentage of revenue derived from external data customers. Total company gross profit increased 65% as compared to the year ago quarter.

As a percentage of revenue, gross profit totaled 24% during the quarter, which was down less than 100 basis points versus the year ago quarter. Despite the nearly $7 million decline in the order shortfall penalty as compared to the second quarter of last year. G&A expenses increased 14% year over year Excluding stock comp, G&A was only up 7% versus the year ago quarter. As revenues continue to scale, we have seen meaningful leverage in our G&A expenses. Total G&A expense declined to less than 8% of revenue in the second quarter of this year, compared to nearly 12% in the year ago quarter.

This marks the lowest quarterly G&A rate as a percentage of revenue that we have achieved in at least the last decade. Net income for the quarter was $10 million or $26 per share compared to $1.8 million or $0 per share in the prior year quarter. Our June 30 balance sheet reflects the increased activity during the quarter particularly the strong month of sales in June. While our ABL balance was elevated at June 30 relative to funding working capital needs, Borrowings outstanding as of this morning on our ABL had been reduced to 0. First half results were impressive with revenue up 49%, adjusted EBITDA up 81% versus the first half of last year.

We have delivered strong growth while maintaining a different disciplined balance sheet and low leverage. As shown on slide 19, using the midpoint of the adjusted EBITDA guidance, our leverage ratio is less than 1x based on net debt outstanding as of June 30. We believe this positions us to continue executing our growth initiatives, while maintaining financial flexibility. With that, I will turn it back to Ryan for closing remarks.

Ryan Gillis Ezell: Thanks, J. Bond Clement. Our second quarter results extend our multi year track record of consistent improvement as we continue transforming Flotek into a data driven technology leader. The data analytics segment delivered strong growth highlighted by triple digit increases in service revenue expanding recurring revenue streams and a robust multiyear contracted backlog now exceeding $500 million Together, with our resilient prescriptive chemistry management services, Flotek is well positioned to gain additional market share and drive further top and bottom line improvement with substantial upside opportunities in our data driven services. We remain committed to shaping the industry's digital and sustainable future by leveraging chemistry as our common value creation platform.

With our proven execution, expanding high margin capabilities, and clear pathway, to scaled growth Flotek is poised for the next phase of value creation for our investors. Operator? Ready to open the floor for questions.

Operator: Thank you. Ladies and we will now begin the question-and-answer session. Should you have a question, please press star followed by the number 1 on your touch tone phone, and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. 1 moment, please, for your first question. So your first question comes from the line of Rob Brown of Lake Street Capital Markets. Your line is now open.

Rob Brown: Good morning. Congratulations on all the progress.

Ryan Gillis Ezell: Yeah. Good morning.

Rob Brown: First question is on the on kind of the overall power infrastructure business. The Puerto Rico contract was a great add. Could you kind of comment on the overall pipeline in that business? And maybe just some color on other what other kinds of projects are out there in terms of the pipeline you are pursuing?

Ryan Gillis Ezell: Yeah. You know, we look at it right now. Right now, I would say that our power services pipeline, particularly related to utilities, infrastructure, and data centers are the highest it is been in the history of the company. And, you know, this recent award with PREPA is an example of the type of pipeline that we have a series of different opportunities that we are in various stages of bidding and processing around that. what is exciting is we have now moved measurement devices. We are actually monitoring real time gas fired traditional power plants, some in the Northeast. A couple here, they are moving in Texas. We have also expanded our measurement services into data center growth.

It was this I mentioned that project about the real time blending and control for 1 of the major IOCs, this is an area that is gonna be targeted for data center growth for some of the larger behind the meter power generation, companies. And so we are seeing a significant pipeline there. I would say you know, when you look at a combined value of well over $1 billion now, on the pipeline potential and at various stages of bidding, negotiation, etcetera.

So exciting time to see what we are doing here at Flotek and I think it is also important to note that you know, since the starting of our power tech segment in the second quarter of last year, We have now grown we will be doing measurement and or some variance of control and distribution on almost 5 gigawatts of power. So it is an exciting growth platform for Flotek and for the future as it continues to gain rapid growth and scalability.

Rob Brown: Okay. Excellent. And then just more detail on the Puerto Rico contract. It sounds like you are doing a combination of gas control and power generation. Could you just elaborate on the on the power generation side when that activity kicks in and how that is going to gonna fit into the mix of what you are doing.

Ryan Gillis Ezell: Yeah. You know, I would say this was so new where we released that. We are going to be giving us some numbers on guidance on when we think those financials begin to hit You will really start to see those play in the first quarter of 27 maybe a little bit of mobilization pieces here in the back part of Q4. Our initial 40 megawatts of prime generation will move pretty quick. it is kind of a baseline startup piece there. As well as all of our conditioning and distribution setup. I think, you know, what we talk about is the conservative financials around the baseline of the contract.

When you look at the infrastructure needs inside Puerto Rico, they are actually out looking at growing almost 3 gigawatts of power as they are trans-- moving over from I would say, coal and or diesel type burned fuel facilities to nat gas So not only is this initial 400 megawatts a great opportunity for us, I think we will have quite a few other opportunities to expand our work there. what is unique is this is gonna be a LNG transition to CNG potentially combined with I would say, biogas, some from landfills, And so this is where you start to see the unique real time monitoring and real time blending technologies of Flotek.

Become extremely differentiated and why you know, it puts us at a forefront of being able capture this kind of work. But I, you know, I think that we will get some further updates on timing, and maybe potential scope increase as we get closer to the kickoff point in Q4.

Rob Brown: Okay. Thank you. I will turn it over.

Operator: And your next question comes from the line of Jeffrey Scott Grampp of Northland Capital. Please go ahead.

Jeffrey Scott Grampp: Morning, guys. Congrats on all the recent positive news this week.

Ryan Gillis Ezell: Yes, guys. Was Good.

Jeffrey Scott Grampp: Thanks. Was curious to get maybe a little more backstory on, your involvement with this Puerto Rico contract. My understanding is this project's been in the works for a bit here, and, potentially, I do not maybe you guys were involved in some of the earlier stages while that was being negotiated, but, like, what is the backstory on, you know, how you guys became aware of this project or how the you know, your partner became aware of you just kinda curious how that evolved and how you guys ultimately kinda conveyed that value add to win the deal. Thanks.

Ryan Gillis Ezell: Yeah. You know, it is a it is it is an interesting evolution. Piece, would say, Jeffrey, is that as we have begun know, we started out with this initial work in Montana, supporting some of the government driven contracts. This has evolved. there is some additional pursuit around that. And some of the contacts that we have spoken to there I would say, you know, there is a there is a basket of various opportunities to support land service contracts, utility backup, and then when you look at the government, US government support a the Puerto Rico, I mean, technically, they are backing the majority of a lot of this work.

Through the financial FMOB, call it financial management oversight board. In combination with 3 PPO and PREPA. And so we had been brought in actually initially to look at gas fired power generation from US government defense contract sites and they were aware of our technologies. And as the opportunity is expanded, as I mentioned under the umbrella, some of that 3 gigawatt gas fired power transition there our technology was brought into play. In terms of is they wanna look at not only doing that LNG to CNG transition, but also the incorporation of potential biogas and our ability to monitor real time blend, control, and distribute became an extremely strong value proposition.

And this, this did not happen overnight. This was a multiple quarter pursuit and testing component in there. And so you know, kudos to the team led by you know, Thomas Redlinger and our engineering staff at pursuing this and getting it done. And I think it is gonna continue to open multiple doors as people start to kind of put on the center stage of capabilities of the PWRtek platform.

Jeffrey Scott Grampp: Got it. Appreciate those details. For my follow-up, I wanted to understand this metric you guys put in the release that this 5 gigawatts that are under measurement or control. Can you contextualize that, Ryan? From a revenue perspective? I know the Yeah. Revenue exposure can vary depending on the exact scope of work there. But, just trying to, I guess, triangulate the financial impact of that 5 gigawatts and at the risk of being greedy, maybe if you can split that out between oil and gas exposure versus other end markets you guys are penetrating.

Ryan Gillis Ezell: Hey, you are trying to give me a pull up. Hamstring on guidance here. Yeah. So what I will try to do is I will walk you through a little bit about how we get to 5 gigawatts. Right? And then I because it is hard to directly extrapolate the revenue because if you look at in the very appendix part of our deck, we talk about the sales pursuit where we go to measurement and then that transitions into control and then the longer term piece with distribution.

So what we have got what we have secured is we have secured measurement devices in over 50% of power generation e-frac and natural gas fired fleets here in The US on the e-frac side of business. Those run anywhere from 35 to 40 megawatts per location. or do some form of measurement and or measurement and control. Obviously, if we are doing just plain measurement versus measurement control and distribution, the revenue streams are different.

So I am going to kind of shy away from giving direct revenue on that, but that helps you understand-- this I would say it is roughly 75 plus or plus or minus 1 or 2 I would say measurement and or control sites on almost 40 gigawatts per site to get your baseline number. Yeah. And then we turn around, and we have got if you take the natural gas fire power plant facilities like CPV Fairview and a couple other ones, those are just under 2 gigawatts of power that we are looking at.

And what we are doing there traditionally is have a measurement device looking at unconventional shale gas We are trying to figure out do they knock condensates out, or what do they do there? Most of these have an ethane capacity problem, and we are trying to figure out do they cryo drop it, or do they let it burn through and how much are we gonna take on a derating capacity at those facilities. So that contributes just under 2 gigawatts, and then you have got this recent prep of 400 megawatt award, which puts us right at 5 gigawatts. And then, you know, we talked about our robust pipeline, but that is how it kind of builds up.

Each 1 of them has a little bit different revenue bill because I do not want to say they are complicatedly customized, but depending on what level of condition and or distribution or a primary power is pulled in there with it that you see a variance in how the revenue evolves there. But as you can imagine, there is significant upside because as we transition from med measurement to measurement plus control and the control plus distribution, the revenue per location increases dramatically.

Jeffrey Scott Grampp: Got it. that is awesome details. And, the Hammy made it through that explanation. I will I will hop back in queue.

Operator: that is great. And your next question comes from the line of Gerry Sweeney of Roth Capital. Please go ahead.

Gerard Sweeney: Hey. Good morning, Ryan, J. Bond Clement, and Mike. Thanks for taking my call this morning.

Ryan Gillis Ezell: Hey, Gerard.

J. Bond Clement: Hey, Gerard.

Gerard Sweeney: I had a question. You know, obviously, on the on the data analytics side, you have power, you have valuation, you have the reef the e-frac fleet opportunity. You know, these markets are expanding. I think you are getting a better understanding of the opportunity. You know, is there anything you need to do invest in to maybe attack this market faster, solidify your position, you know, grow a bigger pipeline to drive more, you know, more consistent potential consistency with unlocking opportunities.

Ryan Gillis Ezell: Yeah. Gerard, that is a very interesting question. I will try to dissect this as number 1. When we look at it from a rapid organic growth penetration, and scalability, We have now invested going on 13 plus million dollars in CapEx into monitoring equipment, conditioning equipment, distribution equipment, If you were to take every year that I have been at Flotek and add them together and multiply it times 2, we have a spent that much CapEx. And this has been solely in growing the power services digital valuation businesses. I look for that number to continue expand even further in the back half of the year,.

As we continue to put CapEx on these, as is the right thing for us to do and reinvest in cash flow just from the fact of the ROI is very, very solid for the company. Also, there is other opportunities, I think, for us as we look at you know, we mentioned some of these contracts that we are picking up on utilities. We do not wanna be as pure play power provider, but I think there is opportunities for us to supplement the partners that we work with also the mobilization power.

So there is an opportunity there for us to potentially grow some of our I would say, organic power services, say, 50 to a 100 megawatts just to have to help stabilize the work that we do with the bigger behind the meter power generation people. And then I also think there is some opportunities for M&A and or consolidation.

For some people that are trying to do some level of gas monitoring or conditioning albeit not in real time or more mechanical in nature. there is opportunities there that we could take some of their existing equipment and utilize our proprietary blending technology and measurement to upgrade the equipment into a more advanced form of a form of monitoring depending on the vertical application there. So I think, you know, those are, I would say, 3 primary pathways we are looking at accelerating the growth. You know, we were speaking to the board at This growth is kind of choppy.

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I mean, when you start picking up 100, 500 megawatt awards, you know, you have got we gotta start with pre investing and have some of those assets. Luckily for us, most of our measurement and or conditioning assets, can build in 4 weeks, 5 weeks. So we get pretty quick turnaround, but I hope that gives you a little bit of color on what we are doing to expand the business and grow the opportunities that we are getting.

Gerard Sweeney: Yeah. that is helpful. I mean, obviously, you get sometimes these big chunky opportunities but even on the digital valuation, keeping growing those consistently, I think builds in some of the opportunity as well. Technology, you know, how does this separate you or create advantages in the power market? Are more and more potential customers or clients or partners recognizing this And how do you actually expand this or sort of highlight it per se?

Ryan Gillis Ezell: So I would say that, you know, we have started our pursuits with heavily in a lot of the behind the meter guys that we knew had started in the e-frac space has now moved into the major top 10 behind the meter power suppliers, and we started doing measurements. A good example in this slide deck, we have representation of the of the real time gas and gas blending. And if you look in there, that specific patented technology for us And there is a graph on there that shows fuel gas being conditioned by 1 of these mobile gas power plants. Or shall I say, gas conditioning plants.

And even when it comes out of that, it is still variable in quality. And what you can see us tracking is the variance in the methane number of that gas with how we open and close automatically by the measurement device, the blending valve to put the CNG in, And then after doing that, we level out. The MN number directly to what is prescribed for the turbine or the recip. In this particular case, it was a turbine. And up until us coming out there, that turbine was shutting down They had multiple hours of NPT. It was shutting down once or twice a week.

We went out on location, and we were out there for 6 weeks and did not have 1 single shutdown. And then you start to see the value creation component around improved fuel efficiency by doing this. what is really important is the maintenance cycle improvements, which saves a lot of money Some of these turbines and recaps are wearing out faster than what they thought because of the wear and tear. On variability and gas quality. And then also the derating capacity where you have less equipment on location, And then finally, the value creation of carbon credits from less emissions.

And so you know, when you look at the velocity measurement in this level of speaking directly to the control modules on the engines, We have a very, very, very differentiated set of technologies And know, as we are building these skids, every single 1 of them are going out contracting on location. So we are really excited about it. And this was the first of its kind being able to do that.

So it is an exciting piece, and I would say that these type of case studies, we are gonna continue to put them out and put impact in number on the ROI and the value creation from them as we begin to accelerate our adoption within the market space.

Gerard Sweeney: Got it. I appreciate it. I will jump back in queue. Thanks, guys and congratulations. Thanks, Jerry.

Operator: Your next question comes from the line of Josh Sullivan of Jones Trading. Please go ahead.

Analyst: Good morning. Congratulations on the quarter here.

Ryan Gillis Ezell: Good morning, Josh. I wanted to follow-up on that comment you know, potential to acquire some of the mechanical conditioning operators How large is the mechanical market just so we can think of and frame of reference? You know, I it in terms of I would say in terms of dollars, it is it is kind of it is kind of hard to say on what some of them call their self doing. Because it depends on some of them are just doing what I would call traditional filtration. And knocking sands and or debris, etcetera.

Some people move into a more of a JT skid type applications at different parts, but you know, most of the time when you see fuel gas utilization being run directly to frac fleets, there is traditionally some type of filtration usage ahead of it. Now the problem is that they never can really detect what quality of the gas is in real time nor can they effectively blend it If they were trying to blend it with real time measuring, that would be a violation of our technology patent.

So but I would say there is there I think that when you look at the amount of capital investment that is in the area that every frac every e-frac fleet that is running field gas and probably running some form of CNG should have at least a Smart Skid type on there, which is a low rental cost considering. The ROI that you get on fuel improvements, and protection of the equipment. And so you know, right now, there is probably a 110 to 120 locations that is possible for it. Or full conditioning and distribution. And, you know, we have got some measurement device on about 75 of those.

And you know, I think that puts us in a good place to continue to grow. The most exciting part is these are the same companies in the majority of space that are moving into behind the meter. Our generation, they have created their own interior, some spin off of their company. And this type of technology is moving directly with them. And what is even more exciting about it is you know, people have traditionally thought you did not need some type of monitoring conditioning even if you have pipeline gas going to data centers. But we have shown that to not be the case because we see that variance in quality in our natural gas fired power facilities.

Plus the premature damage on the turbines over a long time. The derating problems, and all the other issues that we can really help to help to solve. And I guess just to on that point, on all the advantages you guys are bringing to the behind the meter conversation, how much inbound are you guys getting versus outbound work are you doing You know, is the word out you know, to your to your point on some of those dynamics you are really helping out on? Or just curious on the inbound at this point.

You know, it is a it is traditionally what we are starting see now is we are seeing a growing amount of inbound when there you know, companies are to point up. These turbines are shut down and reset, and it takes multiple hours to get them back up and running. And a lot of the inbound we see is where we have already got measurement devices out there. They wanna go to the next level of customization. And now we are we are also was I would say even more excited is we are starting to see more on the I would say, infrastructure side piece around utilities contractors on inbound pieces coming there.

They have seen, you know, what our technologies can do for protecting assets. And then we are seeing some more of the data center inbounds. We are continuing to expand our, I will say, sales and, pursuit teams in the field. Right now, you know, we will double those by the end of the year. And we will continue to add as we see the market piece come.

The other side that is been interesting, we are seeing a strong inbound zone, is the OEM engine builders that we mentioned prior We did not talk about in our prepared comments here, but we have we built the specific XSPCT FG units amount directly to reciprocating engines to control fuel quality and adjust timing and firing on those engines. Those tests are going really well in the field. And we are getting constant. Inbounds from OEMs to test that type of equipment on their various engine types. So you know, it is an exciting time for us.

I think we are we are kind of at that precipice to where the pursuits outward are now being overcome by what we are seeing on inbounds.

Analyst: Good to hear. Well, congratulations on the quarter, and thanks again for taking the questions. Yes. Thank you.

Operator: Your next question comes from the line of Blake McLean of Daniel Partners. Please go ahead.

Analyst: Hey. Good morning, guys. Thanks for taking my call here.

Ryan Gillis Ezell: Hey, Blake. Thought yeah, I thought I maybe I would switch gears a little bit and talk about chemistry and specifically some of the international success that you guys have had. I think it is been kind of a theme that we have seen across the space this quarter. Traditionally, sort of more North America focused OFS names, redeploying resources and equipment into international markets. So I thought maybe I would just ask you to talk about that opportunity set. More broadly and maybe comment how you how you think about that split going forward? Yeah. You know, it is a it is an interesting strategic piece for us.

Flotek, and that We probably got over 3.5 4 years invested in the evolving growth of our international business. We you know, 1 of the things that I will say since I came here was focusing on you know, if you have these a lot of these OFS components of the business, it is much better to have and have a broad, diverse domestic and international piece to stabilize you know, different points in commodity pricing cycles because it used to be if 1 was strong, 1 was weak, and they kinda kept a little balance to 1 another.

Plus, on these long on these international contracts, they attest to me typically will be of a longer duration less transactional in nature, a little bit better on a forecastable side. And so what we had, you know, done in Middle East and I will tell you, you know, Leon Chad done a fantastic job at driving this pursuit with Jamal Al-Wabel, our team in the Middle East. At for these pursuits to get the technologies approved tested, and continued pursuits, this mobilization through disruptions we have seen at The Middle East. You have seen this play out now. We moved up to we are on 4 frac fleets in the Jafarah field. Providing chemistry.

Right now, we have that potential that bend us to expand to 6 by the end of the year. And so, you know, you see a little bit play out on our balance sheet. At the end of the quarter numbers. You see saw us pull revenue number ahead of what we thought would have been in the normal forecast. Which, you know, kind of exceeded our expectations in a good way. Put the supply chain under some strain. But Shane and the team did a great job. It getting that through.

So I think you will continue to see strong numbers from The Middle East to back half of the year with potential upside if we expand by another 2 fleets. The good news about that scope of work is you know, that scope under this fair contract will go for another 4.5 plus years. And so that gives a good runway piece there. Another interesting part is I think there will be some other unconventional areas or indoor gas fields that will follow suit on the design of how that executes. And we are actively promoting our technology systems in those other countries and geographies. We are seeing that start to play out in Latin America as well.

Moving not only our chemistries down there, but now we are also building data analytics equipment there as well as our real time chem ed units there. For applications in Latin America. And I would say that in the Middle East, we have deployed a series of data analytics equipment there for gas monitoring, RVP measurements, transmix, and those are all approved technologies aside ADNOC and Aramco. So it is it is a lot of exciting pieces there. And I think we are in the real early innings of our international growth. And I think you are gonna see that start to proliferate or have the potential to proliferate in the back half of the year, and further in 2027.

Analyst: Got it. Got it. Alright. Good stuff. I appreciate all the color this morning, guys. Yeah. Thank you. Thanks, Blake.

Operator: Your next question comes from the line of Bo Fratt of AGP. Please go ahead.

Analyst: Hey, good morning. I have a couple of questions. The first question I had was if you could just talk about your guidance. For the year and mainly on the revenue side. If I back out the first half revenues, it looks like the second half revenues are gonna be below the second quarter level. Can you just talk about some of the factors that make the second half revenue look a little bit lighter than the first you know, first half revenue.

J. Bond Clement: Yeah. So, I mean, the second half, you know, if you look at just extrapolation, the second half is gonna be bigger than first half, Paul. We are just trying we made the comment during the call that we did, you know, kind of a huge month of external chemistry on the domestic side, a huge quarter at $20 million. So we are just moderating our outlook on the back half of the year given that we know there was a couple of customers who moved work from July into June that sort of front loaded 2Q. You look at the variability in that external chemistry line, we did 12.8 million in the first quarter.

And then jumped up to $20 million in the second quarter. So we are sort of normalizing that in the back half. As sort of an average between those 2 quarters. that is probably the biggest change And the other piece that we pointed out in our call commentary we currently do not have anything forecasted in the in the fourth quarter relative to the Montana Power Services contract, did about $6 million of revenue in 2Q. And an extension of the Montana contract, you know, is that the sort of run rate that you potentially are looking at with an extension? 6 million a quarter? Correct, Yeah. Correct. For the time being, Yep.

And can you just roughly frame out the, you know, $340 million to $350 million of revenue guidance for the year and split it between data analytics and chemistry? Yeah. So you know, without giving you specific numbers, obviously, we do expect our data analytics data analytics segment to grow revenue sequentially in the back half. With the exception of the fourth quarter. Again, we think we get that extension done. Then we will see sequential growth in both the third and fourth quarters on data. We are holding pro frac sort of flat with where the numbers have been in the first half on an average.

International, we are assuming continued strong quarter similar to what we put up in the second quarter. And then on the domestic piece, as I mentioned, we are we are moderating the back half outlook due to the transition transactional nature. So if you kinda look at it on an average of 1Q and 2Q, as a framework for what we are looking at third quarter and fourth quarter. Okay. that is really helpful. And then from a cash standpoint, if you could just talk about the working capital draw that you saw of the first half. I think it is like what, about 36 million And sort of does that unwind over the second half of the year?

And then also, Ryan said before that the CapEx number is going to go up You know, I had built in, like, 5 million a quarter from here on out. Or here on out, is that roughly a good estimate for CapEx going forward on a quarterly basis? Yeah. Just keep in mind, the CapEx is not going to show up on the cash flow statement because remember, we had about $12.5 million of the shortfall payment at the end of 25. That we transitioned into a construction credit, if you will, So from a cash perspective, that equipment is being constructed currently on a non cash basis because ProFrac is essentially paying us an OSP through equipment.

So you will not see that come through on the cash flow statement, but I will tell you during the second quarter, we utilized about 3 million of that order shortfall payment even though it does not show up on the cash flow statement. It does show up on the balance sheet. And we already have POs in place for the remaining kind of 10 million ish that is in progress right now and coming out sort of on a on a monthly basis. But, yeah, we did have some pretty big working capital headwinds during the quarter, obviously. Supported a big, big a big growth trajectory in the second quarter.

As we look this morning, as I mentioned, our ABL balance is down to zero as we have monetized a lot of the receivables that we have built up there at the end of the quarter. Okay. that is helpful. And then if I could just look at the comments that you made about the 5 gigs of either measurement and control next year by the first quarter. We know 400 megawatts equals 40 million and the power plant component, I think, is 2 gigs. Is there a revenue number associated with that?

That you would like to offer and then the measurement, you know, the measurement controls, I think, is a lot lower, but just sort of to get a flavor on sort of the potential revenue impact from that 5 gigs of measurement and control in the first quarter? Yeah. So the not to give I am not gonna we will not give any revenue numbers on those. About it already.

Ryan Gillis Ezell: But what I would say is on the some of these older, like, what I would say just pure gas fired power plants would big power density turbines, mostly just doing measurement. Right? there is not a significant amount of control on those now. As we are getting some of the more advanced designs because those were built. You know, these started pretty good while back. Some of our first ones, we began monitoring. As we are looking at some of these more advanced combined cycle and we are seeing improved efficiencies, they will have measurement and potential additional control.

So but, you know, we are we are we are not gonna really give out the numbers directly on what those are.

Analyst: Yeah. Understood. I will try to back into them. And then could you talk about the gross margin profile on the PREPA contract, dollars 40 million a year kicking in really the second quarter 27 because you are going to-- you stated you have about 30 million built in for 2027 that goes up to $2.04 billion in 2028. what is the margin profile look like?

J. Bond Clement: Hey, Paul. We are gonna defer on the margin question. As well for now. We like to give a more holistic update relative to financials as we sink our teeth in a bit more. I would tell you initially, we are thinking the initial power that we will provide will be on a rental basis similar that we are doing on the Montana project, which will carry lower margins than if we own the equipment. But we are still working through when we might transition from a rental model to a power owned perspective, which changes the margin profile.

Analyst: Great. Thanks for your help.

Operator: Your next question comes from the line of Eric Benjamin Swergold of Firestorm Capital. Please go ahead.

Eric Benjamin Swergold: Good morning, gentlemen. I cannot believe that just a few years ago, I was sitting near a conference room and you were doing 10 million a quarter and had your back against the wall. And now you are doing a $100 million in a quarter. Congratulations. And not to put you not to put your feet to the fire on 1, but we talked a little bit this morning about generators versus turbines, and there is been a lot of discussion getting about getting built into generators How about getting built into some of the turbines from the biggest turbine manufacturers as a built in option from the get go on those? Thanks.

Ryan Gillis Ezell: Yeah. So that is a great a great question, Eric. I think I think that is the natural evolution pieces. A lot of the original, I would say, the high power density turbines have traditionally required a they have, like, a long standing agreement with some of the gas chromatography suppliers to do that even though they know they do not take fast measurements they are lucky to get a measurement every couple hours. They are we have we have had some initial inbounds around that potential component. Now it was always funny because you know, they there was a discussion over turbines can burn anything. Well, that is probably true.

But when you start looking at the amount that are on location, and the impact of derating, and how we can help that overall fuel efficiency over them running in the in the long term. And then you combine that with the improved maintenance schedules we present a very, very, very strong value proposition and ROI. At our equipment being included as not only an OEM, but as a conditioning package in the front end. And so I would tell you that they are they are evolving similar to what we saw on the recip side of the business. it is been a little it has not been as fast but that is evolving.

Eric Benjamin Swergold: Great. that is very helpful. Well, congratulations. Thank you very much for your hard work. Thank you, the entire team. Thanks to Bon for sticking in there when it was really bleak. Thanks to Mike for really helping out with the PowerTech side. You guys have done a fabulous job. Thanks very much. Appreciate it. Thank you.

Operator: And your next question comes from the line of Jeffrey Scott Grampp of Northland Capital. Please go ahead.

Jeffrey Scott Grampp: Hey, guys. Thanks. I just had 1 more, quick follow-up. Ryan, the, integrating the data and the chemistry side, sounds pretty interesting. I do not know if you guys have talked too much about kind of early time success or revenue contribution there. I mean, it makes a ton of sense to, blend those 2 together. But just wondering if you can expand on kind of timing of ramping up some of those opportunities or where kind of the stage of conversation is at with respect to customers adopting that, a little bit more extensively?

Ryan Gillis Ezell: Yeah. You know, you know, Jeffrey, I gotta be honest. You made my day asking about how chemistry and data works together. Because that is been 1 of the key value creation platforms that we talk about, the convergence of the 2 segments of the business. I am extremely happy to report that we have now gotten deployment of direct XSPCT units on wells that we have done chemistry completion on.

This is the core backbone of us, number 1, not only validating that our targeted chemistry improves uplift because we can see the chemistry that comes out of the hole in combination with the initial production on that initial production wedge, we are able to see not only the quality of the liquids, but also gas. And we can see any NGLs that potentially be lost massive value creation there. But more importantly, it is evolved into what we are almost calling reservoir mapping or DNA fingerprinting of higher end hydrocarbons that we are targeting our PCM treatment to release.

Which is we are actually looking at the lab, designing to do that, and then we validate that flow And so even on a say an a flow rate that has the same BTU because we can see the real time speciation in the shift in hydrocarbon quality there is a higher value for that producing oil. And so this is unlocking tremendous value from multiple customers that we moved in from basically, a benchtop discussion to full field deployment. And that is gaining a significant amount of traction.

And if you think about on a higher scale in the industry, you have got the large IOCs of the world between Conoco, Chevron, Ovintiv, and you guys talking about their particular surfactant design, targeted chemistry designs, you know, we have been per se preaching that gospel for over a decade and a half, and not only do I feel Flotek is the best in the business at delivering this type of service, We now have the differentiated high velocity high accuracy measurement devices to show how effective that service is.

And that benefits the entire energy and infrastructure chain is now we have measurement devices that can look at every aspect of the value chain up and down inside hydrocarbon production. And improve the overall efficiency. And I think you are gonna see this have dramatic uptake and really accelerate our digital valuation business hand in hand with our prescriptive chemistry management. So we are super excited about it.

Jeffrey Scott Grampp: That sounds awesome. I look forward to following the details there and congrats on everything. Thanks, guys. Yep.

Operator: And there are no further questions at this time. I will now turn the call over to Mike Critelli. Please go ahead.

Mike Critelli: Thanks again for joining our call. Please join us at some of our investor events on August 7, seventeenth to the nineteenth at EnerCom Denver, where we will be presenting another investor presentation. On September 10 at Lake Street's tenth annual best Ideas Growth Conference in New York City. And then join us on November 10 and 11 at the Daniel Energy Partner's Annual Permian Barbecue, where we hope to compete for best barbecue dish. For other events and the latest info, look at the events section of our website. And with that, I will hand it over to Ryan.

Ryan Gillis Ezell: So we would like to thank everyone for joining us today for the continued support of the organization. And we look forward to bringing you positive updates in the back half of the year,. Thank you for joining.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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