TETRA Technologies (TTI) Q2 2024 earnings summary

Executive summary

• Achieved 14% sequential revenue growth to $172 million and a 32% increase in adjusted EBITDA, driven by international offshore activity and European industrial chemicals peak.

• Secured a three-well deepwater CS Neptune fluids project in the Gulf of Mexico, set to begin late Q4 2024, marking the first multi-well deepwater project since 2019 and expected to materially impact financials over the next 6-9 months.

• Strategic initiatives in water desalination, battery electrolyte, bromine, and lithium are progressing, with transformational potential for future growth and technical resource reports completed for Arkansas projects.

• Revenue for the first six months of 2024 was $322.9 million, flat year-over-year, with growth in Completion Fluids & Products offset by declines in Water & Flowback Services.

• Net income attributable to stockholders for Q2 2024 was $7.6 million ($0.06 per diluted share), down from $18.2 million in Q2 2023.

Financial highlights

• Q2 2024 revenue was $171.9 million, up 14% sequentially but down 2% year-over-year; adjusted EBITDA was $30.2 million (17.6% margin), including $1.1 million in foreign exchange losses.

• Net income for Q2 2024 was $7.6 million; net income per share was $0.06, and adjusted net income per share was $0.07.

• Free cash flow from base business was $19 million, with total adjusted free cash flow at $9.4 million; operating cash flow for H1 2024 was $11 million.

• Liquidity at quarter-end was $180 million, with a net leverage ratio of 1.6x and net debt of $142 million.

• Return on net capital employed for the twelve months ending June 2024 was 17.4%.

Outlook and guidance

• Revenue for Q3 and Q4 expected to be flat to Q2, with continued focus on maintaining EBITDA margins above 15% amid flat onshore activity.

• The three-well Gulf of Mexico project is expected to start in late Q4 2024, with remaining wells extending into H1 2025 and a meaningful step up in revenue and EBITDA anticipated.

• Strong free cash flow expected in Q3 as inventory and receivables from the European peak season are monetized.

• Anticipates increased demand for zinc bromide electrolyte and additional commercial pilot units for water desalination in 2025.

• Initial economic assessment for a lithium extraction plant in Arkansas is anticipated in late 2024, with ongoing feasibility studies for bromine processing.