Registration of securities issued in business combination transactions

Segment information

v3.22.2.2
Segment information
 6 Months Ended 12 Months Ended
Jun. 30, 2022
Dec. 31, 2021
Segment Reporting [Abstract]    
Segment information
18. Segment information
Our business has three reportable segments: Stimulation services, Manufacturing and Proppant production. Each reportable segment represents a separate business unit that operated as a standalone company prior to the reorganization of the Company in December 2021. Following the reorganization, each reportable segment continues to have distinct management and prepares discrete financial information for the segment (consistent with when each operated as a standalone business). FTSI is part of our stimulation services segment. Amounts in the other category reflect our business activities that are not separately reportable, which only included Flotek for the periods presented. Our chief operating decision makers review the discrete segment financial information, including Adjusted EBITDA as the measure of profitability, to evaluate the performance of our segments and make resource allocation decisions.
We account for intersegment transactions as if the transactions were with third parties, that is, at estimated current market prices. For the three and six months ended June 30, 2022 and 2021, intersegment revenues for the manufacturing segment were 92% and 88% and 88% and 87%, respectively. For the three and six months ended June 30, 2022 and 2021, intersegment revenues for the proppant production segment were 64% and 44% and 66% and 38%, respectively.
The performance of our segments is evaluated primarily on Adjusted EBITDA. We define Adjusted EBITDA as our net income (loss), before (i) interest expense, net, (ii) income tax provision, (iii) depreciation, depletion and amortization, (iv) loss on disposal of assets, and (v) stock-based compensation, and (vi) other unusual or
non-recurring
charges, such as costs related to our initial public offering,
non-recurring
supply commitment charges, certain bad debt expense and gain on extinguishment of debt.
Segment information, and a reconciliation of Adjusted EBITDA, for the three and six months ended June 30, 2022 and 2021 is as follows:
 
    
Three Months Ended

June 30,
     
Six Months Ended

June 30,
  
(In thousands)
   
2022
     
2021
     
2022
     
2021
  
Revenues
                                    
Stimulation services
    $ 576,556      $ 168,506      $ 912,711      $ 312,209  
Manufacturing
      34,854        16,223        66,860        30,880  
Proppant production
      17,531        7,781        29,939        13,370  
Other
      15,359        —          15,359        —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Total segments
      644,300        192,510        1,024,869        356,459  
Eliminations
      (54,456 )       (17,691 )       (90,045 )       (32,054 ) 
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
    $ 589,844      $ 174,819      $ 934,824      $ 324,405  
    
 
 
     
 
 
     
 
 
     
 
 
  
Adjusted EBITDA
                                    
Stimulation services
    $ 196,088      $ 30,475      $ 269,657      $ 43,428  
Manufacturing
      9,360        349        19,382        2,679  
Proppant production
      12,574        3,246        20,459        5,652  
Other
      (7,454 )       —          (7,454 )       —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Adjusted EBITDA for reportable segments
      210,568        34,070        302,044        51,759  
Interest expense, net
      (13,451 )       (6,187 )       (22,723 )       (12,222 ) 
Depreciation, depletion and amortization
      (64,064 )       (34,904 )       (108,280 )       (70,365 ) 
Income tax benefit (provision)
      (4,112 )       283        (4,864 )       308  
Loss on disposal of assets, net
      (2,143 )       (1,868 )       (1,989 )       (4,075 ) 
Loss on extinguishment of debt
      (8,822 )       —          (17,095 )       —    
Litigation accrual
      (4,000 )       —          (4,000 )       —    
Stock compensation expense
      (1,455 )       —          (1,455 )       —    
Stock compensation expense related to deemed contributions
      (38,849 )       —          (38,849 )       —    
Bad debt expense, net of recoveries
      —          —          (5 )       —    
Loss on foreign currency transactions
      58        —          46        —    
Reorganization costs
      —          —          (55 )       —    
Acquisition related expenses
      (4,063 )       —          (17,082 )       —    
Unrealized gain on investments, net
      426        —          8,526        —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Net income (loss)
    $ 70,093      $ (8,606 )     $ 94,219      $ (34,595 ) 
    
 
 
     
 
 
     
 
 
     
 
 
  
Segment information as of June 30, 2022 and December 31, 2021 is as follows:
 
(In thousands)
   
June 30,

2022
     
December 31,

2021
  
Total assets
                  
Stimulation services
    $ 1,401,665      $ 510,579  
Manufacturing
      113,147        77,968  
Proppant production
      133,235        100,294  
Other
      193,297        —    
    
 
 
     
 
 
  
Total segment assets
      1,841,344        688,841  
Eliminations
      (177,719 )       (24,271 ) 
    
 
 
     
 
 
  
Total
    $ 1,663,625      $ 664,570  
    
 
 
     
 
 
  
10. Segment information
Our business has three reportable segments: Stimulation Services, Manufacturing and Proppant production. Each reportable segment represents a separate business unit that operated as a standalone company prior to the reorganization of the Company in December 2021. Following the reorganization, each reportable segment continues to have distinct management and prepares discrete financial information for the segment (consistent with when each operated as a standalone business). The Wilks, who are our Chief Operating Decision Makers (“CODMs”), review the discrete segment financial information, including Adjusted EBITDA as the measure of profitability, to evaluate the performance of our segments and make resource allocation decisions.
We account for intersegment transactions as if the transactions were with third parties, that is, at estimated current market prices. For the years ended December 31, 2021 and 2020, intersegment revenues for the manufacturing segment were 90% and 97%, respectively. For the years ended December 31, 2021 and 2020, intersegment revenues for the proppant production segment were 40% and 20%, respectively.
The performance of our segments is evaluated primarily on Adjusted EBITDA. We define Adjusted EBITDA as our net income (loss), before (i) interest expense, net, (ii) income tax benefit (provision), (iii) depreciation, depletion and amortization, (iv) loss on disposal of assets, (v) loss on extinguishment of debt, (vi) bad debt
expense, (vii) loss on foreign currency transactions and (viii) other unusual or
non-recurring
charges, such as costs related to our initial public offering, severance charges, and
non-recurring
supply commitment charges.
Segment information as of and for the years ended December 31, 2021 and 2020 is as follows:
 
    
Year ended December 31,
  
    
2021
     
2020
  
Revenues
                  
Stimulation services
    $ 745,373      $ 538,282  
Manufacturing
      76,360        46,222  
Proppant production
      27,225        10,215  
    
 
 
     
 
 
  
Total segments
      848,958        594,719  
Eliminations
      (80,605 )       (47,040 ) 
    
 
 
     
 
 
  
Total
    $ 768,353      $ 547,679  
    
 
 
     
 
 
  
Cost of revenues, excluding depreciation, depletion and amortization
                  
Stimulation services
    $ 570,828      $ 433,122  
Manufacturing
      65,849        40,424  
Proppant production
      14,050        6,064  
    
 
 
     
 
 
  
Total segments
      650,727        479,610  
Eliminations
      (80,605 )       (47,040 ) 
    
 
 
     
 
 
  
Total
    $ 570,122      $ 432,570  
    
 
 
     
 
 
  
Adjusted EBITDA
                  
Stimulation services
    $ 122,634      $ 68,787  
Manufacturing
      1,382        1,325  
Proppant production
      10,672        2,685  
    
 
 
     
 
 
  
Total segments
      134,688        72,797  
Eliminations
      —          —    
    
 
 
     
 
 
  
Total
    $ 134,688      $ 72,797  
    
 
 
     
 
 
  
Depreciation, depletion and amortization
                  
Stimulation services
    $ 128,004      $ 138,122  
Manufacturing
      3,788        2,796  
Proppant production
      8,895        9,744  
    
 
 
     
 
 
  
Total
    $ 140,687      $ 150,662  
    
 
 
     
 
 
  
Capital expenditures
                  
Stimulation services
    $ 82,545      $ 46,371  
Manufacturing
      3,500        1,661  
Proppant production
      1,355        5  
    
 
 
     
 
 
  
Total
    $ 87,400      $ 48,037  
    
 
 
     
 
 
  
Total assets
                  
Stimulation services
    $ 545,047      $ 452,729  
Manufacturing
      77,968        64,769  
Proppant production
      100,294        73,918  
    
 
 
     
 
 
  
Total segment assets
      723,309        591,416  
Eliminations
      (58,739 )       (14,139 ) 
    
 
 
     
 
 
  
Total
    $ 664,570      $ 577,277  
    
 
 
     
 
 
  
The following table sets forth the reconciliation of Segment Adjusted EBITDA to net loss in our consolidated statements of operations:
 
    
2021
     
2020
  
Stimulation services—Adjusted EBITDA
    $ 122,634      $ 68,787  
Manufacturing—Adjusted EBITDA
      1,382        1,325  
Proppant production—Adjusted EBITDA
      10,672        2,685  
    
 
 
     
 
 
  
Total
    $ 134,688      $ 72,797  
    
 
 
     
 
 
  
Interest expense, net
      (25,788 )       (23,276 ) 
Income tax benefit (provision)
      186        (582 ) 
Depreciation, depletion and amortization
      (140,687 )       (150,662 ) 
Loss on disposal of assets, net
      (9,777 )       (8,447 ) 
Loss on extinguishment of debt
      (515 )       —    
Bad debt expense, net of recoveries
      1,164        (2,778 ) 
Loss on foreign currency transactions
      (249 )       —    
Reorganization costs
      (2,060 )       —    
Severance charges
      (500 )       —    
Supply commitment charges
      —          (5,600 ) 
    
 
 
     
 
 
  
Net loss
    $ (43,538 )     $ (118,548 )