Flotek Industries (FTK) Q4 2010 earnings summary

Executive summary

• 2010 revenue rose 30.6% YoY to $147.0M as activity, pricing and demand improved; net loss narrowed to $43.5M from $50.3M, but operations remained unprofitable.

• Cash ended 2010 at $19.9M, up from $6.5M; operating cash flow was $12.1M. Management prioritized profitable growth and cost efficiency for 2011.

• Specialty chemicals, drilling tools and artificial lift serve drilling, completion and production markets across domestic and international operations.

Financial highlights

• Revenue was $147.0M, up 30.6% YoY; gross margin increased to $53.0M from $29.4M, supported by higher product and rental sales and direct cost savings.

• Operating loss improved to $6.3M from $33.1M; net loss was $43.5M versus $50.3M, including a $21.5M noncash warrant-liability expense and $9.3M of impairment charges.

• Basic and diluted loss per share was $1.94 versus $2.68; preferred dividends and discount accretion added $6.5M to the loss attributable to common stockholders.

• Operating cash flow was $12.1M versus $2.2M; investing activities used $0.6M and financing activities provided $1.9M.

Outlook and guidance

• The 2011 plan targets profitable growth, continued cost control, international expansion, improved asset utilization and sharper focus on higher-margin products.

• Drilling and completion activity was expected to remain relatively stable versus 2010, with competitive pricing; management planned to expand the drilling tool fleet and pursue international Teledrift opportunities.

• 2011 capital expenditures were budgeted at $8.8M, including $7.9M for Drilling; spending could vary with market demand and realized results.

• Research and development spending was expected to remain near 2010 levels; management also planned an ERP system implementation to improve controls and operational responsiveness.