Quarterly report pursuant to Section 13 or 15(d)

Business Segments

v3.24.1.1.u2
Business Segments
 3 Months Ended
Mar. 31, 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 31% and 32% in the three months ended March 31, 2024 and 2023, respectively. Intersegment revenues for the manufacturing segment were 78% and 95% in the three months ended March 31, 2024 and 2023, respectively.

Revenue to external customers for the stimulation services segment are classified as service revenue on our unaudited condensed consolidated statements of operations. Revenue to 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 March 31, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers — services

 

$

505.4

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

505.4

 

External customers — product sales (1)

 

 

—

 

 

 

53.3

 

 

 

9.6

 

 

 

13.2

 

 

 

—

 

 

 

76.1

 

Intercompany (2)

 

 

11.9

 

 

 

24.4

 

 

 

33.9

 

 

 

28.5

 

 

 

(98.7

)

 

 

—

 

Total Revenue

 

$

517.3

 

 

$

77.7

 

 

$

43.5

 

 

$

41.7

 

 

$

(98.7

)

 

$

581.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (3) (4)

 

$

125.0

 

 

$

28.4

 

 

$

4.4

 

 

$

3.6

 

 

$

(1.7

)

 

$

159.7

 

Depreciation, depletion and amortization

 

 

92.9

 

 

 

18.0

 

 

 

1.1

 

 

 

0.8

 

 

 

—

 

 

 

112.8

 

Investment in property, plant & equipment

 

 

52.7

 

 

 

6.4

 

 

 

0.6

 

 

 

0.2

 

 

 

—

 

 

 

59.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5.8

 

 

$

14.0

 

 

$

3.3

 

 

$

5.2

 

 

$

—

 

 

$

28.3

 

Total current assets

 

 

504.9

 

 

 

172.8

 

 

 

170.8

 

 

 

71.3

 

 

 

(255.2

)

 

 

664.6

 

Property, plant, and equipment, net

 

 

805.7

 

 

 

847.5

 

 

 

19.4

 

 

 

17.2

 

 

 

—

 

 

 

1,689.8

 

Total assets (5)

 

 

2,465.4

 

 

 

1,143.2

 

 

 

253.2

 

 

 

187.8

 

 

 

(1,042.6

)

 

 

3,007.0

 

Current portion of long-term debt

 

 

56.8

 

 

 

75.3

 

 

 

1.0

 

 

 

3.3

 

 

 

—

 

 

 

136.4

 

Long-term debt

 

 

594.7

 

 

 

314.8

 

 

 

2.7

 

 

 

—

 

 

 

—

 

 

 

912.2

 

Total liabilities

 

 

1,380.0

 

 

 

214.2

 

 

 

207.5

 

 

 

51.9

 

 

 

(180.2

)

 

 

1,673.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers — services

 

$

786.7

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

786.7

 

External customers — product sales (1)

 

 

—

 

 

 

55.8

 

 

 

3.4

 

 

 

11.6

 

 

 

—

 

 

 

70.8

 

Intercompany

 

 

3.5

 

 

 

26.4

 

 

 

63.7

 

 

 

37.6

 

 

 

(131.2

)

 

 

—

 

Total Revenue

 

$

790.2

 

 

$

82.2

 

 

$

67.1

 

 

$

49.2

 

 

$

(131.2

)

 

$

857.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (3)

 

$

205.7

 

 

$

41.3

 

 

$

8.0

 

 

$

(7.9

)

 

$

—

 

 

$

247.1

 

Depreciation, depletion and amortization

 

 

96.1

 

 

 

12.4

 

 

 

1.0

 

 

 

0.8

 

 

 

—

 

 

 

110.3

 

Investment in property, plant & equipment

 

 

74.9

 

 

 

7.7

 

 

 

0.4

 

 

 

0.2

 

 

 

—

 

 

 

83.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

611.1

 

 

 

328.2

 

 

 

2.7

 

 

 

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 $13.6 million and $8.1 million in the three months ended March 31, 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 $8.7 million of revenue 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 reorganization costs and other costs related to our initial public offering, 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 and impairments of long-lived assets.
(4)
Adjusted EBITDA for the stimulated services segment included an intercompany supply commitment charge of $8.7 million 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, which was $24.9 million and $23.4 million as of March 31, 2024 and December 31, 2023, respectively. 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 March 31,

 

 

 

2024

 

 

2023

 

Adjusted EBITDA of reportable segments

 

$

159.7

 

 

$

247.1

 

Interest expense, net

 

 

(37.6

)

 

 

(34.9

)

Depreciation, depletion and amortization

 

 

(112.8

)

 

 

(110.3

)

Income tax expense

 

 

(0.3

)

 

 

(6.7

)

Gain (loss) on disposal of assets, net

 

 

1.4

 

 

 

(1.5

)

Gain (loss) on extinguishment of debt

 

 

(0.8

)

 

 

4.1

 

Acquisition earnout adjustment

 

 

—

 

 

 

3.0

 

Stock-based compensation

 

 

(2.1

)

 

 

(2.9

)

Stock-based compensation related to deemed contributions

 

 

—

 

 

 

(10.2

)

Provision for credit losses, net of recoveries

 

 

—

 

 

 

(0.1

)

Severance charges

 

 

(0.7

)

 

 

—

 

Acquisition and integration costs

 

 

(0.2

)

 

 

(12.3

)

Litigation expenses and accruals for legal contingencies

 

 

(4.8

)

 

 

(5.8

)

Unrealized gain (loss) on investments, net

 

 

1.2

 

 

 

(9.7

)

Net income

 

$

3.0

 

 

$

59.8