Flotek Industries, Inc. 2026 Q2 Earnings Call

Please go ahead. Thank you and good morning.

We're thrilled to have you with us for Flotek's second quarter 2026 earnings conference call. Today I'm joined by Ryan Ezell, Chief Executive Officer, and Bond Clement, Chief Financial Officer. We'll begin with prepared remarks on our operations and financial performance, followed by Q&A. Yesterday we released our second quarter results, updated full year guidance, and an updated 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, please 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 Ezell.

Thank you, Mike. 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 three, 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'd 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 technologies 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's 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 MW Puerto Rico Gas Power Utilities project referenced on slide four. Finally, the company updated its 2026 guidance with the new midpoint being 45% and 49% increases versus 2025 actuals on revenue and EBITDA, respectively. This update builds upon a multi-year 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 six. Most importantly, these results were achieved with zero 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. 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's 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 multi-year 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 the details, starting with slide eight. I want to 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 a robust recurring revenue backlog shown on slide nine. Highlighting those wins are our RESA/PREPA 10-year, 400-megawatt utilities power support contract, generating over $400 million per year backlog through 2036. By the first quarter 2027, Flotek expects to support over 5 gigawatts of power through measurement or control by our proprietary PWRtek 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.

We had the successful utilization of our state-of-the-art smart skid to optimize gas quality with real-time blending of field gas and CNG for a 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. Power services led this growth, further reinforcing our shift towards high margin recurring revenue streams. The PWRtek 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, 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 eFrac and natural gas powered fleets by the year end. Additionally, on August 3rd, 2026, Flotek announced its second contract within the utilities infrastructure sector, seen on slide four. 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 Authority, 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 skid 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 conditioning and distribution skids expected by the end of the first quarter of 2027.

Let's transition to slide 13, where we'll 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 from producing wells like never before through real-time digital valuation. We believe the XSPCT's speed, accuracy, durability, and qualification under the rigorous measurement standards outlined in GPA 2172 will provide a significant advantage in discussions with prospective customers as we aggressively expand its manufacturing and field deployment. In March of 2026, the XSPCT Analyzer was named Product of the Year at the 2026 Analyzer Technology Conference, further exemplifying its differentiating 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.