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Date

Wednesday, Aug. 6, 2025, at 10 a.m. ET

Call participants

  • Chief Executive Officer — Ryan Ezell
  • Chief Financial Officer — Bond Clement
  • Director of Finance and Investor Relations — Michael Critelli

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Takeaways

  • Total Revenue-- marking the sixth consecutive quarter of revenue growth as of fiscal Q2 2025. For clarity, all quarterly references are to fiscal periods ending June 30, 2025.
  • Data Analytics Revenue-- Increased 189% in fiscal Q2 2025 versus fiscal Q2 2024, reaching the segment’s strongest quarter ever and representing 10% of company-wide revenue, up from 4% in fiscal Q2 2024.
  • Data Analytics Service Revenue-- Grew 452% in 2025 versus 2024, fueling recurring revenue backlog in the data analytics segment, supported by new multiyear contract wins.
  • Chemistry Technologies Revenue-- Surged 38% year-over-year in fiscal Q2 2025, despite a 24% decline in average active frac fleets during fiscal Q2 2025. Total chemistry revenue grew 19% in fiscal Q2 2025 versus fiscal Q2 2024.
  • Gross Profit-- Increased 57% year-over-year in fiscal Q2 2025. Company-wide gross margin rose to 25% in fiscal Q2 2025. This represents an approximate 200-basis-point sequential improvement in total company gross margin.
  • Net Income-- Net income totaled $1.8 million, or $0.05 per share in fiscal Q2 2025 (GAAP). This includes $4.2 million in asset acquisition expenses.
  • Adjusted Net Income-- Excluding acquisition expenses, adjusted net income was $6 million in fiscal Q2 2025, and there was more than 10% sequential growth in adjusted net income.
  • Adjusted EBITDA-- It also increased 21% sequentially (adjusted EBITDA, fiscal Q2 2025, non-GAAP). This marks the eleventh consecutive quarter of adjusted EBITDA improvement as of fiscal Q2 2025.
  • PowerTech Assets (Data Analytics Segment)-- Accounted for $3.2 million in revenue and roughly $3 million in gross profit over two months of operation in fiscal Q2 2025. Gross margins ranged between 80%-90% for the PowerTech assets in fiscal Q2 2025.
  • Long-Term Contract Backlog-- New six-year data analytics contract secured, adding an estimated $156 million in recurring revenue backlog from a multiyear contract in the data analytics segment.
  • PowerTech Segment Gross Margin Contribution-- Provided 21% of total company gross profit in fiscal Q2 2025, despite representing only 5% of fiscal Q2 2025 revenue.
  • SG&A Expense-- Was 12% of revenue in fiscal Q2 2025, compared to 14% in fiscal Q2 2024, though nominal SG&A costs increased with higher stock compensation.
  • 2025 Guidance Reconfirmed-- Adjusted EBITDA growth of 1,280% is expected for 2025 compared to 2024.
  • PowerTech Revenue Outlook-- Third-quarter 2025 revenue from PowerTech assets is expected to surpass fiscal Q2 2025 levels. Full-year revenue contribution is projected at approximately $15 million for 2025.
  • Safety Track Record-- The MTI facility in Raceland, Louisiana, maintained a 10-year record with no recordable incidents, while the company recorded zero lost time incidents in operations during the quarter.

Summary

Flotek Industries (FTK -3.64%) management emphasized rapid traction in high-value, recurring-revenue data analytics applications, highlighted by a new PowerTech asset acquisition and a six-year $156 million contract secured in fiscal Q2 2025. Data analytics accounted for 26% of gross margin in fiscal Q2 2025, up from 8% earlier in 2025. Chemistry businesses demonstrated revenue resilience in fiscal Q2 2025 despite sector headwinds. Adjusted EBITDA improved by more than 100% in the first half of 2025. Margins expanded in fiscal Q2 2025 due to data analytics contributions and contract wins. Management reconfirmed 2025 guidance, projecting substantial top- and bottom-line growth and highlighted a backlog sufficient to support significant free cash flow and revenue visibility for multiple years.

  • CEO Ezell stated, we anticipate the data analytics segment will contribute over half the company's profitability in 2026.
  • CFO Clement highlighted a “meaningful impact” of PowerTech on profitability and projected all 30 acquired assets will be operating by Jan. 1, 2026.
  • Flotek is piloting field deployment of smart filtration skids, targeting a capital payback in under three months per unit.
  • Chemistry segment growth was led by differentiated, prescriptive chemistry management solutions, with data-driven services touching “almost 80%” of chemistry revenue according to management.
  • Management is pursuing selective inorganic opportunities to expand data analytics and chemistry capabilities, subject to immediate accretion requirements.

Industry glossary

PowerTech: Flotek’s end-to-end fuel management and analytics platform for energy infrastructure, utilizing proprietary monitoring equipment and cloud integration.

Varex Analyzer: A field-deployable, custody transfer-grade optical analyzer used for real-time gas composition and value tracking.

ESD Trailer: Equipment designed to condition high-BTU hydrocarbon streams and allow immediate switching or isolation of fuel feeds in energy operations.

Custody Transfer: The precise measurement and handoff of hydrocarbons between parties, involving validated, auditable metering for royalties and compliance.

Smart Filtration Skid: Compact equipment integrating analyzers for filtration, BTU and emissions monitoring, and real-time, automatic diversion of out-of-spec gas.

Frac Fleet: Mobile equipment and personnel units used for hydraulic fracturing operations in oil and gas well completions.

PCS (Prescriptive Chemistry Services): Flotek’s customized chemistry optimization offering, using real-time data and analytics to drive client production enhancements.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen. Welcome to Flotek Industries, Inc. Second Quarter 2025 Earnings Conference Call. At this time, all lines are in a 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 Wednesday, August 6, 2025. I would now like to turn the conference over to Michael Critelli, Director of Finance and Investor Relations. Please go ahead.

Michael Critelli: Thank you, and good morning. We are thrilled to have you with us for Flotek Industries, Inc.'s second quarter 2025 earnings conference call. Today, I am joined by Ryan Ezell, Chief Executive Officer, and Bond Clement, Chief Financial Officer. We will start with prepared remarks covering our business operations and financial performance. Following that, we will open up the floor for questions. Yesterday, we announced our second quarter 2025 results and an updated earnings presentation, both of which are available on the Investor Relations section of our website. This call is being webcast with a replay available on our website shortly after its conclusion.

Please note that the comments made on today's call may include forward-looking statements, which include our projections or expectations for future events. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from those projected in forward-looking statements. We advise listeners to review our earnings release and most recent 10-Ks and 10-Q filings for a more complete description of risk factors that could cause actual results to materially differ from those projected in forward-looking statements. Please refer to the reconciliations provided in the earnings press release and investor presentation as management will be discussing non-GAAP metrics on this call.

With that, I will turn the call over to our CEO, Ryan Ezell.

Ryan Ezell: Thank you, Mike, and good morning. We appreciate everyone's interest in Flotek Industries, Inc. and for joining us today as we discuss our 2025 operational and financial results. Throughout the quarter, the sector continued to face dynamic geopolitical and macroeconomic challenges that have generated volatility within the commodities market. Despite these headwinds, the Flotek team demonstrated a resilient focus on executing our corporate strategy, driving transformation, and delivering our sixth consecutive quarter of revenue and gross profit growth alongside our eleventh consecutive quarter of adjusted EBITDA improvement.

As a result, Flotek continued its track record of increasing market share in both of our complementary business segments as we remain unwavering in our commitment to excellence and value creation for our shareholders and customers, throughout the convergence of innovative data and chemistry solutions. With that, I'd like to touch on some key highlights for the quarter referenced in slide five that Bond will discuss later in the call. As part of our measure more strategy in the data analytics segment, we acquired 30 real-time gas monitoring and dual fuel optimization assets to accelerate Flotek's strategic expansion into the energy infrastructure. 26 were operating by July, and all 30 are expected to be operating by January 1, 2026.

We continue to build our revenue backlog in the data analytics segment by securing a multiyear contract estimated to deliver $156 million in revenue while providing substantial earnings growth and free cash flow for the segment. Total revenue during the quarter rose 26% versus February 2024, highlighted by a 189% increase in data analytics revenue, our strongest quarter ever. Gross profit climbed 57% versus the second quarter of 2024, with the 2025 gross profit margin rising to 25%. Net income totaled $1.8 million. However, excluding $4.2 million in asset acquisition expenses, adjusted net income totaled $6 million, which is a 202% improvement versus 2024 and more than a 10% improvement sequentially.

Adjusted EBITDA was up 113% versus 2024 and up more than 20% sequentially. Above all, these milestones were achieved with zero lost time incidents in the field of operations. I also want to spotlight our MTI facility in Raceland, Louisiana, which has remarkably maintained a ten-year record with no portion recordables. During that period, MTI has moved over 350 million pounds of dry products and 5.3 million gallons of liquid products. Such an extraordinary feat. I want to thank all of our employees for their hard work and commitment to safety and service quality in achieving these outstanding results.

I remain excited about Flotek's future as we strengthen our position as a technology leader spearheading innovation and delivering tailored data and chemistry solutions that meet our customers' specific needs. Committed to shaping the industry's future by leveraging chemistry as the common value creation platform. Now let's dive into the details referencing slide nine of the investor earnings day. Today, I want to spotlight the remarkable progress in our data analytics segment. We saw service revenues increase 452% in 2025 versus 2024, elevating gross profit to 63% in 2025 versus 30% in the same quarter a year ago. This transformational growth in data-driven service revenue is empowered by three upstream technology applications: power generation, custody transfer, and flare monitoring.

All of which are fueling significant advancements for our organization while generating recurring revenue backlog. The first is our transformative power generation solution, which has evolved from a novel analytical approach into a game changer for the energy infrastructure sector that we call PowerTech. What began as advanced analytics has grown into a comprehensive end-to-end fuel management platform redefining performance standards and operations within the sector. Looking at slide 11, in April 2025, we acquired 30 patented real-time gas monitoring and dual fuel optimization assets. This transaction instantly strengthens our presence across all US basins, adding turnkey capacity for fuel valuation, conditioning, and distribution to support remote and mobile energy services, data center, and grid power generation infrastructure.

In connection with the asset acquisition, we also secured a six-year contract anchoring an estimated $156 million in recurring revenue backlog while generating improvements in annual operating income and boosting free cash flow. At the heart of PowerTech is our Varex analyzer, which goes beyond data collection to deliver custody transfer grade measurements. It provides precise BTU volume reporting for royalties, invoicing, and performance guarantees. Complementing this, our patented ESD trailers condition high BTU hydrocarbon feeds to meet exact turbine or engine performance specifications.

Because every site and grid condition are unique, and seamless backup connections, allowing operators to switch fuels or go off-grid with a single button, resolving major constraints to the development of data center and grid power infrastructure. But PowerTech is about more than just technology. It's about control. Operators interact seamlessly through an owned trailer HMI or a unified web portal that is accessible on desktop, tablet, or smartphone. Our cloud-based portal enables the monitoring of live BTU trends, H2S alerts, Coriolis flow meter readings, and automated CNG blend controls, combined with custom alarm thresholds to automatically isolate all spec hydrocarbon feeds and protect high-value turbines or engines from catastrophic damage, thus minimizing downtime and operational risk while enhancing safety.

All data flow securely through our patented edge-to-cloud pipeline, ensuring zero manual intervention, end-to-end encryption, full audit trails, and compliant custody transfer recordkeeping. Building on the success, we've also taken delivery of our first smart filtration skid, a minimal footprint unit that integrates custody transfer analyzers to remove liquids, monitor BTU, and emissions, and auto-divert out-of-spec gas. Focused on expanding our external customer base, we expect field deployment in 2025 with a potential capital expenditure payback in less than three months. Finally, over 35 data analytics patents position Flotek as a leader across the natural gas value chain.

When considering our capabilities for advanced fuel blending, zero emissions analytics, custody transfer gate flow cell measurements, wireless ESD actuation, and secure edge-to-cloud data transmission, we deliver unmatched monitoring, control, and safety for field gas operations. Now let's transition to slide 12. We'll dive into our second upstream application, custody transfer. This January 2025, a leading E&P partner has been piloting this solution in multiple basins. At a single pilot site, we pinpoint an annual customer opportunity of up to $3.5 million. This highlights the significant value the solution creates. Currently, nine of the custody transfer locations are now six additional locations are expected to convert to recurring monthly revenue in 2025 with further expansion expected.

Additionally, we are actively pursuing opportunities with other domestic operators and targeted NOCs in the Middle East. This groundbreaking application sets a new standard in the oil and gas industry, delivering unprecedented transparency and minimizing enterprise risk for producing wells like never before. By monitoring hydrocarbon quality and composition in real-time, and taking the measurements every five seconds, we successfully unlocked a new market for Flotek. Let's move to our third upstream application, the Veracal flare monitoring solution. We continue to see operational demand in 2025, realizing nearly $1 million in revenue.

We're navigating through the rapidly changing regulatory landscape and partnering with operators and player developers to deliver value that goes beyond compliance, unlocking new efficiencies and environmental benefits for our clients. It's clear that 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 investors. Our DASH-driven strategy ensures predictable recurring revenue and cash flow, delivering stability and long-term value. Our proprietary data technologies and superior measurement accuracy to entry enable velocity and decision control that establish a high barrier, secure client loyalty, and support our value-based service model.

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. Slide 14 underscores the resilient performance of our chemistry segment with second quarter 2025 revenue surging 38% year over year despite a 24% decline in average active frac fleets during the same period. While we anticipate potential commodity price volatility in 2025, we view this as a strategic opportunity to further expand our market share by accelerating the adoption of our prescriptive chemistry management solutions and enhancing asset values for our customers.

It's evident that our chemistry team has executed our strategy flawlessly despite the near to medium-term headwinds. While uncertainties around activity levels in 2025 persist due to the macro factors that could affect the completion chemistry market, we remain focused on defying these challenges, delivering differentiated chemistry and data services to provide our customers with industry-leading returns on their investment. We are confident that our expanding suite of services positions us to deliver superior solutions to a variety of our industry's most challenging problems while maximizing our customers' value chain. Now I'll turn the call over to Bond to provide key financial highlights.

Bond Clement: Thanks, Ryan. I'm excited to discuss our second quarter performance released yesterday afternoon. This marks our first opportunity to assess the financial contribution of our newly acquired gas conditioning assets and the accompanying long-term lease. As we reported yesterday, our new PowerTech assets had a meaningful impact on our second quarter numbers. Operating for only two months of the quarter, they generated $3.2 million in revenues and contributed roughly $3 million in gross profit. The addition of this new high-margin revenue drove total company gross margins for the quarter to 25%, or up approximately 200 basis points sequentially.

As shown in Slide nine of our deck, our PowerTech assets serve as a clear catalyst for margin and profitability expansion, driving improvements not only within the data analytics segment but also at the corporate level. Emphasizing PowerTech's impact, during 2025, the data analytics segment contributed just 8% of total company gross margin. Compare that with the second quarter of this year where that contribution was up to 26%. The numbers become even more compelling when you consider our expectation that third-quarter revenue from these assets will surpass second-quarter levels.

With full-year revenue contributions projected to reach approximately $15 million based on the fixed rental rates in the lease, and with all of PowerTech assets in service for a full year, 2026 revenues are expected to be north of $279 million. Considering that PowerTech generated only 5% of second-quarter revenue but provided a remarkable 21% of total company gross profit, it's clear the strategic weight data analytics will carry in driving profitability over the coming quarters and the duration of the six-year lease. Moving to the quarterly results. As Ryan mentioned, the second quarter marked our sixth consecutive quarter of revenue growth.

Revenue growth was led by a 189% increase in the data analytics segment versus the year-ago quarter, highlighted by the increase in service and rental-related revenues driven by the PowerTech assets. Data analytics segment revenue represented 10% of total second-quarter revenues, up from 4% a year ago. On the chemistry front, total revenue grew 19% versus the year-ago quarter. Please see Slide 14 in our earnings deck that reflects the growth in our chemistry revenues over the last several quarters against the backdrop of declining active frac fleets. SG&A costs during the quarter were up versus the second quarter of last year due to higher stock compensation costs.

However, on a percentage of revenue basis, SG&A was 12% this quarter, versus 14% a year ago. Net income for the quarter totaled $1.8 million or $0.05 per share. It was impacted by $4.2 million in asset acquisition costs, which primarily related to legal and various advisory services. Excluding the expense acquisition costs, adjusted net income totaled $6 million or $0.16 per diluted share. Please refer to slide 26 for the reconciliation between net income and adjusted net income. As it relates to second-quarter share count, as noted in the release, shares outstanding at June 30 did include the weighted average impact of the 6 million shares underlying the warrant that was part of the consideration for the PowerTech acquisition.

Looking at slide six, during the second quarter, we continued our streak with respect to adjusted EBITDA. We have now posted 11 consecutive quarters of improvement. Not only was our second-quarter adjusted EBITDA 21% higher sequentially, but when you look at it through the first six months, adjusted EBITDA is running more than 100% higher than the first half of last year. Similar to what we saw in the gross profit margin side, our second-quarter adjusted EBITDA margin increased by 200 basis points sequentially, primarily as a result of the new data analytics assets. In yesterday's release, we reconfirmed our 2025 guidance, which we have summarized on Slide six.

The midpoint of our revenue and adjusted EBITDA guidance indicates growth of 1280%, respectively, as compared to the 2024 metrics. Assuming the midpoint of both metrics implies a 717% adjusted EBITDA margin as compared to only 11% in 2024, further underscoring the positive margin impact that we witnessed during the second quarter with respect to the PowerTech assets. Consistent with last quarter's call, our guidance reflects a conservative outlook for the second half of the year as it relates to our chemistry business, given the continued industry data points and commentary regarding potentially slowing upstream activity. Touching on the balance sheet, our June 30 financials reflect the full impact of the PowerTech transaction.

As a reminder, consideration included a portion of our 2024 and 2025 chemistry shortfall payments, a $40 million note, and a warrant for 6 million shares. To wrap up my comments on the financials, the second quarter delivered strong performance, highlighted by steady growth in revenue, margins, and profitability. Based on this initial quarter's results from the PowerTech assets, it's clear we're on track to significantly rebalance our profitability mix, transitioning from chemistry technologies as the primary contributor today to data analytics emerging as the leading driver of profitability in the near future. With that, I'll hand the call back to Ryan for closing remarks.

Ryan Ezell: Thanks, Bond. The 2025 results build upon our now multiyear track record of consistently posting improved financials. Our 2025 guidance points to another year of impressive financial improvement as we continue to execute our corporate strategy leveraging chemistry as the common value creation platform. Looking at slide seven, I remain convinced we are still in the early inning of Flotek's transformation as we continue to grow and maximize returns for our customers and shareholders across the entire value chain of the energy landscape. Our transformative and strategic entry into the energy infrastructure sector is expected to provide a significant increase in high-margin data analytics revenue and cash flow for years to come.

Through the growth of our upstream applications, we anticipate the data analytics segment will contribute over half the company's profitability in 2026. We have secured long-term contracts for both our chemistry technologies and data analytics segments, bolstering confidence in Flotek's ability to deliver stable revenue and profitability while effectively shielding our business from the impacts of commodity price fluctuations. Finishing with slide 15, we believe no other company in our industry is better positioned to deliver the cutting-edge technologies needed to tackle the unique challenges of the energy and infrastructure sectors. I'm incredibly proud of our progress and confident in our team's ability to execute moving forward.

Given the growth potential for our chemistry technologies and data analytics segments, we see Flotek as a compelling investment opportunity. I want to thank you for your continued support and we're eager to share our vision for Flotek's future and look forward to updating you on our progress in the quarters ahead. Operator, we're ready to open the floor for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star 2. With that, our first question comes from the line of Jeff Grampp with Northland Capital Markets. Please go ahead.

Jeff Grampp: Morning, guys. Nice quarter. Good morning, Jeff. Ryan was hoping to get an update on progress towards contracting additional PowerTech units to third parties. As I recall, I believe most, if not all, of these units are earmarked to ProFrac. I know you guys have some demand from other parties. So just curious to get an update on those efforts.

Ryan Ezell: Yeah. That's a great question and one we're happy to answer this morning. We've seen solid traction. We've now got an additional five customers that we are going through the pilot phase of testing the Varex and monitoring, proving the application that we'll transfer into the next step of moving the larger assets, like an ESD NGD combo or one of our new smart filtration skids on the location. So, we do expect the first smart filtration skid to be out in the next couple of weeks, and we have accelerated the capital builds on the rest of the equipment to start to answer the building demand.

So we're really excited about it, and we're not only seeing it from the aspect of what I would consider to be rig power, which would be dual fuel or e-fleet turbines, but we're also seeing solid traction in grid power and some of the data center support as well. So exciting time for what's gonna become in the future of PowerTech.

Jeff Grampp: Awesome. That's great to hear. And then shifting to custody transfer, hoping to kinda dive into a little bit with these few locations that have gone commercial here. Can you give a sense of, I guess, quantity of customers or geographies? I think you mentioned one customer in a few different basins, but just curious kind of the breadth or depth of both number of customers as well as the different geographies you guys are getting some traction in?

Ryan Ezell: Yeah. So the larger scale pilot program that we have been conducting with one of the major E&P operators here in North America, those units, we actually have units operating in virtually every US major basin right now. With that one. And they're kind of on as we had started the pilot program, we put we install units and after sixty days of monitoring, they switch over and convert to commercial. So we've now fully activated nine of them under commercial. They started generating revenue at the back half or the back of the last week of May. June 1. We've had six more are now converting, and that number's continuing to climb.

The first ones that converted were out mostly in the Permian Basin. We're seeing them come online in what we call the Rockies region. Then we've got some moving to the Northeast as well that'll be coming online. We've actually got another I would say, eight to ten customers that we have monitoring custody transfer in pilot phases. And the reason we call them pilot is because they're doing different things at different locations. Some of them we're doing a longer-term test section. We're replacing the monetary things they do on spot or composite sampling where they won't do any manual handling. This will turn into the true evaluation component of the flowing gas.

We've also got some that are just looking for NGL production in the first sixty to ninety days when they bring a well online. So they're all doing different things at different locations. As part of custody transfer. But like, as I mentioned earlier, I'm extremely bullish on this app and I think it'll be one of our larger segments in the future here for Flotek.

Jeff Grampp: Great. That's super helpful. Detail. If I can just sneak one more in. I think the release noted something like 90% gross margins on the PowerTech assets. I think you guys were initially targeting something more like 80%. I know it's still early, but just any commentary on the sustainability at that level would be interesting to hear.

Bond Clement: Yeah, Jeff. We obviously were pleased with margins in the first quarter. Keep in mind that those assets were only operating for a part of the quarter, roughly two months. We still think margins are going to be very attractive. It's hard to say if they're gonna be sustained at 90%. But as we said initially, our expectations were gonna be north of 80%. So I think 80 to 90% is probably a reasonable assumption going forward as we sit here today.

Jeff Grampp: Sounds good. Thanks, Bond. I'll turn it back.

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

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

Ryan Ezell: Hey, Gerry. How are you?

Gerry Sweeney: I'm doing well. So just a follow-up question on the PowerTech side. You've mentioned five customers or I think five customers are using the PowerTech or piloting or whatever words are talking to you. How big of a market do those five customers represent?

Ryan Ezell: So, initially, I would say that there's a split. So two of them are very specific to oil and gas operations at Turn Rock. Should it be rig power? And then three of them are related to energy infrastructure, which would be grid power support or monitoring gas for data centers. And I would say that, you know, when you look at if we were to achieve any type of scale, they're in a similar size to our largest customer, which would be what we're doing with the ProFrac PowerGen. So they all have similar footprints, if not bigger. Off-highway customers.

Gerry Sweeney: Yeah. Alright. Is there a difference in terms of the depth of maybe due diligence between the oil and gas guys and the energy infrastructure maybe getting across the finish line?

Ryan Ezell: Yeah. You know, it's we're believe it or not, the path to getting equipment on location is similar to what we did when we did the primary deal with ProFrac is the first thing we do is show the validity and the capabilities of the Varex monitoring system, which is the heart of all these pieces of equipment. And we usually go on a couple of weeks of tests with our in the field gas, seeing the in combination with current knockout systems they have on location, and then we move into the larger assets. Like an ESC NGD combo which is the monitoring stop gap. With distribution, or we move it to a smart filtration skid with distribution.

DSD and smart filtration are very similar. It's just the footprint is a little smaller for the smart skid. And, you know, the diligence part in terms of comes into it is they both if you're using the really remote and raw field gas, they're very similar. However, when you look at some of these power facilities, particularly data centers, a lot of them are getting more what I consider to be refined, almost what we call city-level gas. So they have a little bit different process. It's more about metering and valuation and volume coming through as much as the control of worry about a lot of liquids coming through, if that makes sense.

Gerry Sweeney: Gotcha. And then secondarily then I'll jump back in line. Just manufacturing capacity, where do you stand on that front just maybe even meeting potential demand as we move into next year?

Ryan Ezell: Yeah. You know, it's I would say from depending on the service line, I'll talk about PowerTech first. We have plenty of backlog of Varex analyzers to answer the demand. And then as you see, we had acquired those initial 30 assets. We've got 26 of the 30 with four more coming. We've already built our first smart filtration kit. We have it moving in operations. We've now ordered an additional one of those coming online. We're working on placing additional orders of ESD NGDs. Most of them have anywhere from four to eight-week timeline to build. So I think we're gonna be able to keep up.

We've got multiple builders that can actually, because we've got kind of proprietary framing on those. So it's not they're not very difficult, I would say, be able to take long lead times. When you look at the custody transfer, we've got about 200 plus units available for deployment, and we are steadily streamlining and bringing those in because we feel like there'll be larger numbers of those in comparison to the analyzers that's just used for PowerTech as that field deployment starts to grow. But we are still in the process of doing some more advanced streamlining on the expect units as they come online.

Gerry Sweeney: Gotcha. Sorry. I lied. Last question. But you mentioned 200 units for field custody. So, I mean, you're expecting that to ramp significantly over the next twelve to eighteen months with that type of?

Ryan Ezell: Yeah. So the great part is that, you know, our original, we call it our core business. Where we're doing read vapor pressure monitoring or transmix. Because they're multichannel units, we could put one or two units in a refinery and they can monitor multiple areas at once. When you look at what we're doing here on custody transfer, these orders are coming in anywhere from eight to 20 units at a time. For a full deployment in an area.

So they have a much larger enterprise deployment capability than what we would traditionally see in the older core business, which is exactly the reason why we push so much in the upstream is the competitive advantage we have and our ability to monitor in real-time plus the larger scale deployment opportunities.

Gerry Sweeney: Got it. I appreciate it. I will jump back to mine. Thanks. Great quarter.

Operator: And your next question comes from the line of Paul Fratt with Alliance Global Partners. Please go ahead.

Paul Fratt: Hi. Good morning. You covered a lot of ground, but can we just maybe look at the energy infrastructure, the PowerTech business? The non-ProFrac revenue, when do you think that's gonna hit the operating results? And can you give us sort of an order of magnitude about the level that we might see this year in non-ProFrac customers for the PowerTech sector?

Ryan Ezell: So we will start seeing revenue from non-ProFrac customers in Q3 of this year. And that will continue to expand because the rental rates of what we would do for the service from just Varex as we're proving it out versus when we get the higher day rates for the full systems on location are quite a bit different. So we'll start seeing a lot of the initial Varex revenue already coming through because the majority of the units have already been delivered in July.

And so we'll start to see that come into a larger scale in the back half of the year, but we'll definitely see some in 2025 with a pretty rapid acceleration from what we'll see in '26.

Paul Fratt: Great. And is there any way, Ryan, to quantify the revenue potential per customer? Is it even relevant to look at the 30 units generating $27 million of annual revenue and compare that to your new customers? Is that a way to bring it, or am I missing something?

Bond Clement: Hey, Paul. It's Bond. You gotta remember when we talk about power service, it can be a combination of a lot of different types of activities. What we're doing with a lot of non-ProFrac customers today is simply the rental of the Varex unit, which as Ryan mentioned, is kind of the brains of the skids that we bought in connection with the PowerTech deal. So, obviously, those are not gonna be as impactful from a revenue perspective. But when we talk about the smart skid that we just rolled out our first one, expect to put that into service in Q3.

Not, you know, I don't think it's too early for us to start getting into financial details relative to the economics of these smart skids since we haven't placed one with a customer today. But those units could be very meaningful financially similar to what we see with the pairs of ESD and distribution skids with ProFrac.

Paul Fratt: Okay. And can we do the same thing for the transfer business? It looks like third quarter, you might see some revenue there. Can you sort of quantify what you might have seen or you might have booked in the second quarter? And then sort of how it scales up over the rest of the year?

Bond Clement: Yes. Second quarter was very small. Less than $50,000 in terms of 2Q. We do expect that obviously to expand with a full quarter of revenue. Again, don't want to get into individual rental rates on these units, given the fact that trying to expand customer acceptance of the technology. And we're in some pretty highly competitive discussions right now.

Paul Fratt: Okay. That's really helpful. Thank you, Bond. And then, you know, in the last call, you were somewhat cautious on the chemistry side of the business. Looking at the second half of the year. Can you update your view on the outlook for the chemistry business right now? Relative to what you said on the first call or the last call?

Ryan Ezell: So I think, you know, I think we have seen you go back, you know, ninety, hundred and eighty days, we've seen quite a bit of fluctuation in the market. I do think that, as we mentioned earlier, there's been some core factors that's impacted commodity pricing on the geopolitical aspect as well as the impacts of what the back half of the year demand may be. You look at OPEC plus versus what a lot of OECD countries, including the IEA, think on demand. Could impact the absorption, I would say, normalization of Saudis in improved production out into the market, how it plays to the price of oil.

And also how much the demand for natural gas influences this price in an upward direction. I do feel that we will see that, you know, you look at us, we're proprietary technologies. The reason that we continue to grow when there's been a reduction in active frac fleets is that people and our customers are seeing the improvements in the reservoir production with utilization of our chemistry. So I think when you look at our proprietary technology around complex nanofluids, surfactant simulations, we'll see those continue to expand and grow and see great adoption. Where I think our chemistry business will be most impacted will be on the commodity chemicals like friction reducers.

There's gonna be pricing pressure on those. And those are, like they're very commoditized chemicals. So what I guess, and we'll see a little bit of impact on the FR sales. And what I'm looking at on the chemistry side, and that'll probably carry through into the back half of Q4. We are starting to see a little light. International business, I think, is gonna hold pretty steady. In the tunnel in the back half of Q4. If not grow from the activity we see in Saudi. And I think, you know, if the natural gas demand will eventually have to come online, and we'll see some improvement there.

We're very strong in a lot of the natural gas basins in comparison to the commodity battle that we see in the Permian.

Paul Fratt: Great. Very helpful. Thanks, Ryan.

Operator: And your next question comes from the line of Eric Svergold with Firestorm Capital. Please go ahead.

Eric Svergold: Thanks, guys, and congratulations to your entire team. Of repositioning the company to be able to grow through downturn and also continuing to move up value in terms of product and commodity.

Ryan Ezell: Thank you.

Eric Svergold: My question was, can you discuss the efforts to get your sensors spec into power gen equipment from the top power gen equipment manufacturers?

Ryan Ezell: Yeah. That's a great question, Eric. And what we're seeing now is that we've had some we've got multiple partners right now that are at the supply of a lot of the, I would say, the upper-end turbine engine production. That we are testing to where there's and most of the testing we're doing now is to optimize the performance and lifetime of the engine. In terms of doing dynamic adjustments to fuel and air control going to them. To maximize that they run at the optimum rate and prevent engine wear and tear. And the costly failure of these pieces of equipment. So we are involved in that.

And what's been unique is that traditionally, there was two approaches to looking at that. One, would it be like an OEM part that would come with? A turbine or a dual fuel asset? Or would it become a service? And we've moved towards it working with these larger producers that it becomes like a service that they offer and we're the brains of the service. So that is progressing. And making good progress. And you know, we definitely consider those are strong opportunities for us. The back half of this year. One of those is one of the pilot programs that we're running now. That I mentioned earlier.

Eric Svergold: Great. Thanks a lot, and congratulations again on doing such a good job repositioning your company to grow through a downturn.

Ryan Ezell: Yeah. Appreciate it, Eric. Thank you.

Operator: And your next question comes from the line of Chris Sakai with Singular Research. Please go ahead.

Chris Sakai: Hi. I'm in for Gaushi Sriharan. Can you discuss your continued push into prescriptive analytics or chemistry optimization, roughly what portion of chemistry revenue now directly ties to data-driven services? And how do you expect that ratio to change by next year?

Ryan Ezell: You know, that's quite unique in that. I would say that the data-driven part of what we do on the PCS side of the business touches almost 80% of what we do because where we look at it from on the completion chemistry side right now, we are taking real-time data from water quality and different pieces. We make adjustments to chemistry there. Plus, everything that we do on the PCM side when we bring in and we test, whether drill cuttings, core samples, initial crude, potential composition, water, the different pieces we do on XRD. We plug those chemometric models to help us prescribe the technology that we use on location.

And then before we tweak down, based on control and optimization. So it's technically, in a way, touching almost all we do on the PCM service. Now we do sell some bulk chemistry that is just on a price basis, but the big majority of our external customers now use PCM service. What you're gonna see from Flotek, and if you look, I believe it's on slide 10 of the infrastructure slides that we have, we are now moving our expect units into real-time monitoring of the hydrocarbon quantity produced, which will lead to our opportunities to treat production chemistry on the back end. We're also looking at advanced techniques and monitoring water on the front end in real-time.

Where we can adjust on the fly. The technologies and chemistries that we use based on water quality, getting the water in shape so that you get the most optimum production from your frac. So it's pretty I mean, every component, when you when we really say you're starting now to see the convergence of real-time data, and optimized prescribed chemistry we're at the tip of the spear doing that, for the industry, and we're gonna continue to evolve that drive that as part of our differentiation in the business going forward. And that's slide seven too, just the quick correction.

Operator: And your next question comes from the line of Josh Jayne with Daniel Energy Partners. Please go ahead.

Josh Jayne: Thanks. First one for me, just I guess, a shorter-term question. Could you walk through the expected delta between the low and high end of the guidance range looking into the back half of the year? Which segments are going to drive it one way or the other? I would assume because of the size just of where it sits today, it's probably the chemistry side of the business. But maybe you could talk if there's some variability from some of the other businesses that's ultimately driving the expected outcome in those guidance ranges.

Bond Clement: Yeah. I mean, Josh, as we talked about, I think Ryan and I alluded to, each in some of our comments, the real variability in the guidance, particularly on the revenue side, is going to be the back half on the chemistry outlook. It's primarily going to be focused on North America. We've obviously shown some resilience relative to decorrelating with the declining active frac fleets. But, you know, we're just taking a conservative look as it relates to our guidance in the back half of the year. Recognizing that, you know, that ultimately may come to see us on the chemistry side.

On the data side, we feel really good given the fact that as we continue to bring more PowerTech units online throughout the year, that revenue stream is expected to increase sequentially in the third quarter and then again in the fourth quarter. That's obviously going to be supportive of revenue and obviously with the margins that those assets put up supportive to the adjusted EBITDA guidance.

Josh Jayne: Understood. And then maybe just a more of a strategic question for Ryan. I mean, it's been an incredibly busy last twelve months. Of expansion. Into a number of different business lines and also growing internationally, etcetera. Is it safe to say that over the next sort of six to nine months, the company is gonna be more focused on executing with what you've acquired and built? Or are there other things that you're looking at on the M&A side that could ultimately complement some of these new forward? Maybe just how you're thinking about that would be helpful. Thanks.

Ryan Ezell: So, you know, I look at this as a, you know, albeit there is what I would consider to be macro headwinds, I look at this period over the next six to eight months as a great opportunity for the company to further advance our strategy. There's no doubt we're heavily focused on in our operations teams at commissioning the new assets that we're building and the growth of our PowerTech business and expansion custody transfer. And our chemistry technology segments are significantly focused on further expanding the adoption of our, you know, complementary services that help improve reservoir.

But I do believe if you look at where we sit, and the value that we bring as opportunities for not only do potential activities that could expand our data analytics footprint, but also look for opportunities that do both. In the growth of chemistry and data. And so I think that for us, we're gonna continue to look at focus opportunities to do some potential inorganic activities that could expand what we do in our footprint that combine the chemical sales with more or measurable plus control strategy on the data side.

So we will be selectively looking at ways to potentially consolidate chemistry businesses and or grow our data analytics spend as long as with the one core value is that they're accretive immediately to the business. And so that's the driving factor there.

Josh Jayne: Understood. Thank you. I'll turn it back.

Operator: Thank you. And we have no further questions at this time. I would like to turn it back to Michael Critelli for closing remarks.

Michael Critelli: Thank you everyone for joining our call today. Please join us at some of our upcoming events, Intercom August 17 to the twentieth in Denver, Colorado. We'll also be at the Gateway Conference, September 3 through the fourth in San Francisco, California. We're also excited to be part of the New York Stock Exchange Technology Summit October 14 in New York City. And then lastly, our Permian Power Connection Conference, September, where we hope to showcase some of our new PowerTech smart filtration skids. Please come join us. And, again, thanks everyone for joining us today in support of Flotek Industries, Inc., and we look forward to speaking to you again soon. Thank you.

Operator: Thank you, presenters. And this concludes today's conference call. Thank you all for joining. You may now disconnect.