Flotek (FTK) Q3 2026 Earnings Call Transcript

DATE

Wednesday, Nov. 4, 2026

CALL PARTICIPANTS

• VP Commercial and Investor Relations - Mike Critelli
• Chief Executive Officer - Ryan Gillis Ezell
• Chief Financial Officer - J. Bond Clement

TAKEAWAYS

• Revenue -- $114.4 million, representing a 104% increase year over year driven by triple-digit growth in both the chemistry and data analytics segments.
• Adjusted EBITDA -- $19.5 million, up 87% from $10.4 million in the third quarter of 2025 due to higher revenue volumes and G&A leverage.
• Net Income -- $13.3 million, or $0.34 per diluted share, compared to $20.4 million or $0.53 per diluted share in the prior year period, which had included a one-time tax benefit.
• Full-Year Revenue Guidance -- $382 million to $390 million, an increase from the previous range of $360 million to $370 million.
• Full-Year Adjusted EBITDA Guidance -- $59 million to $62 million, raised from the prior expectation of $50 million to $54 million.
• Data Analytics Revenue -- $18.1 million, growing 104% year over year with 80% of segment revenue now derived from Data-as-a-Service offerings.
• Chemistry Technologies Revenue -- $96.3 million, up 104% from the prior year quarter due to a significant expansion in international sales and related party activity.
• International Chemistry Revenue -- $28.4 million, increasing from $2.2 million last year and now accounting for 25% of total company revenue.
• Related Party Chemistry Revenue -- $50.3 million, up 87% year over year and the first time quarterly revenue under the long-term supply agreement exceeded $50 million.
• Data Analytics External Revenue -- $11 million, increasing approximately 300% from $2.8 million in the third quarter of 2025 as the customer base diversified.
• Data Analytics Gross Margin -- 68%, contributing 45% of total company gross profit despite representing only 16% of total revenue.
• Gross Profit Margin -- 24%, a decrease from 32% in the third quarter of 2025 primarily due to a $7.8 million reduction in order shortfall payments which carried no associated costs.
• G&A Expense -- $8.5 million, declining to 7% of revenue from 13% in the prior year quarter as the company realized operational leverage.
• 2027 Capital Expenditure Plan -- $15 million to $20 million, focused on expanding the fleet of gas conditioning equipment and enhancing manufacturing capacity.
• Digital Valuation Devices -- Over 135 total units deployed as of the end of the third quarter, with more than 35 units added during the three-month period.
• PowerTech Capacity -- Management expects to support almost 6 gigawatts of behind-the-meter power by the first quarter of 2027.
• Term Loan -- $120 million senior secured facility closed in September to fund the 2027 data analytics expansion and repay the previous loan.
• Leverage Ratio -- Less than 1x, based on the midpoint of 2026 Adjusted EBITDA guidance and net debt as of Sept. 30, 2026.
• Data Analytics Service Revenue -- $14.2 million, up 98% from $7.2 million in the prior year quarter.
• Data Analytics Product Revenue -- $3.9 million, up 128% from $1.7 million in the third quarter of 2025.

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RISKS

• Clement warned that guidance assumes no fourth-quarter revenue from the Montana power services contract because the initial agreement expired in Sept. 2026.
• Ezell noted that a contract in Puerto Rico with PREPA was no longer active because an initial consortium failed to put up a performance bond, causing the conditioning pieces of the project to unwind.

SUMMARY

Flotek Industries, Inc. (NYSE:FTK) reported financial results for the third quarter of 2026, highlighting a doubling of total revenue and an increase in full-year guidance. Management stated that the company is transitioning toward a Data-as-a-Service business model, with the Data Analytics segment providing nearly half of total gross profit. The company reported significant expansion in international chemistry markets, particularly in Saudi Arabia, while related party revenue from its supply agreement with ProFrac reached record levels. To support further scaling of its data offerings, the board approved a capital investment plan for 2027 funded by a new $120 million senior secured term loan.

• CEO Ezell stated, "The stratégic 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."
• The company received EPA approval for its VeraCal system as an alternative to gas chromatography for measuring flare vent gas in petroleum refineries, which management expects to unlock a total addressable market exceeding $40 million.
• Management indicated that approximately 75% of the 2027 capital plan is already tied to specific customer opportunities or wins.
• The company expects to take delivery of four next-generation distribution skids by the end of 2026, three of which are already under contract for use in turbine and data center applications.
• CFO Clement noted that excluding noncash stock compensation, G&A expenses increased 10% year over year while declining significantly as a percentage of total revenue.

INDUSTRY GLOSSARY

• Behind-the-meter: Energy generated and consumed on-site, not passing through a utility's electrical meter.
• DaaS: Data-as-a-Service, a business model where data is provided on demand to users regardless of geographic or organizational separation.
• GPA 72: A technical standard for the measurement of natural gas liquids.
• MATS CC: Mercury and Air Toxics Standards for Petroleum Refineries.
• PCM: Prescriptive Chemistry Management, a service involving tailored chemical applications to optimize hydrocarbon extraction.
• ProFrac: ProFrac Services LLC, a related party and major customer of Flotek under a long-term chemistry supply agreement.
• Quad Oa: EPA standards for volatile organic compound emissions in the oil and gas sector.
• VeraCal: A proprietary measurement system used for monitoring flare vent gas and net heating value.
• Xpect: A real-time digital valuation measurement technology for gas and liquids.

Full Conference Call Transcript

Operator: 1, Good morning, ladies and gentlemen, and to the Photoshop Industries Third Quarter 26 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. This call is being recorded on Wednesday, 11/04/2026. I would now like to turn the conference over to Mike Critelli, VP Commercial and Investor Relations. Please go ahead.

Mike Critelli: Thank you, and good morning. We are thrilled to have you with us for Flotek's third quarter 26 earnings conference call. Today, I am joined by Ryan Gillis Ezell, Chief Executive Officer; and J. Bond Clement, Chief Financial Officer. We will 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 site. 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 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, Ezell.

Ryan Gillis 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 the 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, Blotek 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 would like to touch on some key highlights for the third quarter shown on slide 5. That Bob 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 is important to note that almost 80% of data analytics revenues 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 2020 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 multiyear trend of growth as the company executes on its strategy to 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 0 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. that is recalibrating the risk profile of regional 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 points towards a stronger commodity pricing environment for increased upstream activity 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 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 operation performance and fuel efficiency. With multiyear waiting list for turbines and reciprocating engines, protecting these capital intensive investments is critical along with enabling electric reliability services that improve operational uptime and overall efficiency. Transitioning from the micro view, let's dive into the details starting with slide 8. 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 of 2026 versus only 2.8 million in the third quarter of 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 10.

By the first quarter 2027, FlowsTech expects to add an additional 1 gigawatt of power support to the measurement or control by proprietary PowerTech 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 Skids to optimize gas quality with real time blending and field gas continues to expand as new skids are brought 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 net heating value in petroleum refineries under the MATS CC certifications. The milestone marked the 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 PowerTech platform has evolved from a novel analytical approach into a transformative solution for the energy and infrastructure sector.

What 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 or 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 will dive into our second application, digital valuation. This groundbreaking use case set 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 the Xpect's speed, accuracy, durability, and qualification under the rigorous measurement standards outlined in GPA 72 will provide a significant advantage in discussions with prospective customers as we aggressively expand this manufacturing and field appointment. In the third quarter of 2026, we extended the total number of digital valuation measurement devices deployed to over 135 as this evolution into enterprise level value creation gains momentum and a diversified customer base. It is clear that the execution of our transformation to grow the data analytics segment, the upstream application continues to gain momentum, but what is most important what it means for stakeholders and investors.

Next 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 PowerTick 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 is 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 DaaS-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 Flotek'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 to $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 1 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 will turn the call over to Bond to provide key financial highlights.

J. Bond Clement: Thanks, Ryan. Good morning, everyone. it is 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 update and guidance on total revenues and adjusted EBITDA in yesterday's release.

As shown on slide 6, we are not expecting total revenue the range of $382 million to $390 million with adjusted EBITDA in the range of $59 million to $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 noncash 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 26 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 103% 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 segment contributed 45% of company gross profit. For the quarter, the segment generated gross margins of 68%.

Third quarter 26 gross profit as a percentage of revenue 24%, which was down from 32% in the year ago quarter. it is important to note that third quarter 25 results included an order shortfall payment of 8.7 million. 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 the 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 noncash stock comp, G&A increased 10% versus the year ago quarter. As revenues continue to scale, we have 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% in 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. Decade. Net income for the quarter was $13.3 million or $0.34 on a diluted share basis compared to $20.3 million or $5.03 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 a 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 $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 term loan with initial funding of 75 million After repaying our previous term loan and 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 DA 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 1x. We believe this positions us to continue executing our growth initiatives while maintaining financial flexibility. With that, I will turn it to Ryan for closing remarks.

Ryan Gillis Ezell: Thanks, Bond. Flotek's third quarter results extend our multiyear 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 leveraging chemistry as our common value creation platform. With our proven execution, expanding high margin capabilities, a clear pathway to scale growth, Flotek is poised for the next phase of value creation for our investors. Operator, we are ready to open the floor for questions.

Operator: Thank you. If you would like to withdraw your question, press 2. Your first question comes from Jeffrey Grampp from Northland Capital Markets. Please go ahead.

Ryan Gillis Ezell: Good morning, Jeff.

Geoff Graham: Hey. Well, I wanted to 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? Assume a lot of those are with ProFrac, but what are the others doing, and what are. What kind of structure or contracts are those generating revenue under today?

Ryan Gillis Ezell: Yeah. So that is a great question. So when we look at the total 41 skids, we have got rough roughly 25 to 28 in service with ProFrac right now. The other 13 to 15 are done on a series of other ancillary service. We have got some that were in utilities. We have got some that are in power space. And we have got some that have transitioned to preliminary work on, on data center. So we are definitely starting to see the tentacles move out and expand just from what we are doing traditional from the oilfield power space. We initialize this footprint and it is moving into the diversified base.

Geoff Graham: Fantastic. Appreciate those details. And for my follow-up, on the 2027 capex plan that you guys provided, Could you walk us through like the process of establishing that quantum? And what kind of fleet is that gonna 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.

Ryan Gillis Ezell: Yeah. Yeah. So let me kinda walk through. So where we talk about these 41 skids that we ended the quarter at, we have now taken acceptance on a multitude of other fleets. So we had an initial targets of wanting to more than double the PowerTech fleet in 2026. We are gonna far exceed that goal. And so our plans in the 2025 is to build a fleet that would match our potential wins that we are having built in our CRM system. With probably about a 25% excess because we are seeing a lot of work come to us like, hey. Do you have it right now?

And so we will be bringing forward I would say out of the current plan right now, 75% of us already got a hold. That we have got for the 25 plan. And then we will have about 25% of it that we are looking for homes sometime throughout the year, if that makes sense. Now notice all. Not all 15 to 20 million that are in Q1. They are kinda staggered throughout years. We have got a few potential opportunities with the data centers that are coming online, some other utility contracts, different pieces there. So plus, some of the conversion of our current monitoring services over into full time conditioning and or distribution.

So it is it is a pretty exciting piece for us. You know? When you look at the intensity and then the design some of the equipment, particularly the real-time blending skids that are. They are doing some monumental things in the field right now. Great. First, those details, Ryan. I will pop back in queue. Yep.

Operator: Your next question comes from Rob Brown from Lake Street Capital Markets. Please go ahead.

Rob Brown: Good morning. Just wanted to touch base a little bit on the digital valuation growth there, strong growth, 35 units. How do you see that market developing into 2027? And what are sort of the customer interest opportunities that are developing there?

Ryan Gillis Ezell: You know, Rob, this is this is actually know, the time you spent talking to me, this is probably 1 of our most exciting when you look at long term development and long term segments of the organization. You know, what started out with us just trying to understand the value of gas when we first acquired this technology, what it is evolved to now has been quite amazing. And so we have had the movement of the instruments. Number 1 has been highly on recurring revenue debt services on a rental basis. Some of the growth has been moving directly to the wellhead at what we call production surveillance.

So we are actually monitoring the initial flow out of the well. We are looking at chemistry that comes out, the initial production wedge, oil gas ratio changes, total valuation of the inventory, etcetera. So some monumental breakthrough in some of the trials that we are seeing there. We are seeing phenomenal uptake in when I say, gathering locations. We are actually looking at true custody transfer components in digital evaluation. And the other 1 is looking at kind of a mod. Look at RVP measurements on volume expansion, volume blending. So it is kind of a very diverse and spread out growth component there.

And if you look at the opportunities that we have got as your number on the size, of what it is. I mean, this could be, you know, a really profitable long term investment for Flotek. And the enterprise value that is creating for the E and P operators and the midstream companies is unbelievable. So we are really excited about, what. what is going on in digital valuation. And if you remember, at the start of the year, we wanted to have a 150 instruments roll out in 2026.

And we surpassed the 35 mark in Q3 And they are getting bigger every quarter, and we expect Q4 to be our biggest delivery of units, so we will far exceed that 150 unit target for 2026.

J. Bond Clement: 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 is really gaining a lot of traction pretty quickly.

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

Ryan Gillis Ezell: Yeah. So it is to me, that we are making consistent steady progress aligned with our prior guidance on that. I think right now, 1 of the primary customers that we had are in final stages of what I call field acceptance testing and software integration. We have also added another 3 customers that are looking at it for talking directly to their engine. So not only would you see our potential gas conditioning equipment or our power skids, but also mounting of our expect FG units directly on in just to further optimize fuel efficiency and or prevent derating issues. So a lot of good movement there.

You know, we still kinda 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 have also been able to bring a couple of new customers on in that realm. Yeah.

Rob Brown: Thank you. I will turn it over.

Operator: Your next question comes from Gerard Sweeney from ROTH Capital. Please go ahead.

Ryan Gillis Ezell: Good morning, Mike, Thanks for taking my call.

Gerard Sweeney: Hey, Gerard. How are you? I am doing well. Thanks.

Ryan Gillis Ezell: I wanted to maybe open up the aperture a little bit, take a little bit of step back. You know, obviously, on data analytics, but obviously, you got. You have a lot of shots on goal next year. Power service digital valuation, you know, below that refining opportunities, the OEM engine opportunities. Yeah. How do we look at those opportunities as we go into 2027? You know, how big of an opportunity are they in gen. You know, maybe holistically and then into 2027? And how much could they potentially move the needle? Know, that Better model looks like question. I am gonna well, I. it is it is a great question.

I want to tip to around the line because we have not issued our 2027 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. That would have been back at the 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 are continuing to unlock additional value add components around electrical route. Reliability services on a data center and industrialized power platforms and so it. We have got significant runway. I think there is.

As you can imagine, there is significant higher percentage growth in the data services, particularly in the upstream and the power side 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 lifting growth And then when you look at. You know, when you when you combine chemistry in there, chemistry will have really strong sustained size in international business. And then you know, I look for North American land to be flat to down in activity.

So without getting specific numbers being we have not issued guidance, 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.

Gerard Sweeney: Does this pickup in CapEx spending or well, I was gonna ask about this, and hopefully, it does not come across the wrong way. But you knew debt facility up in CapEx. Was the. Was that a. Was CapEx a limiting factor for data analytics growth in the short term? And does this really start to accelerate it into next year?

Ryan Gillis Ezell: I do not know that CapEx was a limiting term for us in this in the near term. Because we were still. A lot of these technologies are so new. You gotta realize they are not even 2 years old yet. And, you know, it was more of an acceptance rate issue We. What we were trying to do is, as you can imagine, a start-up business or a new scale business, when do you actually pour the fuel to the fire to get the growth?

And what we are getting comfortable with is being able to address the wins we are getting and then we are going a little bit in the excess to where we have got some call off call off capital. And when you consider the fact that we are gonna spend close to 15 million in CapEx in 2026, and there will be another 15 to 20 next year. I think in the prior years leading up to that, we might have spent a couple million in total in my first 5 years here. So a significant investment for us, but I do not think it is been a limiting piece right now. You know, we have seen some things.

What we are as pre investing in our manufacturing capacity so that we do not have those bottlenecks. that is been a big step that, we are looking at 2027 and we have 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 are 2 different manufacturing platforms.

Gerard Sweeney: Got it. You mentioned the term acceptance in market acceptance, the OEM taking a step back, I think it was Rob's question, was the OEM partnership or opportunity, however you wanna 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 is in the in that process.

Ryan Gillis Ezell: So our initial potential partner that we are working with there, it went through an evolution where they started with the artificial, like, barax box that moved to an expect, and now we have the expect f g As you can imagine, a multimillion dollar piece of equipment, they want a field ances test, and 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 would 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 you know, it is kind of be like the fast forward component. We will not have all those growing pains. That we did during the first unit. They will move it straight into the FG model and the updated model capital in terms of the piece of equipment. Plus they will move into the updated FG software modeling and chemometric studies have been done. So they will come on orders of magnitude faster, if that makes sense.

Gerard Sweeney: Gotcha. Okay. Super helpful. I appreciate it. Thanks for taking my question. Absolutely.

Operator: Your next question comes from Donald Crist from Johnson Rice. Please go ahead.

Donald Crist: what is going on, guys? Good morning. Ryan, I wanted to ask about the new EPA approval and refineries more generally. I know you have been talking to the refiners for quite a while. In switching loads over, you know, making sure that diesel is in the diesel tank, etcetera. But is this new EPA approval, does that kinda unleash further acceptance and allow for a lot more sensors to actually be deployed now versus before? Just kind of comments around where you stand with the refineries today.

Ryan Gillis Ezell: Yeah. So our initial our initial player business that we had, Donald, was around Quad Oa, Quad Oc. For flaring you would see in the field of operations on normal and gas wells. And then we have got to the point on the refinery side and let's say LNG trains, etcetera. 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, etcetera. So now we have gotten we have the original Quad Oa emissions thing is we have got the MATS CC certification. And we have got the GPA 72.

We have every single certification in a full refinery to replace every GC on location. Now. And so not only does it allow us to do the flares that you are constantly burning on a petrochemical, facility because we talk about this probably 130 to 150 facilities that we know of on the market right now. They do not have just 1 flare side. They have multiple locations And then they got. There. Some of these facilities are running 75 to a 100 gas chromatography units in at 1 time. So we look at this number of plants, but you can imagine it is a 100x that in terms of measurement points and devices.

So it is a pretty good unlocking piece because now it is just to your point, they do not have to buy 2 pieces of equipment. They can buy 1 to do all of it. And so I do believe this is gonna unlock a significant amount of value for us. And what is pretty interesting is now you are starting to see from the wellhead all the way through, we are now making measurements with the data and the next type of measurement, whether it be a VeraCal, an Xpect, an XpectFG, a VeraCal, or whatever it is, all of them down the value chain, whether it is liquid, or gas. And so this is a.

These are some big steps that we are having, you know, when you look at that think 1 of our initial slides here that 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 j p 3 back in 2020. I appreciate that color, and it is gonna be very exciting.

Donald Crist: On the chemical side, can you talk about South America, specifically Argentina, I know things are really blowing and going down there. Do you have any track down there? And are you. Or some of your customers from The US kinda pulling you down there? Any comments around Argentina?

Ryan Gillis Ezell: it is a comment of both. Right? We have so we have got we have been selling chemicals down there for quite a bit. Of the individuals that we have been selling chemicals are inquiring about our data services. We have had questions in Venezuela. We have had questions in Argentina. We have had questions in Colombia. And so we are-- we are moving down there. We have not penetrated at the rate, obviously, if you go to the numbers of what we have in The Middle East. But, yeah, that is an ongoing piece. We have a manufacturing partner that we are working with down there. That actually is already building equipment for us internationally and domestically.

So we have been taking preliminary steps about how that works. We are traditionally trying to keep services together between chemicals, data, etcetera, like what we have seen how we started that business in North America, how we were able to penetrate The Middle East, and we will we will look to do the same thing in Latin America, Dom.

Donald Crist: I appreciate the color. I will turn it back. Thanks, guys. Yep.

Operator: Your next question comes from Joshua Jayne from Daniel Energy Partners.

Josh Jain: Thanks for taking my questions. First 1 is following up on Donald'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 is the latter, how much more runway is there internationally relative to The US, for example, for that business?

Ryan Gillis Ezell: Yeah. So, if you allow me, Josh, it is a great question. And I am gonna kinda bifurcate those. Right? Let's talk on the international piece. International piece is a 100% been mostly share gain. Because you look at we came in with accepted technology by Aramco's technology group. And then we moved in to being 1 of the top fluids provider in the Jafurah unconventionals. Right? So that is been a big spearhead there. You look at some of our other, what I call conventional stimulation, acid stimulation, completion stuff in The UAE and those other ones, that is share maintenance and share growth.

You look at some of the chemicals that we are selling into Latin America, Now I am not the same size volume as what is going in the KSA, but still that share gain. Now transition. And I think there is quite a bit of run room there. We have. there is a few long term opportunities that we are bidding in The UAE right now. there is additional work in stage volume in Saudi. That we are, you know, 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 is you know, it is interesting how we look at it.

A lot of times, we try to bifurcate between what we call external revenue and related party In reality, those are a lot of times on the same location. So sometimes I feel it is partnered in the total growth of the business, which has been substantial year over year. So you gotta say we are taking total number of wells. We look into market share. But I do believe in all honesty, that we have been preaching for since you have 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 are combining that with our production surveillance technologies with our data analytics and I believe that is being a differentiator and being perceived as that now. And traditionally, when we go head to head, in our PCM service versus other types of service out there, we come in a really good spot. there is 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. So you know, and looking at.

I do not know. it is hard to rate you know, how the growth would be in North America till 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 know, you could see ramp ups. You could see a headwind. So we will we will give a little more color in that. But definitely think it is a tale of 2 cities. International's taking share. North America is a battle for a little bit of share, but more about technology adoption, if that makes sense.

Josh Jain: 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 have seen in 2026, a lot of the people who have increased activities since the start of the year have been on the private side. Could you just give any color, like, I know you are not gonna quantify, you know, 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 to the privates.

Maybe you could just unpack that a little bit more, and then I will turn it back. Thanks.

Ryan Gillis Ezell: Yeah. You know, I think that you know, the predominant thing I say, Josh, is 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 E and P guys, but also the service companies. And to me, this is this is making a little bit better long term healthier market in terms of how we holistically look at the drilling completion and turning a well online in North America.

I do believe that you have had a lot of companies that have been kinda on the forefront, whether you look at Ovintiv or Chevron or some of these that have been out there. They have invested a lot of money trying to understand whether you call it cubic analysis spacing, well design, what is the appropriate chemistry for your target zone, you know, 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 and 2019. So to me, all of these are you know, advancements in the field.

But I can tell you, what it all relates to is we are getting more out of less. In terms of there is less fleets active because they are more efficient. We are getting better productions at lower cost. We are 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 extreme value proposition for us in the future. But, again, I think, you know, my initial look right now pre the election last night, I was thinking, do you see that kinda flat to, you know, hold pacing in 2027. We will see how that plays out over the next couple weeks as we get ready to release guidance here in Q1.

Josh Jain: Thanks for taking my questions. Yep.

Operator: Your next question comes from Tom Bishop from BI Research. Please go ahead.

Tom Bishop: 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 you resurface in solving that problem in the not too distant future?

Ryan Gillis Ezell: Yeah. You know, it is interesting for us because with that contract, both. There were 2 primary bids and awards that took place inside Puerto Rico. 1 was for the coast of Surf facility and 1 was the Aguirre 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 2026 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 did not have the infrastructure to move enough CNG through ISOs, and so they were gonna try to combine CNG with LNG and some biogas inputs. And so our blend technology did a phenomenal job for that. However, you know, after they had kicked off, 1 of the initial consortiums They did not 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 was not moving forward. And so for us, they are still in dire need for the power They are working at a power deficit as a country. there is 200 thousand people a day without electricity. They reach out to us on a regular basis asking us. However, you know, there has to be some type of contractual construct. We cannot just ship you know, the assets down there and take that kind of risk on. Especially considering the potential turmoil and what they have seen with their nationally run, electricity groups, etcetera.

But, you know, for us, our big push initially was around almost like a human itarian deal to come in and help with that. And we are still. We would still be potentially open to do it, but it has to be a contractual construction pricing that makes, makes sense going forward.

Operator: Ladies and gentlemen, as a reminder, Your next question comes from Jeffrey Grampp from Northland Capital Markets. Please go ahead.

Geoff Graham: Hey, guys. Thanks for holding my back in. Ryan, on this new NGD skid that kinda has all the bells and whistles, is that for a particular customer type or end market And are. Is there kind of plans in place for those to be immediately deployed It kinda sounds like from our earlier conversation that these are kinda spoken for, but just wanted to kinda better understand if these are for a specific, use case, customer end market, etcetera.

Ryan Gillis Ezell: Yeah. So we have. We should be taking delivery of 4 of them by the end of the year. 3 of the 4 are already contracted. And will go out upon completion of FAT testing. And they are they are specifically designed to address a few issues, particularly around working specifically with turbines. They are built towards also applications for data centers. And that they are a 1 stop shop piece of equipment And so they are answering some specific requirements to control pressure step down, reheating and control, etcetera, of the natural gas operations.

But of the initial 4 that we will get, 3 of them already called for, we are building an additional 5 in 2 thousand and 2 thousand 27. So then we could bill more. You know? But right now, we. We have got a pretty good line of sight on where all those are going. Great.

Geoff Graham: Thanks. And if I can get 1 more in to be to be greedy on digital valuation. You know, 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 have seen this year maybe looking ahead Are the use cases How does that kind of pie chart look like in terms of where you are seeing the most accelerated adoption there? And also curious if pricing differs between application or if it is kind of you know, pretty similar across, across use cases. Thanks.

Ryan Gillis Ezell: 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. has 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, you know, the other allocation and production measurement pieces, they are unlocking such a significant amount of value depending on the volume and rates and stuff, that we are seeing I would say, significantly better overall pricing And we discussed.

Because there is such a strong return on investment there, there is very little pushback on rental models versus selling the capital, selling more like what you would inside of a refinery or flare monitoring segment. And so there is there is no doubt that the again, as our premise has been, the further you move upstream, usually, better the pricing is. And the higher degree of, what I say ROI to the customer is, if that makes sense. Fantastic.

Geoff Graham: Sounds good. I appreciate it. Thank you.

Operator: And there are no further questions at this time. I will turn the call back over to Mike Critelli for closing remarks.

Mike Critelli: Thank you all for joining today. Join us some of our upcoming investor events tomorrow. We will be at the Invest Houston Leadership Summit in Houston where Ryan will be speaking. On November 10 and 11 at the Daniel Energy Partners Annual Permian Barbecue where we hope to win a couple awards some of our barbecue dishes. On November 17 and 19, we will be at the ROTH Technology Conference in New York City. And on December 3, we will be at the Daniel Energy Partners NASDAQ market site. In New York City. Oh, and lastly, on December 9 and 12 at Rock Deer Valley in Park City, Utah.

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

Ryan Gillis Ezell: 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 spear going forward. Thank you, guys.

Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.

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