Flotek Industries Inc (FTK) 2026 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Flotek Industries Third Quarter 2026 Earnings Conference Call.

(Operator Instructions). I would now like to turn the conference over to Mike Critelli, VP Commercial and Investor Relations. Please go ahead.

Thank you, and good morning. We're thrilled to have you with us for Flotech's third quarter 2026 earnings conference call. Today, I'm joined by Ryan Ezell, Chief Executive Officer, and Bond Clement, Chief Financial Officer. We'll begin with prepared remarks on our operations and financial performance, followed by Q&A.

Yesterday, we released our third quarter results, updated full year guidance, and an updated investor presentation, all available on our Investor Relations website. This call is being webcast with a replay shortly afterward.

Please note that today's comments may include forward-looking statements. These are subject to risks and uncertainties that could cause actual results to differ materially from our projections. For a full discussion of risk factors, please review our earnings release and most recent SEC filings, as well as Slide 2 of our investor presentation. Please also refer to the reconciliations in our earnings release and investor presentation for non-GAAP measures.

With that, I will turn the call over to our CEO, Ryan Ezell.

Thank you, Mike, and good morning, everyone.

Appreciate your interest in Flotek and your participation today as we review our third quarter 2026 operational and financial results.

In the third quarter, Flotek's growth storyline continued through the execution of our corporate strategy and industry's adoption of our evolving portfolio of advanced technologies.

Driven by 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 industrialized pivot built on diverse, recurring revenue, higher-margin services, and proprietary technologies that create value for our customers and improve returns for our shareholders.

The strategic transition of the company into a data-as-a-service business model continues to gain momentum while expanding the total addressable market for the company.

As a result, Flotek's data analytics segment grew exponentially, while our differentiated chemistry technology segment outpaced the market and extended its international footprint 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 third quarter shown on slide 5 that Bam will discuss later in the call.

Company total revenue exceeded $114 million, more than doubling from the third quarter of 2025 and the highest quarterly revenue performance since 2014.

Data analytics revenue grew 104% from the third quarter of 2025. It's important to note that almost 80% of data analytics revenue is derived from data as a service offerings, making a milestone in the company's transformation.

Additionally.

The percentage of external customer revenue within data analytics grew 61%, up from 31% in the prior year quarter.

Chemistry technologies revenue increased 104% versus the prior year quarter, with international chemistry revenue reaching $28.4 million, representing 25% of total company revenue in the quarter.

Company gross profit climbed 54% versus the third quarter of 2025. And total company adjusted EBITDA grew 87% year-over-year, totaling $19.5 million.

The company updated its 2026 guidance with the new midpoint being 63% and 83% increases versus 2025 actuals on revenue and adjusted EBITDA respectively. This represents the third increase to 2026 guidance and builds upon a multi-year trend of growth as the company executes on its strategy-provide. Long-term resiliency and profitability as shown on slide 6.

And finally, in September, the company secured a $120 million senior secured term loan to fund the 2027 data analytics CapEx and strategic growth initiatives.

Most importantly, these results were achieved with zero lost time incidents in the field of operations.

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 continue to believe that the ongoing geopolitical unrest and the situation in the Middle East will have impactful and potentially long-term implications on global supply and energy security.

The industry continues to exhibit a shift in supply-side dynamics, thus recalibrating the risk profile of regions of supply while fundamentally establishing a higher baseline for energy security, driven by the almost 3 billion barrel production disruption and 1 billion barrel drawdown of global strategic reserves.

We expect increased investment in localized oil and gas developments, while geographies that do not possess resources look to rapidly diversify energy security exposure.

All of these factors point towards a stronger commodity pricing environment for increased upstream activities for an extended duration.

Layering in the expanding power demand driven by AI. Data centers and industrial reshoring combined with the reliability issues of an aging transmission infrastructure, the expectations for tailwinds within the energy sector further strengthen.

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 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 electrical reliability services that improve operational uptown and overall efficiency.

Transitioning from the micro view, let's dive into the details starting with slide eight.

I want to spotlight the transformational growth in our data analytics segment. We saw total segment revenues up 104% year-over-year and third quarter 2026 service revenues exceeding total segment revenues from the year-ago quarter.

More importantly, external customer revenue increased to $11 million in the third quarter 2026 versus only $2.8 million in the third quarter 2025.

This is an almost 300% increase as the customer base continues to diversify.

This strong growth is powered by our flagship upstream technologies, power services and digital valuation, both of which are generating significant contracted wins and a robust recurring revenue backlog.

Highlighting these wins are shown on Slide ten.

By the first quarter of 2027, Flotek expects to add an additional 1 gigawatt of power support to the measurement or control by proprietary PWRtek platform, extending our services to supporting almost 6 gigawatts of behind-the-meter power. This further validates the demand and scalability of our innovative technologies in the rapidly growing behind-the-meter power space.

The successful utilization of our state-of-the-art smart SCIs to optimize gas quality with real-time blending and field gas continues to expand as new SCIs are bought online in the next several months.

In October, Flotek announced that the VeraCal had received EPA approval as an alternative to gas chromatography for measuring flare vent gas and the heating value in petroleum refineries or the MACT CC certifications. The milestone marked Veracal's second EPA alternative method approval while extending the company's addressable market for flare operations.

We estimate the refinery total addressable market relative to flare monitoring to be in excess of $40 million. Power Services continues to lead this growth, further reinforcing our shift toward high-margin recurring revenue streams.

Flotek's PWRtek platform has evolved from a novel analytical approach into a transformative solution for the energy and infrastructure sector.

What we began as advanced analytics has grown into a comprehensive end-to-end fuel management platform, redefining performance standards and operations within the sector.

Our expanding portfolio of patents and field-proven use cases position Flotek as a leader across the entire natural gas value chain.

When considering the velocity of measurement, we deliver unmatched real-time fuel monitoring, conditioning, blending, and engine control to optimize performance and safety for behind-the-meter distributed power operations, as shown on slide 11.

In addition, we are now realizing the impact of real-time measurements on the electrical reliability services, or ERS, value chain and expect to expand our technologies into additional ancillary service opportunities in the sector, such as emissions and noise reduction. Now let's transition to slide 13, 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 valuation.

We believe to XSPCT 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.

In the third quarter of 2026, we extended the total number of digital evaluation measurement devices deployed to over 135 as its evolution into enterprise-level value creation gains momentum and a diversified customer base.

It is clear that the execution of our transformational strategy to grow the data analytics segment, through the upstream applications, continues to gain momentum, but what is most important is what it means for stakeholders and investors.

That is first, our DaaS-driven strategy ensures predictable recurring revenue and cash flow, delivering stability and long-term value.

Second, 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. And third, long-term high-margin subscriptions position Flotek for sustained growth and margin expansion, driving significant shareholder value over time.

Now lastly, our chemistry technology segment continues to deliver robust performance, driven by the differentiation of our prescriptive chemistry management services, expanding international presence, and leveraging our real-time production surveillance services to enhance asset returns.

Slide 15 highlights the resilient performance of our Chemistry segment, which delivered a 104% increase in total revenue for the third quarter of 2026 compared to the third quarter of 2025 and was the strongest quarter of chemistry sales since 2014.

International revenue totaled $28.4 million in the third quarter of 2026 versus only $2.2 million in the third quarter of 2025, up almost 12x from the year-ago quarter and 168% sequentially.

Looking to 2027, we anticipate the strength of our international business to maintain pace in Saudi Arabia with potential upside in Latin America and UAE.

The combination of our PCM service, production surveillance, and power tech offer a unique and innovative entry point for growth that mimics our strategy in North America while providing substantial value creation for our customer base.

It's evident that our chemistry team has executed our strategy flawlessly as we move through the remainder of 2026.

Opportunities leveraging the convergence of prescriptive chemistry management and data services move to the forefront through high-margin services that improve operator ROI.

These advanced, DAS-driven services include Smart Chem-add units, real-time flowback monitoring, and the implementation of prescriptive geological targeting.

Looking ahead, I am more confident than ever in Flotech's momentum and our ability to drive sustained, profitable growth as we execute our transformative corporate strategy.

In yesterday's release, we announced a 2027 capital plan to support the continued development of our data analytics segment.

We expect to invest $15 million - $20 million to expand our fleet of gas conditioning and distribution equipment. Grow our inventory of measurement instruments and enhance our manufacturing capacity to support further segment scaling.

We anticipate the majority of next year's capital spend to be allocated to our next-generation distribution skids as pictured on Slide 10.

These assets combine the functionality of our measurement, conditioning and distribution into one platform. They should provide a competitive advantage as we continue to expand beyond oil and gas.

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 Bar to provide key financial highlights.

Thanks, Ryan. Good morning, everyone. It's great to be able to report another exceptional quarter as compared to both the prior year and sequentially.

As Ryan mentioned, third quarter revenue more than doubled from a year ago as we grew both chemistry and data analytics top-line by 104%. Adjusted EBITDA followed suit with third quarter results exceeding the year ago quarter by 87%. In conjunction with continued strong results, we provided updated guidance on total revenues and adjusted EBITDA in yesterday's release.

As shown on Slide 6, we are not expecting total revenue in the range of $382 million - $390 million. With adjusted EBITDA in the range of $59 million - $62 million.

As Ryan pointed out, the midpoint of these metrics implies very strong growth rates as compared to full-year 2025 revenue and adjusted EBITDA.

As a reminder, our adjusted EBITDA guidance does not add back non-cash amortization of contract assets, which is expected to total approximately $9.3 million during 2026.

Our updated guidance includes fourth quarter international chemistry revenue forecasted at similar levels to third quarter.

Consistent with comments made on our second quarter earnings call with respect to guidance, we are again assuming no fourth quarter revenue related to our power services contract in Montana in our guidance. We continue to evaluate options for additional work beyond the initial term, which expired in September.

Moving from guidance to quarterly results, we posted strong growth in revenue throughout 2026 as year-to-date revenues recorded through September have surpassed the full year 2025 revenue by nearly $50 million.

Quarter-over-quarter growth was driven by international and related-party chemistry sales as chemistry accounted for about 84% of the total revenue growth as compared to the third quarter of last year.

Our external chemistry sales totaled approximately $46 million and consisted of $17.5 million of domestic revenue and $28.4 million of international sales.

Domestic external chemistry sales approximated the prior year quarter, while international sales were up over $26 million from third quarter last year, driven by our ongoing work in the Middle East.

International chemistry revenue accounted for roughly 25% of total revenue in this quarter as compared to just 4% in the year-ago quarter. To provide some context on the rapid growth in international this year, international chemistry revenue totaled $1.9 million in the first quarter, $10.6 million during the second quarter, and now $28.4 million this quarter.

Year-to-date international chemistry revenues totaled $40.8 million as compared to just $10 million during the year-ago period.

As noted in our comments on guidance, we expect fourth quarter 2026 International Chemistry revenues to be fairly consistent with third quarter, which would bring the annual total for International Chemistry to approximately $70 million.

Related party chemistry revenues also had an impressive quarter as it increased 87% from the year-ago quarter, topping the $50 million quarterly mark for the first time in the history of our long-term chemistry supply agreement that we put in place in 2022.

Data analytics revenue posted another strong quarter with revenue of $18.1 million.

Year-to-date, our data analytics revenue was up 173% from prior year-to-date period as we continue to see strong gains in our upstream applications, including power services and digital evaluation that Ryan highlighted earlier.

Data analytics provided a solid contribution to gross profit during the quarter. Comprising only 16% of total quarterly revenue, the segment contributed 45% of company gross profit.

For the quarter, the segment generated gross margins of 68%. Third quarter 2026 gross profit as a percentage of revenue total of 24%, which was down from 32% in the year-ago quarter. It's important to note that third quarter 2025 results included an order shortfall payment of. With the record related party chemistry revenue posted this quarter, the order shortfall penalty fell to less than $1 million.

Because the order shortfall penalty carries no associated cost, it had a significant impact on margins in the year-ago quarter.

Excluding this shortfall penalty, the current quarter gross margin was approximately 400 basis points higher than last year, attributable to the 104% increase in data analytics revenue and higher margin chemistry sales.

G&A expenses increased 15% year-over-year, but excluding non-cash stock comp, G&A increased 10% versus the year-ago quarter.

As revenues continue to scale, we've seen meaningful leverage in our G&A expenses. Total G&A expense declined to 7% of revenue in the third quarter of this year compared to 13% of the year-ago quarter. This marks the lowest quarterly G&A as a percentage of revenue that we have achieved in at least the last decade.

Net income for the quarter was $13.3 million, or $0.34 on a diluted share basis compared to $20.3 million, or $0.53 per diluted share in the prior year quarter.

As a reminder, net income last year included a $12 million tax benefit associated with the partial release of valuation allowance on deferred tax assets. Excluding that tax benefit in the third quarter of last year and assuming an effective tax rate consistent with the current quarter. Earnings per share for the year ago quarter would have approximated approximately $0.17 per share versus the $0.34 per share where we came in for the third quarter of this year.

During September, we closed the new term loan with initial funding of $75 million. After repaying our previous term loan at closing, remaining net proceeds are expected to be used to fund our 2027 data analytics capital plan announced yesterday.

The capital investment plan is targeted to support the expansion of the data analytics segment. With investments focused on the priorities Ryan outlined earlier and also summarized in the release.

Just to close up, we have posted consistently strong results throughout 2026. Our recent term loan strengthens our liquidity and provides capital for our DEA expansion plans. As shown on Slide 17, we have maintained our focus on keeping relative leverage low.

Using the midpoint of our updated 2026 EBITDA guidance and net debt as of September 30, our leverage ratio is less than one times.

We believe this positions us to continue executing our growth initiatives while maintaining financial flexibility. With that, I'll turn it to Ryan for closing remarks.

Thanks, Bond.

Flotek's third-quarter results extend our multi-year track record of consistent improvement through the execution of our corporate strategy and the transformation of Flotek into a data-driven technology leader.

Both data analytics and chemistry technology segments delivered robust growth, highlighted by triple-digit increases in revenue and rapidly expanding upstream application portfolios.

Together, our synergistic segments position Flotek to gain additional market share and drive further top and bottom line improvement with substantial upside opportunities in our data-driven services.

We expect investments made through our 2027 capital plan will drive longer-term high-margin growth and should accelerate Flotek's transition to a data and technology-driven enterprise.

We remain committed to shaping the industry's digital and sustainable future by leveraging chemistry as our common value creation platform.

With our proven execution, expanding high-margin capabilities, and clear pathway to scale growth, Flotek is poised for the next phase of value creation for our investors.

Operator, we're ready to open the floor for questions.

Jeff Grant, Northland Capital Markets. (Operator Instructions).

Want to guess?

Hey, well, I wanted to start on slide 10 and some of the KPIs you gave on these power tech skids. Can you give us a sense of the end markets these 41 skids are being used today? I assume a lot of those are with ProFrac, but what are the others doing and what kind of structure or contracts are those generating revenue under today?

Yeah, so that's a great question. So look at the total 41 skids. We've got roughly 25 to 28 in service with ProFrac right now.

The other.

13 - 15 are done on a series of other ancillary services. We've got some that were in utilities, we've got some that are in power space, and we've got some that have transitioned to preliminary work on data centers. So we are definitely starting to see the tentacles move out and expand just from what we're doing traditional from the oil field power space where we initialize this footprint and it's moving into the diversified base.

Fantastic. Appreciate those details. And for my follow-up, on the 27th CapEx plan that you guys provided, could you walk us through the process of establishing that quantum? What kind of fleet is that going to build? And is that size informed by customer demand, by manufacturing capacity? Just trying to understand how you guys ultimately decided on the quantum of that program. Thanks.

Yeah, so let me kind of walk through. So where we talk about these 41 SKIs that we ended the quarter at, we've now taken acceptance on a multitude of other fleets. So we had an initial target of wanting to more than double the PWRtek fleet in 2026. We're going to far exceed that goal. And so our plans in the 2025 is to. Build a fleet that would match our potential wins that we're having built in our CRM system with probably about a 25% excess because we're seeing a lot of work come to us like, hey, you have it right now. And so we'll be bringing it forward.

I would say out of the current plan right now, 75% of it's already got a home that we've got for the 25 plan. And then we'll about 25% of it that we're looking for homes sometime throughout the year, if that makes sense.

Now, notice not all $15 to $20 million that are in Q1. They're kind of staggered throughout the years. We've got a few potential opportunities with the data centers that are coming online, some of the utility contracts and different pieces there. So plus some of the conversion of our current monitoring services over into full-time conditioning and or distribution. So it's a pretty exciting piece for us, when you look at.

The intensity and the design of some of the equipment, particularly the real-time blending skis that are doing some monumental things in the field right now.

Great. Push those details around. I will pop back in queue.

Rob Brown, Lake Street Capital Markets. (operator Instructions).

Good morning.

Just wanted to touch base a little bit on the digital valuation.

Growth there, strong growth, 235 units. How do you see that market developing into 27 and what are sort of the customer interest opportunities that are developing there?

Rob, this is actually, the time you spent talking to me, this is probably one of our most exciting when you look at long-term development and long-term statements of the organization.

What started out with us just trying to understand the value of gas when we first acquired this technology and what it's evolved to now has been quite amazing. And so we've had the movement of the instruments, number one, has been highly on recurring revenue, gas services on a rental basis.

Some of the growth has been moving directly to the wellhead of what we call production surveillance. So we are actually monitoring the initial flow out of the well. We're looking at chemistry that comes out, the initial production wedge, oil/gas ratio changes, total valuation of the inventory, et cetera. So it's a monumental breakthrough in some of the trials that we're seeing there.

We're seeing phenomenal uptake in what I say gathering locations, we're actually looking at true.

Transfer components in digital valuation, and the other one is looking at kind of a modified look at RVP measurements on volume expansion, volume blending.

So it's kind of a very diverse and spread out growth component there. And if you look at the opportunities that we've got as sheer number on the size.

Of what it is. I mean, this could be a really profitable long-term investment for Flotek. And the enterprise value that it's creating for the EMP operators and administrative companies is unbelievable. So we're really excited about what's going on in digital evaluation. And if you remember, at the start of the year, we wanted to have 150.

Instruments roll out in 2026 and we surpassed the 135 mark in Q3 and they're getting bigger every quarter and we expect Q4 to be our biggest delivery of units, so we'll far exceed that 150- unit target for '26.

Hey Rob, just to give you a sense of scale of the growth in that particular application, digital valuation made-up only about 3% of second quarter DA revenue, for the third quarter it jumped up to 9%. So it's really gaining a lot of traction pretty quickly.

Okay, great. Excellent progress there. And then on the OEM kind of segment, how is that developing and what do you sort of see there in the next 12 -18 months?

Yeah, so it's to me that we're making consistent steady progress in line with our prior guidance on that. I think right now one of the primary.

Customers that we had are in final stages of what I call field acceptance testing and software integration.

We've also added another three customers that are looking at it for talking directly to their engines. So not only would you see our potential gas conditioning equipment or our power tech skids, but also mounting of our expect FG units directly on engines to further optimize.

Fuel efficiency and/or prevent derating issues. So a lot of good movement there.

We still kind of keep close to the chest on exactly who and what that is, but those things are running spot on track of where we want, and we've also been able to bring a couple of new customers on in that realm.

Yeah, thank you. I'll turn it over.

Gerry Sweeney, Roth Capital. (Operator Instructions).

Good morning, Mike Bond. Ryan, thanks for taking my call.

Hey, Gerry, how are you?

I'm doing well, thanks.

I wanted to maybe open up the aperture a little bit, take a little bit of a step back.

Obviously, on data analytics, but obviously you have a lot of shots on goal next year, power services, digital valuation.

Below that refining opportunities, the OEM engine opportunities, how do we look at those opportunities as we go into '27? How big of an opportunity are they maybe holistically and then into '27 and how much could they potentially move the needle?

It's a great question. I'm going to tiptoe around the line because we haven't issued our 2022 guidance yet.

But when you look at it holistically, let's talk about it as a group, when we started the digital transformation of the business, we only had about a $2.5 billion total addressable market, and that would have been back at the end of 2020 as we started 2021.

Where we sit today, our total addressable market between our advanced chemical technologies and our data analytics business is approaching $20 billion, and we're continuing to unlock additional value-add components around electrical reliability services on a data center and industrialized power platforms.

And so we've got significant runway.

I think there's, as you can imagine, there's significant higher percentage growth in the data services, particularly in the upstream and the power side of business than we would typically see in chemistry because chemistry is a much more mature business.

But when I look at '27, I do believe that our power services division.

Digital valuation and some of the ERS platforms will do the bulk of the heavy lift in growth.

And then when you look at when you combine chemistry in there, chemistry will have really strong sustained size in international business. And then I look for North American land to be flat to down in activity. So without getting into specific numbers, then we have an issue of guidance, I hope that gives a little bit of color on the opportunity size and where we think the bigger portion of the growth will come from as a percentage. Basis will be on the data analytics side.

Does pickup in CapEx spending or well, I was going to ask about this and hopefully it doesn't come across the wrong way, but you knew debt facility up in CapEx.

Was CapEx a limiting factor for data analytics growth in the short-term, and does this really start to accelerate it into next year?

I don't know that CapEx wasn't a limiting term for us in the near term because we were still -- a lot of these technologies are so new, you've got to realize they're not even two years old yet.

And it was more of an acceptance rate issue. What we were trying to do is, as you can imagine, in a startup business or a new scale business, when do you actually pour the fuel to the fire to get the growth? And what we're getting comfortable with is being able to address the wins we're getting, and then we're going a little bit in the excess to where we've got some call-off capital.

And when you consider the fact that we're going to spend close to $15 million in CapEx.

In 2026, and then we'll be another 15 to 20 next year. I think in the prior years leading up to that, we might have spent a couple of million in total in my first five years here. So a significant investment for us, but I don't think it's been a limiting piece right now.

We have seen some things, what we are as.

Investing in our manufacturing capacity so that we don't have those bottlenecks. That's been a big step that we're looking at '27, and we've got basically a stepwise plan in that, depending on what we do to address power tech skids and equipment there versus if we have OEM build opportunities for analyzers. So they're two different manufacturing platforms.

Got it. You mentioned the term acceptance, market acceptance, but.

The OEM, taking a step back, I think was Rob's question, was the OEM partnership or opportunity, however you want to phrase it, but what does final field acceptance mean? I mean, is that the last hurdle? If it passes that, do you get into nitty gritty in terms of talking economics or just curious as to what final field acceptance means in that process?

So our initial.

Potential partner that we're working with there, it went through an evolution where they started with the initial like verax box then moved to an XSPCT, and now we have the XSPCT FG as you can imagine a multi-million dollar piece of equipment They want a field acceptance system. They need so many thousand hours with that thing delivering consistent information within a specific accuracy ratio and more importantly. Was understanding the software components to make sure the logic transfers effectively. And so the measurement device has been very successful at the accuracy and velocity of measurement. And right now they are just fine tuning what I'd call the software components to it that would do it. Now, the great part about that is other OEM type customers that come on board.

It's kind of be like the fast follower component. We won't have all those growing pains that we did during the first unit. They'll move it straight into the FG model and the updated model capital in terms of the piece of equipment. Plus, they'll move into updated FG software modeling and chemometric studies that have been done. So they'll come on, orders of magnitude faster, if that makes sense.

Gotcha. Okay. Super helpful. I appreciate it. Thanks for taking my questions.

Absolutely.

Don Christ, Johnson Rice. (Operator Instructions).

What's going on, guys? Good morning. Ryan, I wanted to ask about the new EPA approval and refineries more generally.

I know you've been talking to the refiners for quite a while.

In switching loads over, making sure that diesel is in the diesel tank, et cetera.

But is this new EPA approval, does that kind of unleash further acceptance and allow for a lot more sensors to actually be deployed now versus before? Just kind of comments around where you're staying with the refineries today.

Yeah, so our initial flare business that we had, Don, was around Quad O b , Quad O c for flaring you would see in the field of operations on normal oil and gas wells. And then we've got to the point on the refinery side and let's say LNG trains, et cetera. Traditionally, our high velocity instruments have been used to basically serve as a insurance policy on the velocity at which a lot of the GCs were taking measurements, et cetera.

And so now that we've gotten, we have the original Quad O B emissions things, we've got the MACT CC certification and we've got the GPA 2172, we have every single certification and a full refinery to replace every GC on location now. And so not only.

Does it allow us to do the flares that you constantly burning on a petrochemical facility? And because we talk about there's probably 130, 150 facilities that we know of on the market right now. They don't have just one flare site. They have multiple locations. And then they have some of these facilities are running 75 -100 gas chromatography units at one time. So, we look at this number of plants, but you can imagine it's 100x that in terms of measurement points. Devices. So it's a pretty good unlocking piece because now, it's just to your point, they don't have to buy two pieces of equipment. They can buy one to do all of it. And so I do believe this is going to unlock a significant amount of value for us. And what's pretty interesting is now you're starting to see from the wellhead all the way there, we are now making measurements with.

The data analytics type of measurement, whether it be a Verax, an XSPCT, an XSPCT FG, a VeraCAL or whatever it is, all up and down the value chain, whether it's liquid or gas. And so these are some big steps that we're having. When you look at that, I think one of our initial slides here today shows that whole ecosystem. We are actively generating revenue in almost every measurement point now compared to where we just started in the midstream when we acquired JP3 back in 2020.

I appreciate that color, and it's going to be very exciting. On the chemical side, can you talk about South America, specifically Argentina?

I know it's things are really blowing and going down there. Do you have any traction down there, or some of your customers from the U.S. Kind of pulling you down there? Any comments around Argentina?

It's a comment of both, right? We have.

So we've got, we've been selling chemicals down there for quite a bit. Some of the individuals that we've been selling chemicals are inquiring about our data services. We've had questions in Venezuela, we've had questions in Argentina, we've had questions in Colombia.

And so we are moving down there. We haven't penetrated at the rate, obviously, if you go to the numbers of what we have in the Middle East, but that is an ongoing piece. We have a manufacturing.

Partner that we're working with down there that actually is already building equipment for us internationally and domestically. So we've been taking preliminary steps about how that works.

We're traditionally trying to keep services together between chemicals, data, et cetera, like what we've seen, how we started that business in North America, how we were able to penetrate the Middle East, and we'll look to do the same thing in Latin America, Dom.

I appreciate the color. I'll turn it back. Thanks, guys.

Josh Jane, Daniel Energy Partners. (Operator instructions).

Thanks for taking my questions. First one is following up on Don's a little bit just on the international chemistry side, which has continued to be pretty strong.

How much of your growth over the course of this year is market share versus, in your opinion, just chemistry being adopted in more wells? And if it's the latter, how much more runway is there internationally relative to the U.S., for example, for that business?

Yeah, so if you'll allow me, Josh, I'm on a great question. I'm going to kind of bifurcate those, right?

Let's talk on the international piece. International piece has 100% been mostly shared gain, because you look at we came in with accepted technology by Aramco's Technology Group, and then we moved into being one of the top.

Fluids provider in the Jafera unconventionals, right? So that's been a big spearhead there.

You look at some of our other what I call conventional simulation, asset simulation, completion of stuff in the UAE and those other ones, that is share maintenance and share growth.

You look at some of the chemicals that we're selling into Latin America now, I'm not the same size volume what's going in the KSA, but still that share gain.

Now transition, and I think there's quite a bit of run room there. There's a few long-term opportunities that we're bidding in the UAE right now.

There's additional work in stage volume in Saudi that we're looking at targeting and working on and then obviously significant growth potential in Latin America.

Now, we look more at the domestic business. I think it's interesting how we look at it. A lot of times we try to bifurcate which one we call external revenue and related party. In reality, those are a lot of times on the same location. So sometimes I feel partnered is in the total growth of the business, which has been substantial year over year. So you got to say we're taking total number of wells. We look into market share, but I do believe.

In all H1sty that we've been preaching for since you've been talking with me about the importance of choosing the right set of chemistry like what our PCM service does to minimize formation damage and optimize the output of the asset and we're combining that with our production surveillance technologies around with our data analytics and I believe that is being a differentiator being perceived as that now and traditionally when we go head to head at our PCM service versus. Other types of service out there, we come in a really good spot. There's no doubt that when you bid this on a commodity-for-commodity basis, we may or may not be that choice. But if you want the best return out of that asset, we definitely move to the tip of the spear for that.

And looking at, I don't know, it's hard to rate how. The growth will be in North America until we understand a little bit better how we finished Q4 and what we think the activity will be. And considering what happened yesterday with the government changes, everything will take place, you could see ramp-ups, you could see a headwind. So we'll give a little more color in that. But I definitely think it's a tale of two cities. International is taking share.

North America is a battle for a little bit of share, but more about technology adoption, if that makes sense.

That makes sense. Thanks for all that. And then as my follow-up, could you just speak to, I guess, over the course of what we've seen in 26, a lot of the people who've increased activities since the start of the year have been on the private side.

Could you just give any color, like I know you're not going to quantify thoughts on next year yet, but just has your customer base in the lower 48 evolved over the course of this year or are you seeing different penetration with sort of the larger integrated relative to the privates? Maybe you could just unpack that a little bit more and then I'll turn it back. Thanks.

Yeah, I think that the predominant thing, I say, Josh, has been not only apparent to me, but been a breath of fresh air, is there seems to be significant more capital discipline being shown by not only the EMP guys, but also the service companies.

And to me, this is making a little bit better long-term, healthier market in terms of how we holistically look at.

The drilling completion and turning wells on in North America.

I do believe that you've had a lot of companies that have been kind of on the forefront, whether you look at Oventive or Chevron or some of these that have been out there. They've invested a lot of money trying to understand whether you call it cubic analysis, spacing and well design, what's the appropriate chemistry for your target zone.

The impact of water damaging wells, infield wells versus the parent-child interactions, all these things are discussions that are significantly further along than what I was seeing back in 2020, in 2019. So to me, all of these are, advancements in the field, but I can tell you.

What it all relates to is we're getting more out of less in terms of there's less fleets active because they're more efficient. We're getting better productions at lower costs. We're doing all these types of things. So I think what will challenge that paradigm is who can maintain the quality of acreage. And as with Flotek being able to bring advanced technologies on understanding the quality of production and making real-time logic decisions on improving the chemistry throughout. I think that we will help kind of bridge that gap and produce Tier 1 economics out of Tier 2 acreage, which I think will be an extreme value proposition for us in the future.

But again, I think in my initial look right now, pre the election last night, I was thinking you see that kind of flat to whole pace in '27. We'll see how that plays out in the next couple of weeks as we get ready to release guidance here in Q1.

Thanks for taking my questions.

Tom Bishop, BI Research. (Operator Instructions).

Hi, good morning.

I apologize if you covered this, but I was interested in the utility side and if you could explain what happened with the Puerto Rico contract and assuming they still need the power, might the...

You resurface in solving that problem in the not-too-distant future.

Yeah, it's interesting for us because with that contract, both -- there were two primary bids and awards that took place inside Puerto Rico. One was for the Coastal Surf facility and one was the Aguri facility bid through a public tendering process. Both of those were awarded. Back at the end of '25, we got reevaluated this first part of '26.

When they were looking at starting initial mobilizations of those, we were asked to come in on the backside of those awards to help a technical aspect of it because they didn't have the infrastructure to move enough CNG. Through ISOs, and so they were going to try to combine CNG with LNG and some biogas inputs, and so our blended technology did a phenomenal job for that.

However, after they kicked off one of the initial consortiums, they didn't put up a performance bond.

And so the contract unwound and the conditioning pieces that we were tied to were related to that.

And so our contract that we had directly with PREPA was no longer active because the consortium wasn't moving forward.

And so for us, they are still in dire need for the power.

They are working at a power deficit in the country. There's 200,000 people a day without electricity.

They reach out to us on a regular basis asking us, however, there has to be some type of contractual construct, we can't just ship the assets down there and take that kind of risk on, especially considering the potential turmoil and what they've seen with their nationally run electricity groups, etc.

But for us, our big push initially was around almost like a humanitarian deal to come in and help with that.

And we would still be potentially open to do it, but it has to be a contractual construction pricing that makes sense going forward.

Jeff Grant, Northland Capital Markets. (Operator Instructions).

Hey guys, thanks for letting me back in.

Ryan, on this new NGD skid that kind of has all the bells and whistles, is that for a particular customer type or end market?

And is there kind of plans in place for those to be immediately deployed?

It kind of sounds like from our earlier conversation that these are kind of spoken for, but just wanted to kind of better understand if these are for a specific use case, customer end market, et cetera.

Yes, we have -- we should be taking delivery of four of them by the end of the year. Three of the four are already contracted and will go out upon completion of FAT testing.

And they are specifically designed to address a few issues, particularly around working specifically with turbines.

They're built towards also applications for data centers in that they are a one-stop shop piece of equipment.

And so they are answering some specific requirements to control pressure step down, reheating and control, et cetera, of the natural gas operations. But of the initial four that we'll get, three of them already called for, we're building an additional five in 2027. So we could build more, but right now we've got a pretty good line of sight on where all those are going.

Great, thanks, and if I can get one more in to be greedy on digital valuation, it seems like the use cases are evolving and expanding here from the original kind of custody transfer application.

Do you have a sense of like the incremental growth we've seen this year, maybe looking ahead, are the use cases.

How does that kind of pie chart look like in terms of where you're seeing the most accelerated adoption there? And also curious if pricing differs between application or if it's kind of, pretty similar across use cases. Thanks.

Well, as you can imagine, in areas where some other type of technology has been doing, let's say pure custody transfer, right, the pricing there is a little bit. I would have a little bit more of a ceiling on it because you still have a manual sampling and laboratory testing with GCs that can step in, right? So it has more of a fixed base. These other components we look at, we talk about production surveillance, the other allocation and... Production measurement pieces they're unlocking such a significant amount of value depending on the volume and rates and stuff that We are seeing I would say significant better overall pricing and we discussed because there's such a strong return on investment there's very little pushback on rental models versus selling a capital selling instrument like what you would inside of a refinery or flare.

Flare monitoring segment. And so there's no doubt that, again, as our premise has been, the further you move upstream, usually the better the pricing is and the higher degree of what I say ROI to the customer is, if that makes sense.

Fantastic. Sounds good. I appreciate it.

Thank you.

Michael Critelli (Operator Instructions).

Thank you all for joining today. Join us at some of our upcoming investor events tomorrow. We'll be at the Invest Houston Leadership Summit in Houston where Ryan will be speaking on November 10th and 11th at the Daniel Energy Partners Annual Permian Barbecue where we hope to win a couple awards for some of our barbecue dishes.

On November 17th and 19th, we'll be at the Roth Technology Conference in New York City. And on December 3rd, we'll be at the Daniel Energy Partners NASDAQ market site in New York City. And lastly, on December 9th and 12th at Roth Deer Valley in Park City, Utah.

For any other events and the latest info, go to our website and I'll turn it over to Ryan.

Yeah, thanks.

Thank you all of you again for joining us today, and we look forward to updating you on our progress and how Flotek is bringing technology to the forefront and the tip of the spirit going forward.

Thank you, guys.

(Operator Instructions).