Quarterly report pursuant to Section 13 or 15(d)

Business Segments

v3.24.2.u1
Business Segments
6 Months Ended
Jun. 30, 2024
Segment Reporting [Abstract]  
Business Segments

NOTE 12. BUSINESS SEGMENTS

We manage our business segments primarily on the type of product or services provided. We have three reportable segments which we operate within the United States of America: stimulation services, proppant production and manufacturing. Amounts in the other category reflect our business activities that are not separately reportable, which primarily includes Flotek for the periods presented.

Intersegment transactions are intended to be at estimated market prices. Intersegment revenues for the proppant production segment were 23% and 27% for the three and six months ended June 30, 2024, compared with 31% and 32%, respectively, in the same periods last year. Intersegment revenues for the manufacturing segment were 74% and 76% for the three and six months ended June 30, 2024, compared with 73% and 88%, respectively, in the same periods last year.

Revenues from external customers for the stimulation services segment are classified as service revenue on our unaudited condensed consolidated statements of operations. Revenues from external customers for the proppant production segment, the manufacturing segment, and our other business activities represent product sales for these businesses and are classified as such on our unaudited condensed consolidated statements of operations.

Summarized financial information for our reportable segments is as follows:

 

 

Stimulation Services

 

 

Proppant Production

 

 

Manufacturing

 

 

Other

 

 

Eliminations

 

 

Total

 

Three Months Ended June 30, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers — services

 

$

492.9

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

492.9

 

External customers — product sales (1)

 

 

 

 

 

53.7

 

 

 

14.6

 

 

 

18.2

 

 

 

 

 

 

86.5

 

Intercompany (2)

 

 

12.7

 

 

 

15.8

 

 

 

41.3

 

 

 

29.4

 

 

 

(99.2

)

 

 

 

Total Revenue

 

$

505.6

 

 

$

69.5

 

 

$

55.9

 

 

$

47.6

 

 

$

(99.2

)

 

$

579.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (3) (4)

 

$

107.3

 

 

$

25.7

 

 

$

0.1

 

 

$

4.4

 

 

$

(1.9

)

 

$

135.6

 

Depreciation, depletion and amortization

 

 

77.6

 

 

 

21.6

 

 

 

3.8

 

 

 

0.7

 

 

 

(0.3

)

 

 

103.4

 

Investment in property, plant & equipment

 

 

50.0

 

 

 

4.9

 

 

 

7.0

 

 

 

 

 

 

 

 

 

61.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers — services

 

$

607.7

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

607.7

 

External customers — product sales (1)

 

 

 

 

 

75.4

 

 

 

8.3

 

 

 

17.8

 

 

 

 

 

 

101.5

 

Intercompany (2)

 

 

0.5

 

 

 

34.4

 

 

 

22.8

 

 

 

33.9

 

 

 

(91.6

)

 

 

 

Total Revenue

 

$

608.2

 

 

$

109.8

 

 

$

31.1

 

 

$

51.7

 

 

$

(91.6

)

 

$

709.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (3) (4)

 

$

122.9

 

 

$

57.8

 

 

$

3.1

 

 

$

(1.3

)

 

$

 

 

$

182.5

 

Depreciation, depletion and amortization

 

 

89.9

 

 

 

17.3

 

 

 

0.9

 

 

 

0.8

 

 

 

 

 

 

108.9

 

Investment in property, plant & equipment

 

 

75.2

 

 

 

22.7

 

 

 

0.1

 

 

 

0.1

 

 

 

 

 

 

98.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11.6

 

 

$

6.2

 

 

$

1.4

 

 

$

4.8

 

 

$

 

 

$

24.0

 

Total current assets

 

 

541.6

 

 

 

154.3

 

 

 

209.6

 

 

 

73.2

 

 

 

(274.8

)

 

 

703.9

 

Property, plant, and equipment, net

 

 

926.4

 

 

 

842.6

 

 

 

82.5

 

 

 

16.6

 

 

 

(1.4

)

 

 

1,866.7

 

Total assets

 

 

2,958.3

 

 

 

1,046.0

 

 

 

387.2

 

 

 

188.9

 

 

 

(1,416.9

)

 

 

3,163.5

 

Current portion of long-term debt

 

 

82.9

 

 

 

84.1

 

 

 

1.5

 

 

 

5.9

 

 

 

 

 

 

174.4

 

Long-term debt

 

 

695.4

 

 

 

306.4

 

 

 

22.9

 

 

 

 

 

 

 

 

 

1,024.7

 

Total liabilities

 

 

1,853.7

 

 

 

196.3

 

 

 

299.2

 

 

 

49.8

 

 

 

(507.6

)

 

 

1,891.4

 

 

 

 

 

Stimulation Services

 

 

Proppant Production

 

 

Manufacturing

 

 

Other

 

 

Eliminations

 

 

Total

 

Six Months Ended June 30, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers — services

 

$

998.3

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

998.3

 

External customers — product sales (1)

 

 

 

 

 

107.0

 

 

 

24.2

 

 

 

31.4

 

 

 

 

 

 

162.6

 

Intercompany (2)

 

 

24.6

 

 

 

40.2

 

 

 

75.2

 

 

 

57.9

 

 

 

(197.9

)

 

 

 

Total Revenue

 

$

1,022.9

 

 

$

147.2

 

 

$

99.4

 

 

$

89.3

 

 

$

(197.9

)

 

$

1,160.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (3) (4)

 

$

232.3

 

 

$

54.1

 

 

$

4.5

 

 

$

8.0

 

 

$

(3.6

)

 

$

295.3

 

Depreciation, depletion and amortization

 

 

170.5

 

 

 

39.6

 

 

 

4.9

 

 

 

1.5

 

 

 

(0.3

)

 

 

216.2

 

Investment in property, plant & equipment

 

 

102.7

 

 

 

11.3

 

 

 

7.6

 

 

 

0.2

 

 

 

 

 

 

121.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers — services

 

$

1,394.4

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

1,394.4

 

External customers — product sales (1)

 

 

 

 

 

131.2

 

 

 

11.7

 

 

 

29.4

 

 

 

 

 

 

172.3

 

Intercompany (2)

 

 

4.0

 

 

 

60.8

 

 

 

86.5

 

 

 

71.5

 

 

 

(222.8

)

 

 

 

Total Revenue

 

$

1,398.4

 

 

$

192.0

 

 

$

98.2

 

 

$

100.9

 

 

$

(222.8

)

 

$

1,566.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (3) (4)

 

$

328.6

 

 

$

99.1

 

 

$

11.1

 

 

$

(9.2

)

 

$

 

 

$

429.6

 

Depreciation, depletion and amortization

 

 

186.0

 

 

 

29.7

 

 

 

1.9

 

 

 

1.6

 

 

 

 

 

 

219.2

 

Investment in property, plant & equipment

 

 

150.1

 

 

 

30.4

 

 

 

0.5

 

 

 

0.3

 

 

 

 

 

 

181.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1.3

 

 

$

17.7

 

 

$

0.4

 

 

$

5.9

 

 

$

 

 

$

25.3

 

Total current assets

 

 

445.8

 

 

 

181.2

 

 

 

164.7

 

 

 

70.6

 

 

 

(224.2

)

 

 

638.1

 

Property, plant, and equipment, net

 

 

881.6

 

 

 

859.8

 

 

 

19.8

 

 

 

17.8

 

 

 

 

 

 

1,779.0

 

Total assets (5)

 

 

2,483.9

 

 

 

1,160.1

 

 

 

243.9

 

 

 

188.7

 

 

 

(1,005.9

)

 

 

3,070.7

 

Current portion of long-term debt

 

 

46.2

 

 

 

71.6

 

 

 

1.0

 

 

 

7.6

 

 

 

 

 

 

126.4

 

Long-term debt

 

 

611.2

 

 

 

328.2

 

 

 

2.6

 

 

 

0.1

 

 

 

 

 

 

942.1

 

Total liabilities

 

 

1,404.5

 

 

 

225.7

 

 

 

201.5

 

 

 

55.5

 

 

 

(145.1

)

 

 

1,742.1

 

 

(1)
Our proppant production segment recognized noncash revenue associated with acquired contract liabilities of $10.9 million and $16.5 million for the three months ended June 30, 2024 and 2023, respectively, and $27.4 million and $24.6 million for the six months ended June 30, 2024 and 2023, respectively. Refer to Item 8 "Financial Statements and Supplementary Data" in our Annual Report for information about our acquired contract liabilities.
(2)
In our other business activities, Flotek recorded revenue of $8.4 million and $2.0 million for the three months ended June 30, 2024 and 2023, respectively, and $17.1 million and $2.0 million for the six months ended June 30, 2024 and 2023, respectively, related to contract shortfalls because the stimulation services segment did not purchase the minimum contractual commitment of chemistry products from Flotek.
(3)
We evaluate the performance of our segments based on Adjusted EBITDA. We define Adjusted EBITDA as our net income (loss) before (i) interest expense, net, (ii) income taxes, (iii) depreciation, depletion and amortization, (iv) (loss) gain on disposal of assets, net, (v) stock-based compensation, and (vi) other charges, such as certain credit losses, gain (loss) on extinguishment of debt, gain (loss) on investments, acquisition and integration expenses, litigation expenses and accruals for legal contingencies, acquisition earnout adjustments, severance charges, goodwill impairments, gains on insurance recoveries, and impairments of long-lived assets.
(4)
Adjusted EBITDA for the stimulation services segment included an intercompany supply commitment charge of $8.4 million and $2.0 million for the three months ended June 30, 2024 and 2023, respectively, and $17.1 million
and $2.0 million for the six months ended June 30, 2024 and 2023, respectively, because this segment did not purchase the minimum contractual commitment of chemistry products from Flotek.
(5)
Total assets for the stimulation services segment includes our investment in BPC prior to acquisition, which was $23.4 million as of December 31, 2023. The gains and losses associated with this investment are not included in our segment profit measure of adjusted EBITDA.

The following table reconciles Adjusted EBITDA for our reportable segments to net income:

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Adjusted EBITDA of reportable segments

 

$

135.6

 

 

$

182.5

 

 

$

295.3

 

 

$

429.6

 

Interest expense, net

 

 

(39.6

)

 

 

(41.0

)

 

 

(77.2

)

 

 

(75.9

)

Depreciation, depletion and amortization

 

 

(103.4

)

 

 

(108.9

)

 

 

(216.2

)

 

 

(219.2

)

Income tax benefit (expense)

 

 

23.7

 

 

 

(9.6

)

 

 

23.4

 

 

 

(16.3

)

Gain (loss) on disposal of assets, net

 

 

(0.3

)

 

 

0.5

 

 

 

1.1

 

 

 

(1.0

)

Gain (loss) on extinguishment of debt

 

 

 

 

 

 

 

 

(0.8

)

 

 

4.1

 

Acquisition earnout adjustment

 

 

 

 

 

3.6

 

 

 

 

 

 

6.6

 

Stock-based compensation

 

 

(2.9

)

 

 

(2.4

)

 

 

(5.0

)

 

 

(5.3

)

Stock-based compensation related to deemed contributions

 

 

 

 

 

(7.4

)

 

 

 

 

 

(17.6

)

Provision for credit losses, net of recoveries

 

 

 

 

 

 

 

 

 

 

 

(0.1

)

Severance charges

 

 

(1.1

)

 

 

 

 

 

(1.8

)

 

 

 

Acquisition and integration costs

 

 

(2.9

)

 

 

(5.2

)

 

 

(3.1

)

 

 

(17.5

)

Impairment of goodwill

 

 

(67.7

)

 

 

 

 

 

(67.7

)

 

 

 

Gain on insurance recoveries

 

 

3.2

 

 

 

 

 

 

3.2

 

 

 

 

Litigation expenses and accruals for legal contingencies

 

 

(9.2

)

 

 

(7.4

)

 

 

(14.0

)

 

 

(13.2

)

Unrealized gain (loss) on investments, net

 

 

(1.0

)

 

 

(9.3

)

 

 

0.2

 

 

 

(19.0

)

Net income

 

$

(65.6

)

 

$

(4.6

)

 

$

(62.6

)

 

$

55.2