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 chemicals, with net income of $7.6 million in Q2 2024.

• Secured a three-well CS Neptune deepwater fluids project in the Gulf of Mexico, marking the first multi-well deepwater batch since 2019, set to begin late Q4 2024.

• Water and flowback segment margins rebounded to 15.2%, up 560 basis points sequentially, with automation and technology deployment aiding recovery.

• Strategic initiatives in water desalination, battery electrolyte, bromine, and lithium are advancing, with technical resource reports completed and further economic assessments expected in 2024.

• 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.

Financial highlights

• Q2 2024 revenue was $171.9 million, up 14% sequentially but down from $175.5 million in Q2 2023; gross profit was $43.3 million (25.2% margin), and adjusted EBITDA was $30.2 million (17.6% margin).

• 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.

• Free cash flow from base business was $19.2 million, with total adjusted free cash flow at $9.4 million.

• Liquidity stood at $180 million at quarter-end, with unrestricted cash of $38 million and no outstanding ABL facility debt.

• Net leverage ratio at quarter-end was 1.6x; return on net capital employed was 17.4%.

Outlook and guidance

• Revenue is expected to remain flat in Q3 and Q4 compared to Q2, with EBITDA margins targeted above 15%.

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

• Strong free cash flow is expected in Q3 as inventory and receivables are monetized.

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

• Significant momentum projected into 2025, driven by deepwater and battery electrolyte markets, and additional commercial pilot units for water desalination expected.