FTK - Flotek Industries (FTK) - June Quarter Results - A More In Depth Look
Revenues hurt by loss of two large customers. Flotek reported revenues of $9.2 million below 2021-1Q revenues of $11.8 million and our forecast of $12.6 million due to the loss of two significant customers due to merger combinations. Management indicated that absent the loss of these two clients, business would have been up 22% and ahead of internal sales and EBITDA projections. Meanwhile, customer growth has been strong with energy chemical technology customers increasing 26% sequentially. Management offset lower revenues with lower costs. Operating costs (excl. DDA) were $12.1 million down from 2021-1Q costs of $13.8 million and our estimate of $14.8 million. SG&A costs were $2.9 million versus $4.4 million in the previous quarter, which was also our estimate. By lowering costs, the company was able to report adjusted EBITDA of ($6.7) million roughly in line with previous quarters and better than our ($8.1) million estimate. Net income was ($6.5) million or ($0.09) per share, an improvement from first quarter earnings of ($8.3) million or ($0.12) per share and our estimate of ($8.4) million or ($0.12) per share. Management described the cost reductions as generally permanent in nature. The outlook is improving despite the lost customer setback but numbers must come down. Management indicated that July revenues were higher than any month in the second quarter. That said, low sales in the quarter were a surprise and force us to adjust our forecasts. We are lowering our 2021 revenue forecast to $42.6 million from $54.7 million. We are also lowering our 2022 sales forecast to $70.2 million from $98.6 million. Our EBITDA and EPS numbers are tweaked but remain near previous levels as our lower revenue estimate is offset by lower expected operating costs. Rating remains outperform with a $2.50 price target. We believe the company is in the early stages of a turnaround and investors should focus more on company developments more than near-term results. If the company executes its strategic plan, results will follow. We see the restructuring as an end of 2021 event which, combined with improved energy industry economics, has the potential to lead to increasing revenue growth in 2022. Read More >>