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Edited Transcript of FTK earnings conference call or presentation 6-Mar-20 3:00pm GMT

Q4 2019 Flotek Industries Inc Earnings Call

HOUSTON Mar 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Flotek Industries Inc earnings conference call or presentation Friday, March 6, 2020 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Danielle Allen

Flotek Industries, Inc. - SVP of Global Communications & Technology Commercialization

* Elizabeth T. Wilkinson

Flotek Industries, Inc. - CFO

* John Willis Gibson

Flotek Industries, Inc. - Chairman of the Board, CEO & President

* Mark Andrew Lewis

Flotek Industries, Inc. - SVP of Global Sales & Business Development

* Nicholas J. Bigney

Flotek Industries, Inc. - Senior VP, General Counsel & Corporate Secretary

* Ryan Gillis Ezell

Flotek Industries, Inc. - SVP of Operations

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Conference Call Participants

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* Daniel Joseph Burke

Johnson Rice & Company, L.L.C., Research Division - Senior Analyst

* James G. Kennedy

Marathon Capital Management, LLC - President

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Presentation

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Operator [1]

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Greetings, and welcome to Flotek Industries Fourth Quarter and Full Year 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce Danielle Allen, Senior Vice President, Global Communications for Flotek. Thank you. You may begin.

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Danielle Allen, Flotek Industries, Inc. - SVP of Global Communications & Technology Commercialization [2]

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Thank you, and good morning, everyone. We appreciate your participation. Joining me today are John Gibson, Chairman, Chief Executive Officer and President; Ryan Ezell, Senior Vice President of Operations; Nick Bigney, Senior Vice President, General Counsel and Corporate Secretary; and Elizabeth Wilkinson, our Chief Financial Officer.

On today's call, we will first share prepared remarks concerning our business and results for the quarter and full year. Following that, we will answer any questions you may have. Yesterday, we released our earnings announcement for the fourth quarter and full year 2019, which is available on our website. Today's call is being webcast, and a replay will also be available on our website.

Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Also please refer to our reconciliations provided in our earnings press release as management may discuss non-GAAP metrics on this call.

So with that, I'll turn it over to John.

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [3]

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Thanks, Danielle. We appreciate everyone joining us for today's call. And before I begin my comments, given the importance of the topic, I'm going to turn it back to Danielle to update everyone on the process we have in place at Flotek related to the coronavirus. Danielle?

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Danielle Allen, Flotek Industries, Inc. - SVP of Global Communications & Technology Commercialization [4]

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Thank you. And as John said, we do recognize the importance of planning for potential scenarios and anticipated impacts related to coronavirus, and that's why we've developed a task force comprised of leaders across the company and also supported by input from key suppliers and customers. Following guidance from the CDC, the WHO, local health organizations, and OSHA, the task force has developed action plans to address related risks, and we continue to monitor this very dynamic situation. Back to you, John.

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [5]

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Thanks, Danielle. As she pointed out, we are leading an important effort to put people first in Flotek, and that includes our customers and our suppliers. We take ESG seriously and health of employees and suppliers are very important to us. That's great to be here. I'm very grateful for the warm welcome I've received from our customers, shareholders, supplier partners, employees and the Board. I'm humbled and thankful to all of our stakeholders, they have taken the time to share with me their perspectives on the strengths and opportunities at Flotek.

Since this is my first call with you, I want to let you know what you can expect to hear from me and the team on our quarterly calls. On this first call, I want you to get to know me a little bit better, my background and the road map I see going forward. In the future, you'll likely hear less from me and more from the leadership team of the company, and we're going to start introducing them to you today. What you'll not hear from me is promises around what I hope to achieve in the future. To be clear, I'm relentlessly focused on execution, and I intend to focus on what we have accomplished as a team thus far rather than promising things that we have not done yet.

Now as I've talked with our shareholders, one of the most common questions I hear is, why did you come to Flotek? I wanted to share my perspective with those whom I haven't had a chance to get to know you yet. First, I'll share a little bit about my background. For more than 25 years, my career has been focused on identifying and commercializing unique and disruptive technologies in the oil and gas sector. I came to Flotek from Tudor, Pickering, Holt, where I led and continue to act as a Senior Adviser to the Energy Technology team, which focuses on emerging oil and gas technologies. So a great team there at TPH. Prior to TPH, I was the President and CEO of Tervita, which is a major Canadian-based environmental and oilfield services company. Prior to that, President and CEO of Paradigm Geophysical, Landmark Graphics as well as President of Halliburton Energy Service Group. First 12 years of my career included various roles in Gulf Chevron in exploration, production research. So I've been on the producing side, I've been on the technology side, the oilfield service side, the environmental side. I've seen our industry full circle, and I'm excited about being in the chemistry, the specialty chemistry. So why I decided to come to Flotek? Well, I felt my skills throughout my career sort of matched Flotek situation. I've established a proven track record of solving complex challenges and building successful and sizable businesses, and many times the ground up or is a turnaround, and in each instance, this requires the development of a shared vision, supporting strategies and then solid execution. In addition, I'm financially motivated to see Flotek succeed. Prior to joining, I worked closely with the Board to establish a pay structure heavily equity weighted. As a result, I'm aligned with shareholders on wanting to see material stock price appreciation as we move forward. I'd also note that my pay structure where I do not earn any bonus in 2020 unless we achieve at least breakeven adjusted EBITDA on a full year basis. Bottom line, that would mean a nearly $35 million improvement year-over-year in adjusted EBITDA, reasonably easy to see what my motivation is in 2020. My first priority when joining Flotek was to identify additional opportunities for cost reduction. Working closely together, we've embarked on a journey to reduce all cost to accelerate our ability to regain profitability in 2020.

A prime example is the recent amendment of our terpene supply agreement with Florida Chemical Company highlighted in our recent 8-K. I will now have Ryan discuss the key provisions of the amended agreement, but the bottom line is that we will materially improve our cost and cash flow through the terms of the new and amended contract. Ryan?

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Ryan Gillis Ezell, Flotek Industries, Inc. - SVP of Operations [6]

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Thanks, John, and good morning to everyone. We're pleased with the modifications to the current terpene supply agreement. The amended contract represents a significant improvement of Flotek's strategic relationship with Florida Chemical Company and our ability to manage our inventory and ancillary costs. Let me recap the key provisions of the original agreement and the according consequences. Our original agreement required the purchase of approximately twice the value of terpene required to support our current business. This resulted in excess inventory and storage costs. The agreement also had an effective price that was greatly exceeded the market price. We work with FCC to align the agreement with our current business. In order to achieve alignment, we agreed on a reduction in the quantity of terpene we require to purchase from FCC by approximately 3/4 for 2020 and by approximately 1/2 in each of 2021, 2022 and 2023. And we also agreed to an all-in fixed price per pound for terpene in 2020, that is 45% below the price of the original agreement. To make the amended terms and conditions effective, Flotek made a onetime payment of $15.8 million to FCC. Including the payment, this effectively reduces our commitment to less than 50% of the original contract based on current market pricing.

In addition, the agreed price of volume reduction for the purchase of terpene in the amended contract for 2020 alone should substantially offset the onetime payment of $15.8 million cash made to FCC. I would also note that in years 2021, 2022 and 2023, the negotiated volume reduction of approximately 50% in each year should reduce our cash commitments proportionately. Bottom line, we are now in position to be more competitive in the market with regards to our procurement and customized chemical solutions portfolios, and this opens up opportunities to pursue new channels to market. Since joining Flotek at the end of August, we've been relentless in our pursuit to identify opportunities to reduce operational costs and create positive synergies. Value stream mapping and continuous improvement efforts have resulted in millions of dollars in annualized cost savings in the areas of strategic sourcing, logistics, field operations and facilities management. The amended terpene agreement represents another step forward in our commitment to get to positive profitability. With that, I'll turn it back over to John.

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [7]

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Thank you, Ryan. Modifying the terms of the terpene agreement clearly places us in a better position for improved financial results in 2020. However, we're not done yet. We've identified several opportunities aimed at rationalizing our office space without impacting our market presence. We intend to move out of our current headquarters and 2 satellite offices in the next quarter. This should result in a decrease in expense of millions of dollars over the remaining life of the leases. And in talking about that move, I have explained our staff that we're going to do it quickly. That includes, if we have to use concrete blocks and a few doors from Lowes in order to achieve the move in the most expeditious way. In addition, we also believe we can improve our risk mitigation as well as reducing our legal costs. And to discuss the opportunities we see on the legal side, I'm going to hand it off to our new General Counsel and a great new add to our team, Nick. Nick?

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Nicholas J. Bigney, Flotek Industries, Inc. - Senior VP, General Counsel & Corporate Secretary [8]

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Thanks, John, and good morning, everybody. I'm glad to be here as part of the team. While I only joined the company recently, I'm excited about the opportunities we have to improve our legal approach here at Flotek. We're focused on our corporate governance, our compliance programs and mitigating the legal risk that we have. And in particular, we're working to enhance all of our Board interactions, our international trade compliance, our export controls, HR-related policies and similar matters of the company. We believe that putting effort into these areas will reduce our ongoing legal exposure, especially in our international operations. We're also striving to bring down our outside legal spend. Historically, the legal cost of Flotek have been high, and we have an opportunity for some substantial reduction.

For example, we intend to utilize smaller reporting company rules for our SEC filings, which simplifies the process, and in addition, we're bringing more work in-house and only using outside advisers when necessary and cost-effective. While we're still working on identifying all opportunities, our goal is to bring our legal expenditures down to a level that is at or below what is expected for a company of our size. I look forward to working with the rest of the team to make a positive impact going forward. John?

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [9]

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Thanks, Nick. Really a pleasure to have Nick on board. Looking at the current environment for Flotek's products and services, it's clear we must grow our market share by demonstrating how and why our chemistry exceeds competitors and creating tangible returns for our customers in a very, very cost-conscious environment. I've also focused much of my attention on evaluating our sales effort, how we can more effectively engage with current and prospective clients. While there's a consensus there will be no further softening, that there will be -- excuse me, I wish it was no further. That's a misstatement. While there's consensus that we're going to see a lot additional softening in the U.S. onshore oil and gas market in 2020, we believe an increase in the adoption of specialty chemicals could more than offset the decrease in drilling and completions activity. Very few of the wells that are being completed actually use specialty chemicals. If we were to see a tremendous material reduction in the volume of drilling, it should not impact our ability to go out and make a difference on those wells that are being completed. Our key sales focus is growing market strategy by improving returns for our current customers, rebuilding relationships with past customers and identifying new customers that can benefit from our chemistry solutions.

Additionally, we're catalyzing focus on total cost of recovery per barrel oil equivalent rather than just the initial purchase cost as well as strengthening the publicly available evidence for the efficacy of using advanced CnF products to materially impact oil and gas recovery and profitability for operators. Now since joining the company in early January, I spent time with Mark Lewis, our Senior Vice President of Global Business Development and Sales. A member of his team is evaluating our market strategy and related efforts as well as making several sales calls with Mark. Our direct sales channel focus on customers, where we believe we have a high probability of creating improvement and their returns through technology is something that we want to continue to execute. We're targeting our efforts on those customers focused on achieving the highest return on capital rather than the lowest initial purchase cost per activity. We intend to maintain and extend our knowledge and evidence of chemistry's positive impact on well production, completion designs and spacing models. Therefore, this year, we are going to focus on analytics, both internally and externally, to include partnering with specific clients, in many cases, anonymously, that are willing to share the required data to validate publicly the increased long-term profitability of wells when using Flotek's proprietary chemistry, very common today for companies to make their data available anonymously, so that we can take advantage of big data analytics in order to understand the totality of trends and improved results.

We're also looking forward to utilizing third-party digital fluid flow modeling experts to provide production forecast for wells with and without treatment for use in discussions with customers about our products. In addition, we'll continue to fund R&D to sustain differentiation in our product and services. We believe that, that differentiation is going to determine the winners and losers in this market. Finally, instead of a formal Strategic Capital Committee in the company -- formal Strategic Capital Committee, the company will continue to evaluate alternatives with the Board of Directors for deploying the cash we have on hand.

Our current valuations for further capital deployment includes seeking growth opportunities that reduce our dependence on rig count, provide new product lines that create a greater amount of backlog and/or annually recurring revenue, maintain differentiation of our offering from competitors, enhance our capability to provide digital transformation of chemistry, drawing on my background at Landmark, Paradigm and TPH and strengthen our market share for our current product launch.

Bottom line, we believe that our cash position, our public equity, our North American presence, the fact we have no debt, continuous focus on cost reduction, our commitment to ESG make us very attractive. The absence of an IPO market has given us a portfolio of numerous opportunities, seeking liquidity. We're vetting those opportunities to select those providing the greatest long-term shareholder value. With that, I'm going to turn it over to Elizabeth to discuss our financial results. It's a good thing I'll turn it over -- I'm going to turn it over to Elizabeth. She is going to walk us through the financial results. Elizabeth?

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Elizabeth T. Wilkinson, Flotek Industries, Inc. - CFO [10]

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Thanks, John. Similar to the past few quarters, the financial tables in our press release present the operations of our CICT segment as a discontinued operation for all periods. As such, I will focus my discussion today on quarterly results for our continuing operations, which includes our energy business as well as our supporting research and innovation and corporate functions.

Looking at our financial results, revenue for the fourth quarter was $19.5 million compared to $21.9 million for the third quarter. ECT operating expenses were $42.6 million for the fourth quarter versus $23.7 million in the third quarter. Included in the fourth quarter was a $15.8 million loss on purchase commitments associated with the company's 2019 terpene supply agreement and the recording of an additional $4.4 million reserve related specifically to our terpene inventory balance as of December 31, 2019. As a result of the work done in 2019 to improve supply chain and operational efficiencies, together with our negotiation of the amendment to our terpene contract, we will be able to dynamically manage our inventory to lower levels going forward.

Corporate G&A increased to $9 million in the fourth quarter versus $5.7 million in the third quarter due to the severance of $3.7 million recorded in Q4, primarily related to the exit of our former CEO. Research and innovation costs decreased to $2.2 million from $2.3 million in the preceding quarter. At this point, going forward, we anticipate corporate G&A costs will average below $5 million per quarter and R&I costs to average approximately $2 million per quarter. We reported a loss from continuing operations of $37.1 million or a $0.64 loss per diluted share for the fourth quarter compared to a loss of $11.2 million or $0.19 loss per diluted share for the third quarter. As I mentioned earlier, significantly impacting the fourth quarter was the loss on the purchase commitment associated with the terpene supply agreement, the additional reserve taken against our year-end terpene inventory balance and total severance of $3.8 million.

Our adjusted EBITDA for the fourth quarter was a loss of $8.9 million compared to a loss of $8.1 million for the third quarter. The change in adjusted EBITDA is primarily a reflection of lower margin as a result of lower revenue. Please refer to our table in the release for more details on adjusted EBITDA. Turning to the balance sheet. As of December 31, we had cash and equivalents of $100.6 million, no debt outstanding and $9.9 million in escrowed funds still included on our balance sheet, reflecting the estimate of our claim to the remaining balance of the indemnity escrow related to the sale of Florida Chemical to Archer-Daniels-Midland or ADM. The $15.8 million loss on purchase commitments in Q4 and the $4.4 million reserve taken against the terpene balances as of 12/31 reflect our perspective that looking forward into the remaining term of our 2019 terpene supply agreement neither the price nor volume of the agreement aligned with our current plans to sell terpene in diverse formulations and in the raw form through potential new channels to market. Accordingly, we were able to record a loss on the contract commitment as it stood as of December 31, 2019, and reserve against a specific portion of our terpene product on hand at that date. As discussed by Ryan, last month, we paid $15.8 million to FCC to amend the terpene supply agreement. Also in February 2020, the independent third-party mutually engaged by ADM and Flotek to resolve our transaction post-closing working capital dispute awarded $4.1 million, the disputed amount, all in favor of ADM. As recorded -- as a recorded subsequent event, this amount net of tax is reflected as a loss in Q4 2019 discontinued operations.

Echoing John and Ryan's comments, in addition to setting ourselves up to materially reduce our inventory moving forward, over the past couple of months, we have identified additional opportunities to further improve our cost profile. These initiatives complement the approximately $30 million of annualized cost reductions across the business, which we implemented in 2019. We look forward to discussing our current efforts in more detail when we report first quarter results in a couple of months.

And with that, we will now open it up for questions. I would note that joining us for the Q&A session are Mark Lewis; and James Silas, Senior Vice President of Research and Innovation.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question today comes from Daniel Burke with Johnson Rice.

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Daniel Joseph Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [2]

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John, thinking about the top line, I appreciate the sort of upside adoption scenario for this year. But can you also talk maybe about just customer concentration risk? Does that pose any challenges to you guys as you look at your customer base in 2019 versus their proposed activity levels in 2020? And then if I could elicit it just because we are pretty deeply into Q1 '20 at this point, any thoughts on trends in top line in the very near-term here in Q1?

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [3]

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Okay. So such a thoughtful question. Daniel, give me just a second here. The first thing is, since joining, if we sort of think of it as a numerator and denominator, I've spent the majority of the first 60 days on the denominator, trying to get out what we think is maybe an estimated $15 million of additional cost in 2020, and that's been our focus. On the numerator, I have spent some time on the revenue side with Mark. And Q1, we were actually working a way. I don't want to give any guidance on that, but the customer concentration question is important. We do have some -- a few large customers that have been very loyal, and we're excited to be working with and we're expanding out beyond that. So Mark and I both are looking at getting a broader spectrum of customers. As I said before, not very -- many wells, I mean, I suspect it's single-digit percentage of completions actually use specialty chemicals. So our challenge is making sure that the whole of the specialty chemical business for completions increases, and then we want to get that market share. So I'm pretty confident about the numerator, but we're going to expand beyond just taking advantage of our chemicals. We have some infrastructure as well that we think is going to be very valuable to us in the year ahead. And so we're looking at -- there's nothing that we have that we won't try to create shareholder value with revenue. And so I know that the question will come around when do we see breakeven. And I can tell you, I don't want to give guidance on it, but assume I don't get a bonus until I get there. And I have every intention of getting a bonus for 2020. So at what date I'll get there on a full year basis is TBD.

Revenue side, we have some -- a lot of logistical problems that were solved in '19. Thanks to Ryan and the team there. And I think the sales team is really beginning to get focused and congeal around what the customer value proposition is, and so pretty excited about that. But give me until the end of Q1 and come back at the end of Q1, and I'll concentrate the whole of the call on revenue side of the equation, [that's a better call.]

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Daniel Joseph Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [4]

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I think that makes sense. And just a follow-up for one point of clarity. John, I think you said you're focused on an additional $15 million of cost savings in 2020. It seems self-evident, but I want to make sure that's the case. That would be incremental to the savings you'll achieve under the new terpene pricing arrangement. Is that right?

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [5]

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It included -- that included -- yes, I think, it's sort of the 3 buckets where I think we've got really good cost savings I can quantify is the terpene agreement. The reduction in external legal costs as a result of bringing on Nick and the office moves. Okay. Those are 3. And that does not mean we're done there. It just means that those 3 are the most material that we've identified in the first quarter.

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Daniel Joseph Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [6]

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Okay. You'll capture that 15% in 2020, that's not like an exit run rate. That's helpful. Okay.

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [7]

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Yes.

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Daniel Joseph Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [8]

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And then maybe 1 other one. When addressing the cash balance, you all spoke to a growth focus in terms of how to deploy that cash. Can you maybe -- it certainly makes sense that there'd be some interesting or attractive deal opportunities out there. But what size deal makes sense for the company? What's the right range of deal size do you think for you all to contemplate?

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [9]

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Well, another really good question. I think it's pretty easy for us to say that using a combination of cash and equity, that we could -- we believe we could do deals, given the really low multiples that could bring in revenues that range anywhere from, say, $15 million for higher multiple sector to as much as $200 million in the lower multiple sectors. So we're sort of vetting deals that range from at the low end $15 million to the high end a couple of hundred, that, we think, are things that we would be able to do.

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Operator [10]

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(Operator Instructions) The next question comes from Jim Kennedy with Marathon Capital.

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James G. Kennedy, Marathon Capital Management, LLC - President [11]

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John, this may be a question for Mark. But I'm just wondering, in the short time you've spent there, could you speak a little bit to kind of the sales force/go-to-market strategy. How you see that evolving over the course of this year in terms of the focus, possibly the number of people? How it may be a little different than it has been in the past? Can you speak to that sort of go-to-market strategy?

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [12]

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Let me give you a brief overview, then I'll turn it over to Mark. One thing that transpired was the company sort of moved from being mostly indirect to mostly direct in 2019. As we go forward, we're going to sell product. However, we sell product, which means that we're going to have a direct channel approach because we think that's important for a segment of customers. We're going to reintroduce an indirect sales channel approach. We think that is a great way to reach a large portion of the market, and particularly internationally in some regards, and we're working through that. And we're also contemplating, we'll call it, white labeling our products and letting other people sell our advanced products under their name. So if there's any way to sell products, you can assume that all of that is fair game for us today because we're interested in amplifying our sales. And we think all of those different methodologies can result in improved sales. And I had a chance to make a few calls with Mark. So Mark, you want to talk about the direct?

I mean what is your -- when you're meeting with customers, what's the real value proposition that you explain to people today?

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Mark Andrew Lewis, Flotek Industries, Inc. - SVP of Global Sales & Business Development [13]

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I think the real value proposition is improving the rate of return. A lot of our customers are clearly living within cash flow, limited on CapEx spend, very disciplined in terms of the CapEx that they invest. So we're very much focused on the outcomes of the customer. And a lot of our key technologies, particularly the CnF technology, that really shows incremental production in a number of cases in the market. So we think the value proposition is really, really strong. And our sales force is aligned to those outcomes of the client. We've retooled and rebuilt the entire sales team pretty much over the last 6 to 9 months. So we have a full complement of sales staff around the key basins. We're concentrated in Northeast and Midland, Denver, Dallas, Houston and Oklahoma. These folks are very professional, right? They're professional salespeople. They're chemists, chemical engineers, petroleum engineers, business graduates, all graduates and they focus on the outcome of the client. So we're very confident in the -- in our sales staff and their ability to deliver the right outcome for the customer.

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [14]

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One of the things we did too, Jim, is a lot of emphasis has been placed upon sales channel transition and new sales channel and give them a chance. And going forward, we're just not going to make any excuses using anything. So whatever happens, we're accountable for the results of the company. So I'm not going to talk about the sales channel and whether it's new or transitioning. We have an accountability to grow the revenue of the company, and we're going to focus on getting that done. And I think the team is already known for making sure that results are what we're focused on, not on excuses for why we missed.

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James G. Kennedy, Marathon Capital Management, LLC - President [15]

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Right. One further question. Relative to the terpene agreement or adjusted agreement. If you do have increased demand, and you do, let's say, white label a product and you end up with, hopefully, a good problem to have, where the demand is much, much higher a year from now than it is today, how does that tie back into the agreement in terms of your reduced commitment and pricing? How should we look at that in case demand does increase dramatically?

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [16]

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So the simplest answer is, all it did was cap our take-or-pay. And then anything we need above that, we can buy at market and we can buy it from whomever we find the best price. And so what we did is just reduce an obligation that's there to a level that matches what we believe the forecast for our -- demand of our product is this year. We hope that we're buying more from Florida Chemical. Later in the year, we've developed a great relationship. I'm very thankful to them for working with us to get this change so that it underpins a success for our company. But we can buy as much as we need.

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Operator [17]

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(Operator Instructions)

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [18]

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Looks like we're out of questions, operator.

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Operator [19]

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It does. So this will finish our question-and-answer session. I would now like to turn it over to John Gibson for any closing remarks.

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John Willis Gibson, Flotek Industries, Inc. - Chairman of the Board, CEO & President [20]

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Thank you so much. I just want to say thanks to everybody for joining us today. I'm looking here at all the people on the call and a lot of them are employees. And we've got an all-hands meeting here in just a little bit, and I'm excited to hear that our employees are listening in and want to know where the company is going. And we're going to talk to them in person in just a moment. I'm really happy to be here, and I look forward to working closely with the management and the employees as we focus on building a successful long-term business at Flotek and getting to that breakeven point as soon as we can. We appreciate the support of all our shareholders, and we're going to update everyone on our continued efforts at the end of Q1, and I hope we have some really good things to talk about them too. Thanks so much, and I appreciate it.

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Operator [21]

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This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.