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Business Segments | 6 Months Ended
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Jun. 30, 2024
Segment Reporting [Abstract] |
Business Segments | NOTE 12. BUSINESS SEGMENTS We manage our business segments primarily on the type of product or services provided. We have three reportable segments which we operate within the United States of America: stimulation services, proppant production and manufacturing. Amounts in the other category reflect our business activities that are not separately reportable, which primarily includes Flotek for the periods presented. Intersegment transactions are intended to be at estimated market prices. Intersegment revenues for the proppant production segment were 23% and 27% for the three and six months ended June 30, 2024, compared with 31% and 32%, respectively, in the same periods last year. Intersegment revenues for the manufacturing segment were 74% and 76% for the three and six months ended June 30, 2024, compared with 73% and 88%, respectively, in the same periods last year. Revenues from external customers for the stimulation services segment are classified as service revenue on our unaudited condensed consolidated statements of operations. Revenues from external customers for the proppant production segment, the manufacturing segment, and our other business activities represent product sales for these businesses and are classified as such on our unaudited condensed consolidated statements of operations. Summarized financial information for our reportable segments is as follows:
|  | Stimulation Services |  |  | Proppant Production |  |  | Manufacturing |  |  | Other |  |  | Eliminations |  |  | Total |
Three Months Ended June 30, 2024: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External customers — services |  | $ | 492.9 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 492.9 |
External customers — product sales (1) |  |  | — |  |  |  | 53.7 |  |  |  | 14.6 |  |  |  | 18.2 |  |  |  | — |  |  |  | 86.5 |
Intercompany (2) |  |  | 12.7 |  |  |  | 15.8 |  |  |  | 41.3 |  |  |  | 29.4 |  |  |  | (99.2 | ) |  |  | — |
Total Revenue |  | $ | 505.6 |  |  | $ | 69.5 |  |  | $ | 55.9 |  |  | $ | 47.6 |  |  | $ | (99.2 | ) |  | $ | 579.4 |
Adjusted EBITDA (3) (4) |  | $ | 107.3 |  |  | $ | 25.7 |  |  | $ | 0.1 |  |  | $ | 4.4 |  |  | $ | (1.9 | ) |  | $ | 135.6 |
Depreciation, depletion and amortization |  |  | 77.6 |  |  |  | 21.6 |  |  |  | 3.8 |  |  |  | 0.7 |  |  |  | (0.3 | ) |  |  | 103.4 |
Investment in property, plant & equipment |  |  | 50.0 |  |  |  | 4.9 |  |  |  | 7.0 |  |  |  | — |  |  |  | — |  |  |  | 61.9 |
Three Months Ended June 30, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External customers — services |  | $ | 607.7 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 607.7 |
External customers — product sales (1) |  |  | — |  |  |  | 75.4 |  |  |  | 8.3 |  |  |  | 17.8 |  |  |  | — |  |  |  | 101.5 |
Intercompany (2) |  |  | 0.5 |  |  |  | 34.4 |  |  |  | 22.8 |  |  |  | 33.9 |  |  |  | (91.6 | ) |  |  | — |
Total Revenue |  | $ | 608.2 |  |  | $ | 109.8 |  |  | $ | 31.1 |  |  | $ | 51.7 |  |  | $ | (91.6 | ) |  | $ | 709.2 |
Adjusted EBITDA (3) (4) |  | $ | 122.9 |  |  | $ | 57.8 |  |  | $ | 3.1 |  |  | $ | (1.3 | ) |  | $ | — |  |  | $ | 182.5 |
Depreciation, depletion and amortization |  |  | 89.9 |  |  |  | 17.3 |  |  |  | 0.9 |  |  |  | 0.8 |  |  |  | — |  |  |  | 108.9 |
Investment in property, plant & equipment |  |  | 75.2 |  |  |  | 22.7 |  |  |  | 0.1 |  |  |  | 0.1 |  |  |  | — |  |  |  | 98.1 |
As of June 30, 2024: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 11.6 |  |  | $ | 6.2 |  |  | $ | 1.4 |  |  | $ | 4.8 |  |  | $ | — |  |  | $ | 24.0 |
Total current assets |  |  | 541.6 |  |  |  | 154.3 |  |  |  | 209.6 |  |  |  | 73.2 |  |  |  | (274.8 | ) |  |  | 703.9 |
Property, plant, and equipment, net |  |  | 926.4 |  |  |  | 842.6 |  |  |  | 82.5 |  |  |  | 16.6 |  |  |  | (1.4 | ) |  |  | 1,866.7 |
Total assets |  |  | 2,958.3 |  |  |  | 1,046.0 |  |  |  | 387.2 |  |  |  | 188.9 |  |  |  | (1,416.9 | ) |  |  | 3,163.5 |
Current portion of long-term debt |  |  | 82.9 |  |  |  | 84.1 |  |  |  | 1.5 |  |  |  | 5.9 |  |  |  | — |  |  |  | 174.4 |
Long-term debt |  |  | 695.4 |  |  |  | 306.4 |  |  |  | 22.9 |  |  |  | — |  |  |  | — |  |  |  | 1,024.7 |
Total liabilities |  |  | 1,853.7 |  |  |  | 196.3 |  |  |  | 299.2 |  |  |  | 49.8 |  |  |  | (507.6 | ) |  |  | 1,891.4 |
|  | Stimulation Services |  |  | Proppant Production |  |  | Manufacturing |  |  | Other |  |  | Eliminations |  |  | Total |
Six Months Ended June 30, 2024: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External customers — services |  | $ | 998.3 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 998.3 |
External customers — product sales (1) |  |  | — |  |  |  | 107.0 |  |  |  | 24.2 |  |  |  | 31.4 |  |  |  | — |  |  |  | 162.6 |
Intercompany (2) |  |  | 24.6 |  |  |  | 40.2 |  |  |  | 75.2 |  |  |  | 57.9 |  |  |  | (197.9 | ) |  |  | — |
Total Revenue |  | $ | 1,022.9 |  |  | $ | 147.2 |  |  | $ | 99.4 |  |  | $ | 89.3 |  |  | $ | (197.9 | ) |  | $ | 1,160.9 |
Adjusted EBITDA (3) (4) |  | $ | 232.3 |  |  | $ | 54.1 |  |  | $ | 4.5 |  |  | $ | 8.0 |  |  | $ | (3.6 | ) |  | $ | 295.3 |
Depreciation, depletion and amortization |  |  | 170.5 |  |  |  | 39.6 |  |  |  | 4.9 |  |  |  | 1.5 |  |  |  | (0.3 | ) |  |  | 216.2 |
Investment in property, plant & equipment |  |  | 102.7 |  |  |  | 11.3 |  |  |  | 7.6 |  |  |  | 0.2 |  |  |  | — |  |  |  | 121.8 |
Six Months Ended June 30, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
External customers — services |  | $ | 1,394.4 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,394.4 |
External customers — product sales (1) |  |  | — |  |  |  | 131.2 |  |  |  | 11.7 |  |  |  | 29.4 |  |  |  | — |  |  |  | 172.3 |
Intercompany (2) |  |  | 4.0 |  |  |  | 60.8 |  |  |  | 86.5 |  |  |  | 71.5 |  |  |  | (222.8 | ) |  |  | — |
Total Revenue |  | $ | 1,398.4 |  |  | $ | 192.0 |  |  | $ | 98.2 |  |  | $ | 100.9 |  |  | $ | (222.8 | ) |  | $ | 1,566.7 |
Adjusted EBITDA (3) (4) |  | $ | 328.6 |  |  | $ | 99.1 |  |  | $ | 11.1 |  |  | $ | (9.2 | ) |  | $ | — |  |  | $ | 429.6 |
Depreciation, depletion and amortization |  |  | 186.0 |  |  |  | 29.7 |  |  |  | 1.9 |  |  |  | 1.6 |  |  |  | — |  |  |  | 219.2 |
Investment in property, plant & equipment |  |  | 150.1 |  |  |  | 30.4 |  |  |  | 0.5 |  |  |  | 0.3 |  |  |  | — |  |  |  | 181.3 |
As of December 31, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1.3 |  |  | $ | 17.7 |  |  | $ | 0.4 |  |  | $ | 5.9 |  |  | $ | — |  |  | $ | 25.3 |
Total current assets |  |  | 445.8 |  |  |  | 181.2 |  |  |  | 164.7 |  |  |  | 70.6 |  |  |  | (224.2 | ) |  |  | 638.1 |
Property, plant, and equipment, net |  |  | 881.6 |  |  |  | 859.8 |  |  |  | 19.8 |  |  |  | 17.8 |  |  |  | — |  |  |  | 1,779.0 |
Total assets (5) |  |  | 2,483.9 |  |  |  | 1,160.1 |  |  |  | 243.9 |  |  |  | 188.7 |  |  |  | (1,005.9 | ) |  |  | 3,070.7 |
Current portion of long-term debt |  |  | 46.2 |  |  |  | 71.6 |  |  |  | 1.0 |  |  |  | 7.6 |  |  |  | — |  |  |  | 126.4 |
Long-term debt |  |  | 611.2 |  |  |  | 328.2 |  |  |  | 2.6 |  |  |  | 0.1 |  |  |  | — |  |  |  | 942.1 |
Total liabilities |  |  | 1,404.5 |  |  |  | 225.7 |  |  |  | 201.5 |  |  |  | 55.5 |  |  |  | (145.1 | ) |  |  | 1,742.1 |
(1) Our proppant production segment recognized noncash revenue associated with acquired contract liabilities of $10.9 million and $16.5 million for the three months ended June 30, 2024 and 2023, respectively, and $27.4 million and $24.6 million for the six months ended June 30, 2024 and 2023, respectively. Refer to Item 8 "Financial Statements and Supplementary Data" in our Annual Report for information about our acquired contract liabilities. (2) In our other business activities, Flotek recorded revenue of $8.4 million and $2.0 million for the three months ended June 30, 2024 and 2023, respectively, and $17.1 million and $2.0 million for the six months ended June 30, 2024 and 2023, respectively, related to contract shortfalls because the stimulation services segment did not purchase the minimum contractual commitment of chemistry products from Flotek. (3) We evaluate the performance of our segments based on Adjusted EBITDA. We define Adjusted EBITDA as our net income (loss) before (i) interest expense, net, (ii) income taxes, (iii) depreciation, depletion and amortization, (iv) (loss) gain on disposal of assets, net, (v) stock-based compensation, and (vi) other charges, such as certain credit losses, gain (loss) on extinguishment of debt, gain (loss) on investments, acquisition and integration expenses, litigation expenses and accruals for legal contingencies, acquisition earnout adjustments, severance charges, goodwill impairments, gains on insurance recoveries, and impairments of long-lived assets. (4) Adjusted EBITDA for the stimulation services segment included an intercompany supply commitment charge of $8.4 million and $2.0 million for the three months ended June 30, 2024 and 2023, respectively, and $17.1 million and $2.0 million for the six months ended June 30, 2024 and 2023, respectively, because this segment did not purchase the minimum contractual commitment of chemistry products from Flotek. (5) Total assets for the stimulation services segment includes our investment in BPC prior to acquisition, which was $23.4 million as of December 31, 2023. The gains and losses associated with this investment are not included in our segment profit measure of adjusted EBITDA. The following table reconciles Adjusted EBITDA for our reportable segments to net income:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Adjusted EBITDA of reportable segments |  | $ | 135.6 |  |  | $ | 182.5 |  |  | $ | 295.3 |  |  | $ | 429.6 |
Interest expense, net |  |  | (39.6 | ) |  |  | (41.0 | ) |  |  | (77.2 | ) |  |  | (75.9 | )
Depreciation, depletion and amortization |  |  | (103.4 | ) |  |  | (108.9 | ) |  |  | (216.2 | ) |  |  | (219.2 | )
Income tax benefit (expense) |  |  | 23.7 |  |  |  | (9.6 | ) |  |  | 23.4 |  |  |  | (16.3 | )
Gain (loss) on disposal of assets, net |  |  | (0.3 | ) |  |  | 0.5 |  |  |  | 1.1 |  |  |  | (1.0 | )
Gain (loss) on extinguishment of debt |  |  | — |  |  |  | — |  |  |  | (0.8 | ) |  |  | 4.1 |
Acquisition earnout adjustment |  |  | — |  |  |  | 3.6 |  |  |  | — |  |  |  | 6.6 |
Stock-based compensation |  |  | (2.9 | ) |  |  | (2.4 | ) |  |  | (5.0 | ) |  |  | (5.3 | )
Stock-based compensation related to deemed contributions |  |  | — |  |  |  | (7.4 | ) |  |  | — |  |  |  | (17.6 | )
Provision for credit losses, net of recoveries |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (0.1 | )
Severance charges |  |  | (1.1 | ) |  |  | — |  |  |  | (1.8 | ) |  |  | — |
Acquisition and integration costs |  |  | (2.9 | ) |  |  | (5.2 | ) |  |  | (3.1 | ) |  |  | (17.5 | )
Impairment of goodwill |  |  | (67.7 | ) |  |  | — |  |  |  | (67.7 | ) |  |  | — |
Gain on insurance recoveries |  |  | 3.2 |  |  |  | — |  |  |  | 3.2 |  |  |  | — |
Litigation expenses and accruals for legal contingencies |  |  | (9.2 | ) |  |  | (7.4 | ) |  |  | (14.0 | ) |  |  | (13.2 | )
Unrealized gain (loss) on investments, net |  |  | (1.0 | ) |  |  | (9.3 | ) |  |  | 0.2 |  |  |  | (19.0 | )
Net income |  | $ | (65.6 | ) |  | $ | (4.6 | ) |  | $ | (62.6 | ) |  | $ | 55.2 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 48 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482785/280-10-55-48 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards 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