FTK - Flotek Industries (FTK) - Second Quarter Results - Initial Thoughts

Revenues were disappointing. 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. The loss offset a 26% sequential increase in energy chemical tech customers and 58% increase in service customers.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.Revenue growth is paramount. The loss of two large customers is disappointing but a rising customer base may be a positive sign that the salesforce restructuring is working. We see the restructuring as a end of 2021 event which, combined with improved energy industry economics, has the potential to lead to increasing revenue growth in 2022. As such, we are not overly disappointed in the lack of sales growth this quarter. However, we do believe growing revenues is key to the company's success.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 than near-term results. If the company executes its strategic plan, results will follow. Conference call is Tuesday at 9:30 EST (844-835-9986). Read More >>