Flotek Industries Q4 2025 Earnings Call - Data Analytics Surge Turns Flotek into DaaS Profit Engine

Operator/Jenny, Conference Call Operator: Morning, ladies and gentlemen, and welcome to Flotek Industries’ fourth quarter and full year 2025 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would now like to turn the conference call over to Mike Critelli, Director of Finance and Investor Relations. Please go ahead.

Mike Critelli, Director of Finance and Investor Relations, Flotek Industries: Thank you and good morning. We’re thrilled to have you with us for Flotek’s fourth quarter and full year 2025 earnings conference call. Today, I’m joined by Ryan Ezell, Chief Executive Officer, and Vaughn Clement, Chief Financial Officer. We’ll begin with prepared remarks on our operations and financial performance, followed by Q&A. Yesterday, we released our Q4 and full year 2025 results, along with an updated investor presentation, both available on the investor relations section of our website. This call is being webcast with a replay available shortly after. Please note that the comments made on today’s call may include forward-looking statements, which include our projections or expectations for future events. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from those projected in forward-looking statements.

We advise listeners to review our earnings release and most recent Form 10-K and Form 10-Q filings for a more complete description of risk factors that could cause actual results to materially differ from those projected in forward-looking statements. Please refer to the reconciliations provided in the earnings press release and investor presentation, as management will be discussing non-GAAP metrics on this call. With that, I will turn the call over to our CEO, Ryan Ezell.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Thank you, Mike. Good morning, everyone. We appreciate your interest in Flotek and your participation today as we review our Q4 and full year 2025 operational and financial results. In the fourth quarter, we saw North American operators maintain the cautious posture initiated in the second quarter as they continue to navigate the return of OPEC plus spare capacity and persistent global trade volatility. Despite the dynamic geopolitical and macroeconomic challenges that have injected uncertainty within the market, the Flotek team remains steadfast in the execution of our corporate strategy, driving transformation and delivering our third consecutive year of significant gross profit and adjusted EBITDA improvement.

Through the powerful convergence of innovative real-time data and chemistry solutions, as shown on slide 3, Flotek has laid the foundation for a data-driven growth trajectory built on diverse recurring revenue, high margin services, and proprietary technologies that create value for our customers and improve returns for our shareholders. Transitioning to slide 4, Flotek extended its track record of transforming the company into a data-as-a-service business model as our industrial pivot continues to gain momentum while expanding the total addressable market for future growth of the company. Furthermore, we delivered standout performance throughout 2025, resulting in increased market share in both of our complementary business segments. Data analytics grew exponentially, while chemistry outpaced the market in a challenging environment through an unwavering commitment to safety, service quality, innovation, and total value creation.

With that, I’d like to touch on some key highlights for the quarter referenced on slide 7 that Vaughn will discuss later in the call. Q4 and full year 2025 saw the highest quarterly and annual revenues since 2017. Data analytics segment achieved its highest ever quarterly and annual revenue in company history. Our gross profit climbed 24% versus the fourth quarter of 2024 and 52% as compared to full year 2024. The data analytics gross profit accounted for 48% of the total company gross profit during the fourth quarter of 2025, as compared to only 8% in the quarter a year ago. Adjusted EBITDA grew over 123% year-over-year, while 2025 net income improved 191%.

Finally, we completed the onboarding of our PowerTech assets and the strategic entry into power services in 2025. This sets the stage for high margin recurring revenue growth in 2026 and beyond. All of these results were achieved with 0 lost time incidents in the field of operations with our prescriptive chemistry management and Raceland NTI team surpassing over 10 years without a lost time incident. I want to thank all of our employees for their hard work and commitment to safety and service quality in achieving these outstanding results. Now turning to the larger picture for the energy and infrastructure sector, we share the viewpoint that despite the near-term volatility and uncertainty created by the ongoing conflicts in the Middle East, the fundamentals for hydrocarbon demand will continue to grow from the medium to long term.

A rebalance of supply and demand is expected due to the combination of steeper decline rates from large percentages of unconventionals, diminishing overall reservoir quality, and minimal exploration success will create potential tailwinds for energy and infrastructure services. Substantial investment will be required to maintain current production levels, while additional spending would be needed to meet the expanding power demand driven by AI, data centers, and industrial reshoring, combined with the reliability issues of an aging transmission infrastructure. Our legacy pressure pumping customers continue to capitalize on the portfolio diversification opportunity provided by the demand for remote power generation. Flotek is poised to support these emerging customers with products and services that help protect their assets while optimizing their operational performance and fuel efficiency.

With multi-year waiting lists for turbines and reciprocating engines, protecting these capital-intensive investments is critical, along with enabling reliability standards that exceed greater than 99% uptime requirements. Now transitioning from the micro look, let’s dive into the details, starting with slide 11 of the earnings deck. I want to spotlight the remarkable progress in our data analytics segment, which saw service revenues increase 381% in Q4 of 2025 versus Q4 2024, elevating gross profit to 73% in Q4 2025 versus only 39% in the same quarter a year ago. This transformational growth in data-driven service revenue is empowered by three upstream technology applications: power services, digital valuation, and flare monitoring, all of which are fueling significant advancements for our organization while generating recurring revenue backlog.

The first is our power services, which has evolved from a novel analytical approach into a transformative solution for the energy infrastructure sector that we call PowerTech. What began as advanced analytics has grown into a comprehensive end-to-end fuel management platform, redefining performance standards and operations within the sector. Looking at slide 13, at the heart of PowerTech is our Varex Analyzer, which goes beyond data collection to deliver custody transfer grade measurements. It provides precise BTU, methane number, and volume reporting for royalties, invoicing, and performance guarantees. Complementing this, our patented conditioning and distribution trailers actively remove liquids and contaminants, conditioning high BTU hydrocarbon feeds to meet exact turbine or engine performance specifications. PowerTech is more than just a technology; it’s about control.

Our cloud-based portal enables the monitoring of live BTU trends, H2S alerts, Coriolis flow meter readings, and automated CNG blend controls, combined with custom alarm thresholds to automatically isolate off-spec hydrocarbon feeds and protect high-value turbines or reciprocating engines from catastrophic damage, thus minimizing downtime and operational risk while enhancing safety. More importantly, our velocity of measurement enables direct communication to the OEM engine to automatically adjust engine operation parameters and optimize engine performance. We don’t believe there is another analyzer technology capable of executing at this level of real-time automation today. Finally, our 35+ data analytics patents position Flotek as a leader across the natural gas value chain. When considering our capabilities, we deliver unmatched monitoring, control, and safety for field gas operations. On March 3, 2026, Flotek announced its first contract within the utilities infrastructure sector, seen on slide 14.

Leveraging our proprietary PowerTech platform, Flotek will partner with leading distributed power service providers to coordinate the installation of up to 50 MW of state-of-the-art power generation equipment, including advanced gas distribution and smart conditioning systems to support critical federal disaster recovery initiatives. The impacted area was struck by a destructive wind event, which caused significant damage to local power infrastructure. This deployment harnesses real-time data analytics for unparalleled efficiency, ensuring resilient power that drives the community recovery forward. Under the contract, Flotek will supply and mobilize cutting-edge smart conditioning skids and advanced gas distribution equipment alongside natural gas powered gen sets. The gas distribution skid provides independent fuel control to each gen set, allowing seamless maintenance without interrupting the power flow and guaranteeing uptime even in the harshest conditions.

This week, we have boots on the ground evaluating the site selection and continuing to work with engineers and customers to determine the site design, exact power demand, and full deployment schedule. Now let’s transition to slide 15, where we’ll dive into our second upstream application, digital valuation. This groundbreaking use case sets a new standard in the oil and gas industry, delivering unprecedented transparency and minimizing enterprise risk for producing wells like never before through real-time digital twinning of the custody transfer process. By monitoring hydrocarbon quality and composition in real time, we have unlocked a new market for the industry and for Flotek. On October twenty-ninth, two thousand and twenty-five, Flotek reported a historic milestone in natural gas measurement. The X-SPEC spectrometer became the first optical instrument to achieve the stringent reproducibility and repeatability requirements of the oil and gas industry standard for custody transfer, GPA 2172.

The X-SPEC measurement unit is designed to enable more accurate volume and compositional data, thereby delivering greater transparency for royalty owners, operators, and midstream companies than traditional methods. We believe the X-SPEC’s speed, accuracy, durability, and qualification under the rigorous measurement standards outlined in GPA 2172 will provide a significant advantage in discussions with prospective customers as we aggressively expand this manufacturing and field deployment. Since completing our X-SPEC pilot program in third quarter 2025, we exited the year with over $120,000 per month in recurring high margin revenue. Furthermore, 2026 is off to a great start with multiple opportunities on the horizon, each of which could more than double our deployed active X-SPEC units. Let’s move to our third upstream application, the VeriCal flare monitoring solution.

We continued to experience strong operational demand in the fourth quarter of 2025, with total flare monitoring revenue for the full year exceeding $2 million. As we proactively navigate the evolving regulatory landscape, particularly the EPA’s flare monitoring and methane emission standards, we are deepening strategic partnerships with leading operators and flare technology developers. This collaborative approach not only assures seamless compliance, but also delivers substantial operational efficiencies, meaningful methane reductions, and enhanced environmental performance for our clients. It’s clear that our transformational strategy to grow the data analytics segment through upstream applications is gaining traction.

We increased our upstream revenues from $2.1 million in 2024 to over $21 million in 2025, with gross profits expanding from $1.2 million in 2024 to $18.4 million in 2025. What is most important is what it means for our stakeholders and investors. Our DaaS driven strategy ensures predictable recurring revenue and cash flow, delivering stability and long term value. Our proprietary data technologies and superior measurement accuracy enable velocity and decision control that establish a high barrier to entry, secure client loyalty, and support our value-based service model. Finally, long term high margin subscriptions position Flotek for sustained growth and margin expansion, driving significant shareholder value over time.

Now lastly, looking at our chemistry technology segment continues to deliver robust performance driven by the differentiation of our prescriptive chemistry management services and our expanding international presence. Slide 18 highlights the resilient performance of our chemistry segments, which delivered a 25% increase in total revenue for full year 2025 compared to 2024, excluding OSP payment. Despite a 24% decline in the average North American frac count over the same period from 201 at year end in 2024 to 154 at year end in 2025, according to Primary Vision data. While we anticipate potential near term commodity price volatility, we see encouraging indicators for cautious optimism in the back half of 2026 and beyond.

We continue to closely monitor operational and supply chain risks for our international operations amid the ongoing conflicts in the Eastern Hemisphere. It’s evident that our chemistry team has executed our strategy flawlessly despite the near to medium term headwinds. While uncertainties around near term activity levels persist due to macro factors that could affect the completion chemistry market, we remain focused on defying these challenges, delivering differentiated chemistry and data services to provide our customers with industry leading returns on their investment. Looking ahead, I am more confident than ever in Flotek’s momentum and our ability to drive sustained, profitable growth as we execute our transformative corporate strategy. We are firmly positioning Flotek as a high growth technology leader in the energy and infrastructure sectors, accelerating innovation through the powerful integration of real time data analytics and advanced chemistry solutions tailored precisely to our customers’ evolving needs.

Now I’ll turn the call over to Bond to provide key financial highlights.

Vaughn Clement, Chief Financial Officer, Flotek Industries: Thanks, Ryan. Good morning, everybody. Our fourth quarter results cap an exceptional year in which we generated meaningful value for our shareholders. As highlighted in yesterday’s presentation on slide 7, we achieved several important milestones, including our highest quarterly revenue since 2017, driven in part by the largest quarterly contribution from ProFrac in the more than four-year history of our supply agreement, and the first quarter in which our data analytics segment surpassed $10 million in revenue. The continued expansion of data analytics revenue is translating directly into enhanced profitability. As Ryan noted, in the fourth quarter, DA accounted for 48% of total company gross profit, a significant increase from just 8% in the prior year period. Two really impressive metrics stand out as highlighted on slide 11.

One, our data analytics gross profit for 2025 totaled just over $18 million, which represents more than 2x the growth versus last year’s total data analytics revenues. Second, the data analytics revenue during the fourth quarter exceeded DA revenue for the entire year of 2024. Both of these metrics highlight the exceptional growth that we realized in 2025 from our DA segment. Regarding total company revenues during the quarter, they were up 33% from the year-ago quarter and benefited from a $22 million or approximately 80% increase in related party revenue as compared to the fourth quarter of last year. Approximately $15 million of the ProFrac revenue increase was chemistry related, while $6.7 million was associated with the PowerTech lease agreement.

External customer chemistry revenue declined 30% from the year ago quarter, due in large part to slowing activity levels in November and December. However, external chemistry revenues were still up an outstanding 26% for the full year versus 2024, despite the numerous headwinds in the upstream completion markets that Ryan touched upon earlier. Data Analytics had another solid quarter with product revenue and service revenue up significantly from the year ago quarter, driving the segment’s highest quarterly and annual revenue ever. Data Analytics segment revenue represented 15% of total company revenue in the fourth quarter, up from just 5% in the year ago quarter.

PowerTech revenues totaled $15.8 million during 2025, and as shown on slide 11, since closing the PowerTech acquisition in the second quarter, these assets have been a clear catalyst for margin and profitability expansion, driving improvements not only within the DA segment but also at the corporate level. As a reminder, based on the contractual terms of the lease agreement, PowerTech revenues in 2026 are expected to be north of $27 million or an approximate 70% increase from 2025. We continue to expect these assets to be a significant contributor to our 2026 results. Gross profit increased 24% and 52% respectively as compared to the year ago quarter and fiscal year.

Fourth quarter gross profit as a percentage of revenue totaled 22.5% and was impacted by a combination of product mix as well as the approximate $5 million sequential reduction related to the shortfall penalty, which is a byproduct of the huge quarter of revenue we achieved with ProFrac. SG&A expenses increased compared to the fourth quarter of last year, primarily reflecting higher personnel costs, including stock compensation, as well as elevated professional fees, a portion of which relate to the company’s first time integrated audit requirement. Importantly, as revenue scaled, G&A declined to 11% of revenue from 13% in the prior year quarter, demonstrating improving operating leverage and the efficiency of our cost structure as the business grows.

Net income for the quarter totaled $3 million or $0.08 per diluted share, compared to $4.4 million or $0.14 per diluted share in the prior year quarter. It’s worth pointing out that the current quarter net income and diluted earnings per share as compared to the year ago quarter, were impacted by higher depreciation and interest costs, which are primarily related to the PowerTech acquisition, as well as higher effective tax rate driven by non-cash adjustments related to the company’s valuation allowance on deferred tax assets. The effective tax rate for the fourth quarter was approximately 35%, compared to 7% in the year ago period. We do expect the effective tax rate to normalize closer to 21% going forward, and we do not expect to pay cash taxes over the next few years other than minor amounts related to state income taxes.

Earnings per share for the 2025 periods as compared to the year ago periods also included a higher share count as a result of the 6 million share warrant issued in connection with the PowerTech acquisition. Although the warrant has not been exercised, the shares have been included in both basic and diluted share counts since the acquisition closed in the second quarter. As noted in yesterday’s release, as of the end of 2025, we elected to change our calculation of adjusted EBITDA to better align with the SEC’s guidance on non-GAAP financial metrics. What this means is that for external reporting purposes, we will no longer add back non-cash amortization of contract assets to our adjusted EBITDA. All adjusted EBITDA references in the earnings release reflect the revised computational methodology.

To compute adjusted EBITDA consistent with our prior methodology for purposes of comparison to our original adjusted EBITDA guidance, simply add the non-cash amortization of contract assets as disclosed in the press release to the revised adjusted EBITDA balance as shown. That math suggests that adjusted EBITDA for the fourth quarter of 2025 under our previous methodology was approximately $10.1 million. Using the revised calculation, adjusted EBITDA was up 40% versus the year ago quarter and grew 123% for the full year. Using either methodology, we were near the top end of the original or revised methodology guidance range on adjusted EBITDA. Wrapping up my comments, touching briefly on the balance sheet, we ended the year with $5.7 million in cash and $3.3 million drawn on our ABL.

You’ll note that total assets increased to just over $220 million at year-end, primarily as a result of the release of the valuation allowance, allowing us to reflect our deferred tax assets on the balance sheet. With that, I’ll turn the call back to Ryan for closing remarks.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Thanks, Vaughn. Our 2025 results build upon our now multi-year track record of consistently posting improved financials as we successfully transform the organization to enter a new data-driven frontier. Our Data Analytics segment continues to deliver explosive growth with triple-digit revenue increases, expanding recurring revenue streams, and a robust multi-year backlog that provides strong visibility into future cash flows and margin expansion. Combined with our resilient prescriptive chemistry management services, Flotek’s ability to execute strategic wins, advance asset integrations, and differentiate on a technology and returns basis will enable further capture of market share and delivery of continued top and bottom line improvement. We remain fully committed to shaping the industry’s digitalized, sustainable future by leveraging chemistry as the common value creation platform, unlocking higher returns for our customers, and generating compelling opportunities for shareholder value creation.

With our proven execution, expanding high margin capabilities, and clear pathway to scale growth, Flotek is poised for an exciting next phase of value delivery to our investors. Operator, we’re now ready to open the floor for questions.

Vaughn Clement, Chief Financial Officer, Flotek Industries: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. If you wish to cancel your request, please press the star followed by the two. If you’re using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one should you wish to ask a question.

Operator/Jenny, Conference Call Operator: Your first question is from Jeff Grampp from Northland Capital Markets. Your line is now open.

Jeff Grampp, Analyst, Northland Capital Markets: Good morning, guys.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Good morning, Jeff.

Jeff Grampp, Analyst, Northland Capital Markets: I was curious to start on the power services side, and congrats on the recent contract win there. Outside of that opportunity, can you just touch right on the current pipeline of opportunities that you guys are working through? Just kind of curious at the maturity level of those conversations, what stage we’re at and how you’re kind of viewing other opportunities potentially going into the fold here for the rest of the year. Thanks.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yeah. Jeff, I’d be glad to provide a little bit of color on that because we’re pretty excited about the advancements that we’ve made. I’ll kind of refer back to some of the comments I made on our end of quarter call. At Q3, we set up our PowerTech advancement of our business development units around three major steps. One is proving the validation of the measurement, then moving to levels of various control and integration, and then therefore, the final thing we do is full distribution and conditioning. I’m proud to say that we’ve moved into seven new customers successfully on the measurement side with executed POs and successful field trials, and now are moving into longer-term duration contracts and looking at placing our new advanced NGS or smart skids as well as ESD.

We have right now ongoing about six different operations in the field, and on top of our most recent announced win on the industrialized infrastructure component for utilities. It’s going really well. We’ve kind of brought forward what we’re looking at on capital spend at building new pieces of equipment to go out to location. From that standpoint, I think, you know, we’re still on track to hit that run rate of doubling the size of the fleet by the end of the year, if not maybe a little bit sooner on those opportunities.

I think that, you know, the unique capabilities of our technology in some of these harsh conditions is opening up some unique pathways for us to hit some of these really stranded, you know, disaster relief power locations. That’s been an interesting opportunity for us to unlock here at Flotek.

Jeff Grampp, Analyst, Northland Capital Markets: Great. I appreciate that. On a related question, what the business model or kind of contract approach, if you will, on this utility infrastructure deal, do you guys view that as kind of a one-off specific to this customer need? Or is that something you guys view as more repeatable for some of the other opportunities that you’re discussing with customers?

Ryan Ezell, Chief Executive Officer, Flotek Industries: No, I believe it’s 100% repeatable, Jeff. I think that, you know, where our wheelhouse or strength is the monitoring, conditioning, and the setting up of the power generation equipment to be not only successful but operate safely. The fact that we can do this in some of the harshest conditions on the planet, for field gas, no matter isolation or, you know, how we look at it with the field gas, is that this allows us to work with some of the larger suppliers of power to pull them through and jointly with what we do and work alongside of them and provide this power. I think there’s gonna be a multitude of opportunities very similar to this.

We’re hoping that the development of working with some additional power providers opens up some additional opportunities for us inside the data center and some of the more established infrastructure components around AI. Right now, I would say that the horizon looks that direction. It’s worked to our liking so far, and we hope to have some more exciting updates on that as it progresses throughout Q1.

Jeff Grampp, Analyst, Northland Capital Markets: Sounds great, Ryan. I appreciate the details. I’ll turn it back.

Operator/Jenny, Conference Call Operator: Thank you. Your next question is from Rob Brown from Lake Street Capital Markets. Your line is now open.

Rob Brown, Analyst, Lake Street Capital Markets: Good morning. Congratulations on all the progress. On the power services contract or the PowerTech contract, could you kinda clarify how that contract works? I think you said initial six-month term, and then options beyond that, and I think you quoted a kind of $1 million per megawatt. Just a sense of how that revenue flows and kind of the timing of how you expect that to flow in.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yeah. I’ll tell you, we’re gonna be probably providing some, you know, continuous updates on this. There’s like a lot of these remote power gen processes. Kinda we’re looking at a little bit of a on a conservative ramp. Our team has been on location all week. We are expecting to start to see this revenue probably in the starting parts to middle part of Q2, which would be initial mobilization and setup. It’ll probably the power will probably be split over two locations. One is providing power to the current community and its infrastructure, and some of the services there in particular, like the hospitals and things. Then there’s a secondary location that will be powering additional housing that’ll be built to recover from what was destroyed.

It’ll kinda come in, I think, 2 phases. I think for us, we expect some of that to start the mobilization pieces and all go here in Q2. It start to build throughout the year. It does appear that on our initial assessment is that I think this will have a high probability of progressing past the 6 months just for the sheer fact it’ll take longer than that to build the temporary structures or houses. Plus, they’re looking at a full installation of an additional power plant at the end. We’re expecting this to get extended and be a good contract win for us.

The unique model is that we were initially approached because of our unique capabilities in terms of conditioning any types or variable types of gas so that they can provide safe fuel source for operational gensets. I think that allowed us to help go out and work with finding these power providers to bring and pull it through. I think we’ll see some similar model opportunities in these kind of disaster relief components. I don’t know how much that model works when we look at data centers, ’cause usually those are the big megawatt type installations. For these remote areas, it’s a favorable business model for us to help work with the power providers on doing that. The other side, we just be on the pure conditioning aspect.

Rob Brown, Analyst, Lake Street Capital Markets: Okay. Okay, got it. Just to clarify, I think you said the PowerTech contract that you had was $27 million in revenue. Did that include some of this, some of this new award, or would the new award be incremental to that?

Ryan Ezell, Chief Executive Officer, Flotek Industries: The new award is incremental. That is just the original work that we have on a dry lease program for 5 years, 27 million annually on those, plus an extension in year 6 at a market rate. The new industrial, or I should say utility services contract is a complete add-on on top of that.

Rob Brown, Analyst, Lake Street Capital Markets: Okay, great. Thank you. I’ll turn it over.

Operator/Jenny, Conference Call Operator: Thank you. Your next question is from Gerry Sweeney from ROTH Capital. Your line is now open.

Gerry Sweeney, Analyst, ROTH Capital: Good morning, Ryan, Vaughn. Mike, thanks for taking my call.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Hey, Gerry. How are you?

Gerry Sweeney, Analyst, ROTH Capital: I’m doing well, thanks. I wanted to touch upon an area that I think you mentioned in your prepared remarks, just your systems can communicate directly with the engines, and that I think it offers a unique ability to improve engine flow, efficiency, life of the engine. Can you, I think you’re working with some important engine and turbine manufacturers. Can you go into a little bit more detail of what’s happening on that front and how that opportunity could emerge a little bit further in 2026 and 2027?

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yeah. You know, Gerry, this is a really kind of exciting platform for us when we look at applications inside of PowerTech. Without, you know, dropping any specific names, but I will say the majority of the OEMs that we’re working with are the nameplate companies that you see on the majority of these power gen or gensites, particularly on the reciprocating engine side. Essentially what we have is whether you’re using a Varex or an XSPCT unit, is that because most of these engines like to see a gas quality measurement once a day or once every few days just to see that if they’re in an operating realm where they set points for potential adjustment, our capabilities allow data to be fed directly to the OEM engine every 5 seconds.

This allows a closing in of set points, operational efficiency to where they can really get tuned and dialed in to the best operational parameters to not only improve fuel efficiencies, emission standards, but also reduce R&M costs for the engines. For us, you know, there’s potential for one unit to feed multiple engines, or we reduce it down to a simplified version of our XSPCT units per engine. It doesn’t even. You know, we will still be able to independently run our gas conditioning upstream, you know, up from that to where we condition the gas prior to coming to the engine. We technically it’s a separate revenue stream.

We’ve got projects with 4 different OEMs on that at various levels. The longest standing one has been in the works in research for about 18 months, and it’s progressed pretty far down the road into advanced field trials, and we’re hoping to have a little bit more clarity on what a potential long-term relationship looks like there and what that may come back here in 2026. We referenced some of these in a recent social media post with some of the success of the testing here at Flotek. We’re excited about that. I do believe those will start to be monetized here probably by mid-year, if not the back half of the year as a potential addition onto a lot of these reciprocating engine operations.

Gerry Sweeney, Analyst, ROTH Capital: Is this a little bit different approach? I mean, you know, the power side, obviously, you know, you have data centers, fuel gas for frac fleets, et cetera. This almost sounds as though this is purely. I think the ones I just mentioned were protect the engine, different quality gas. This is more pure, efficiency opportunities for the engines and improves.

Ryan Ezell, Chief Executive Officer, Flotek Industries: And-

Gerry Sweeney, Analyst, ROTH Capital: And-

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yeah.

Gerry Sweeney, Analyst, ROTH Capital: Yeah. Sorry.

Ryan Ezell, Chief Executive Officer, Flotek Industries: You’re 100% correct. The value proposition is there. There’s what the NGS, ESDs, and NGSD do on the broad variety of conditioning. You know, horrible gas into much better operational parameters. Then there’s what these individual units do per engine in optimizing timing, firing sequence, fuel mixture, and everything to work them at their optimum rate. You know, minimize derating or different components there. You know, help them in terms of the potential to reduce R&M maintenance throughout the year.

Gerry Sweeney, Analyst, ROTH Capital: Got it. Switching gears, you’re starting to highlight opportunities that you have in the field or deployments. At some point, would you be able to break out or tell us how many data analytic units you have in the field for tracking purposes? Or would this ever occur, or is that asking too much? It could be asking too much.

Ryan Ezell, Chief Executive Officer, Flotek Industries: I think it’s our intent, you know, probably where we are at the end of Q1, we’re gonna come back with where we are updated on the total number of. When I look at PowerTech, I would say the number of types of skids that we have out and operating, and then also combined with where we’re doing measurements to improve distribution and PRV pressure reduction valve units, et cetera. We’ll start talking a little bit more about these growth numbers. What I would say is that, you know, if you look at what our initial contract we had with original PowerTech assets, we’re progressing nicely to get to that doubling of the fleet in 2025.

We’ll probably, as we start to initiate our guidance, like we traditionally do at the end of Q1, we’ll give an update on where that stands, so it’ll help you align the guidance on there.

Gerry Sweeney, Analyst, ROTH Capital: Got it. All righty. I appreciate it. Congrats on a good quarter two. Thank you.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yep. Thanks.

Operator/Jenny, Conference Call Operator: Thank you. Your next question is from Donald Crist from Johnson Rice. Your line is now open.

Donald Crist, Analyst, Johnson Rice: Morning, guys. Ryan, on that last point of the PowerTech units, just to be clear, I believe you bought 22 or so from ProFrac, but then they were delivering another 8. The doubling would be off that 30 number, right?

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yes. We actually had all 30 units by, I’m gonna say, November timeframe of Q4 is when we had taken them all in. So the number we are talking about, Don, is. So we have 30 individual units that make up what we call 15 pairs of operating assets. Our goal is to double that number based on the 30 or 15 pairs.

Donald Crist, Analyst, Johnson Rice: Okay. Yeah. Just to be clear.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yeah.

Donald Crist, Analyst, Johnson Rice: I wanted to touch more broadly on just the construction of whether it be, custody transfer units or, skids or the carts that you put out for the flares. Just how is all that going? I guess one for Bon, in addition to that, is how do we look at CapEx for this year? I’m guessing it won’t be that big, but just any kind of rough parameters would be helpful.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Well, I would tell you what I would say in terms of lead times here is that we the absorption of X-SPEC units and our newer technology that we call the 2C unit, which is a dual channel Varex, have been well received post the GPA 2172 passing of the standard. We’ve seen great progress. We sold out of the 2C units by February, and we’ve advanced capital builds on a multitude of those as well as X-SPEC units. We’ve advanced capital to those to start, really because we’re seeing some strong deployments. Where traditionally, Don, when we first had acquired or brought the data analytics division in, we were selling these things 1-2 off at a time. We’re now starting to receive POs of double-digit numbers at a time.

Some of the unique things about the way our operating with system Varex works, some of the advancements we made in the software really helps to integrate these units and show day-to-day, you know, within the hour value creation of those. We’re seeing significant adoption and absorption of those. I wouldn’t say we’re at a, we’re at a supply constraint yet, but what we are doing is we’re making aggressive steps to rapidly expand that ahead of what we were thinking by this time in the year. We’re allocating capital at Bond. I’ll let you kinda comment on that.

Vaughn Clement, Chief Financial Officer, Flotek Industries: Yeah. Don, I mean, certainly I think 2026 is gonna be the largest year of CapEx we’ve had in quite a long time. I think our CapEx in 2025 was somewhere around $2 million. You know, just rough numbers, we would expect CapEx for 2026 to be somewhere between $10 million and $15 million. Obviously from a funding perspective, we’ve got the OSP and then, as it relates to equipment financing, we’re evaluating options there as well.

Donald Crist, Analyst, Johnson Rice: Right. That OSP should more than double cover that $10 million-$15 million that you have to put out, right? That should all come in the first quarter.

Vaughn Clement, Chief Financial Officer, Flotek Industries: Well, it won’t double it. The OSP because remember, we had a $7 million offset related to the PowerTech transaction, which was effectively deferred consideration. When you look at what the net OSP is at the end of the year, it’s right at $20 million. It surely goes a long way and satisfies from a cash or equipment perspective.

Donald Crist, Analyst, Johnson Rice: Right. You’ll have cash flow through the year as well. Not a big deal there. Ryan, I did wanna ask, you know, obviously there’s a lot of impact in the Middle East right now, from what’s going on with the hostilities. You know, you spent a lot of time over there, and y’all sell a lot of chemicals into there. Just an update on how much product you have on the ground and the options of moving shipments, you know, rather than going through the Strait to other ports, maybe Egypt or something like that, and then shipping them in. Any kind of thoughts around that?

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yeah. What I’d say is I kind of stage these in pieces. Number one, the current operations have been going very well. We’ve had our operations teams on the ground, and we picked up, you know, some of that unconventional work that we had been speaking of, particularly in the Kingdom. It’s picked up and running very well, probably to the upper end of our expectations. And we’re seeing solid growth there.

Just as we’re starting to see that, as you can imagine, the supply constraints is in all the traditional sailing vessel methods that we would deliver, whether it coming from inside the GCC and/or us bringing other chemicals in, some of our specialty stuff, have been a bit strained, as of late, particularly, due to the Straits of Hormuz pressure, et cetera. We are identifying alternative pathways that will probably, in the near term, have a little bit of additional cost, Don, because they have to be touched twice. Again, our goal is to be a solid working partner for our customers there, and we’ve been kind of ahead of this, by about a, you know, technically probably a month or two because we were concerned that this might happen.

I do think right now our supply is relatively stable at this point. There’s no doubt that we’re gonna be all hands on deck, and we’re gonna utilize the multi-years of experience that we have in a global supply chain and, you know, our expertise of being on the ground there and from the past to understand about how we get there and level out. I do think we’re definitely using an alternative delivery method than the traditional sailing routes that we were doing, which will probably include a cross-country trucking methodology. We’ve done this before, Don, on some of the initial move out of there. We had some issues around COVID when we first sent chemicals in, so we’re familiar with this alternative pathway.

It’s just not the best on the margin profile, but we’ll make it work in the near term to make sure that we stay growing with that revenue opportunity.

Donald Crist, Analyst, Johnson Rice: Okay. Just to be clear, I mean, other than some excess shipping costs, activity is basically unchanged right now, right?

Yeah. We haven’t seen-

Things are still moving.

Ryan Ezell, Chief Executive Officer, Flotek Industries: We haven’t seen much disruption in KSA. We have seen a few things that we were doing on the data analytics side, some measurement installs in UAE, and a few of those get pushed back a few weeks just because of the location and different pieces. Right now, you know, we’re having calls. Leon and the team are having calls basically every morning, and we’re steadily running in KSA right now. Because the majority of this Jafurah field is used locally for energy inside the country. It’ll keep running pretty steady. Our bigger customers there. I say it’s business as usual, all things considered, with the instability, you know, to their neighboring countries, but they are full speed ahead right now.

Vaughn Clement, Chief Financial Officer, Flotek Industries: I’ll just say those, you know, we’ll caveat that a little bit. That’s based upon what we know today, Don.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yeah. I mean, it could change tonight, right?

Vaughn Clement, Chief Financial Officer, Flotek Industries: It could change if this thing expands or extends.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Right. Yeah, I get it. But yeah, that’s what I’m hearing too, is it’s pretty much business as usual unless you’re really on the coast, right? That’s about it. I appreciate the color, guys. I’ll turn it back.

Donald Crist, Analyst, Johnson Rice0: All right, man.

Operator/Jenny, Conference Call Operator: Thank you. Your next question is from Josh Jayne from Daniel Energy Partners. Your line is now open.

Josh Jayne, Analyst, Daniel Energy Partners: Good morning. Thanks for taking my questions. First one is just on the chemistry side. Obviously, commodity prices are volatile, but wherever oil settles out over the next few weeks, hopefully in the next few weeks, any thoughts on how operators are ultimately likely going to handle, sort of a higher commodity price deck than they were thinking coming into this year? I know you haven’t given guidance yet for the rest of the year, but I think the world was thinking sort of, flattish CapEx, and that’s what these guys have announced. Maybe just any insight. Are you seeing more demand for, chemistry heading into, you know, the back half of this year in 2026 than you might have been thinking, you know, 3 to 6 months ago? Maybe just some thoughts there.

Ryan Ezell, Chief Executive Officer, Flotek Industries: You know, Josh, that’s a great question, and probably as in-depth as I could maybe look into a hazy crystal ball, right. Let me talk about things that I do see in the industry. You know, I’ll talk about them a little bit in terms of when you look globally around, you’re gonna see we still see the potential for demand to increase in that medium to long term, if not a little bit sooner. You see that supply rebalance. What we are seeing is that there is definitely a reduction in this and whether there’s a decline curve contribution because you have such a large percentage of unconventionals contributing to that stack.

You’re also seeing a little bit of decline in reservoir quality, which would tell me what they’re focused on is getting the most out of what work they are doing, which means leaning in towards advanced technology, efficiency-creating technologies or stuff that improves overall performance. All those things lay into the wheelhouse of what we do well by providing real-time data measurements, making choices based off of that in our prescriptive engineering process with our PCM business. All those things work really well for what we wanna do. Not only that, when you look at product margin basis, they typically run at a little bit better margin for us, throughout the cycle piece in that.

I think the interesting part is there’s no doubt when you look at the products that we sold in Q4 of this year, we saw the frac fleet get to the lowest that it was since probably Q2 2021 coming out of COVID. We saw commodity prices around the same thing, but our revenue was eight times more than it was then, and we made significantly better gross profit. We’ve shown that resiliency through the cycle. What I believe is we’re gonna continue in this near term to see a little bit of softness in the demand for the chemistry parts.

I think we see that upside potential maybe in the back half of the year to start to answer some of the call here, and I think that’ll require some of the advanced technologies that Flotek is poised to position. Now, the level of that, Josh, that’s hard to say right now. I do see a little bit of silver lining in the back half of the year and as we look at 2027.

Vaughn Clement, Chief Financial Officer, Flotek Industries: Yeah. I’ll just add one thing, Josh. I think it’s gonna be interesting to see how producers react relative to the hedge market. I mean, obviously the curve’s still pretty backwardated, but I think just generally even looking out past the spike out to the latter months, those numbers are probably a good bit higher than what expectations were for oil coming into the year. So, you know, if operators have the opportunity and go ahead and lock in those prices over a longer term, I mean, obviously that underwrites higher CapEx.

Josh Jayne, Analyst, Daniel Energy Partners: For sure. I appreciate the color. Thanks for taking my question.

Operator/Jenny, Conference Call Operator: Thank you. Your next question is from Gowshihan Sriharan from Singular Research. Your line is now open.

Gowshihan Sriharan, Analyst, Singular Research: Good morning, gentlemen. Can you all hear me?

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yes.

Vaughn Clement, Chief Financial Officer, Flotek Industries: Yes, sir.

Gowshihan Sriharan, Analyst, Singular Research: All right. Congrats on a strong year and a continued execution. On your expected data analytics drive to be more than half of the company profitability, if we think about that qualitatively, how sensitive is that mixed target to the timing of a few large PowerTech wins? Or is that 50% threshold achieved even if a couple of projects slip right to the end of the calendar?

Vaughn Clement, Chief Financial Officer, Flotek Industries: Yeah. I mean, if you look at the fourth quarter, we were effectively there. We’re at 40% gross margins or gross profit from data analytics. Just thinking about how the PowerTech lease agreement, which we talked about, will be 70% higher in 2026 versus 2025 just due to longer duration for the full year versus a partial year last year, we feel extremely confident we’re gonna exceed 50% in 2026 on the DA side.

Operator/Jenny, Conference Call Operator: Thank you. There are no further questions at this time. I will now hand the call back over to Mike Critelli for the closing remarks.

Mike Critelli, Director of Finance and Investor Relations, Flotek Industries: Thanks, Jenny. Join us at some of our upcoming investor events on March 23rd and 24th. We will be at the 38th annual Roth Conference at Dana Point, California, taking one-on-one meetings with investors and participating in energy industry fireside chats. On May 26th to the 28th, you can catch us at the Louisiana Energy Conference, taking meetings and giving an investor presentation. For all other events and the latest info, look at the events section of our website.

Ryan Ezell, Chief Executive Officer, Flotek Industries: Yeah. We’d like to thank everyone for joining us today and stay with us as we continue on our convergence of real-time data and chemistry solutions. Thank you.

Operator/Jenny, Conference Call Operator: Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect your lines.