- Second quarter revenue is a record high for the Company,
excluding discontinued operations, and increased 25%
year-over-year.
- Net income improved 9 times, or by $16.4
million, year-over-year.
- Net income per share attributable to TETRA stockholders of
$0.14 compares to $0.01 in the same quarter a year ago.
- Net cash provided by operating activities was $28.4 million while adjusted free cash flow was
$17.7 million.
- Adjusted EBITDA increased 93% year-over-year and 75%
quarter-over-quarter.
THE
WOODLANDS, Texas, July 31,
2023 /PRNewswire/ -- TETRA Technologies, Inc.
("TETRA" or the "Company") (NYSE:TTI) today announced second
quarter 2023 financial results. Brady
Murphy, TETRA President and Chief Executive Officer, stated,
"Our exceptionally strong second quarter results reflect our
employees delivering operational and financial excellence in our
core businesses while successfully executing on our strategy.
During a time when global E&P spending is still well below the
2014 peak, our second quarter results reflect the highest quarterly
revenue in the Company's history, excluding discontinued
operations. Net income was $18.2
million, an improvement of 9 times compared to $1.7 million in the same period last year.
Adjusted EBITDA of $36.0 million is
nearly double the $18.7 million in
the second quarter of last year and represents an increase of 75%
from the $20.6 million in the first
quarter of 2023. These operating results were achieved while
simultaneously advancing our efforts regarding evaluation and
development planning for bromine and lithium from our Smackover Arkansas brine leases and our
produced water for beneficial reuse technology. TETRA's current
business and future opportunities are exciting for all of us."
Brady Murphy further stated,
"Second quarter 2023 revenue increased 25% from the second quarter
of 2022 and increased 20% sequentially driven by the seasonality of
our industrial calcium chloride business in Northern Europe and strong offshore completion
fluids activity. Net income was $18.2 million, inclusive of $0.9 million of non-recurring credits, net
of charges, and compares to $1.7 million, inclusive of $4.9 million of non-recurring charges, in
the second quarter of 2022 and to $6.0 million in the first quarter of 2023,
inclusive of $2.0 million of
non-recurring credits, net of charges.
"The second quarter results reflect strong margins in our
industrial calcium chloride business, the benefit from margin
improvement initiatives in our Water & Flowback Services
segment plus higher margins in our offshore completion fluids
business as deep-water activity continues to ramp up. Our
Completion Fluids & Products vertically integrated business
model is performing at an exceptional level with high production
volumes in addition to the benefits of a strong supply chain. The
second quarter of 2023 included unrealized gains on investments of
$0.9 million. Excluding these
unrealized gains on investments, Adjusted EBITDA for the second
quarter of 2023 was $35.1 million (20% of revenue), and is the
highest Adjusted EBITDA, excluding unrealized gains or losses on
investments, since the third quarter of 2015.
"Second quarter cash flow from operating activities was
$28.4 million and compares to
$17.9 million in the second
quarter of 2022 and to $9.0 million in the first quarter of
2023. Adjusted free cash flow was $17.7 million in the second quarter of 2023
and compares to $6.4 million in
the second quarter of 2022 and to a use of cash of $3.7 million in the first quarter of 2023.
The high conversion of net income to cash flow from operating
activities and to adjusted free cash flow was achieved while
revenue was increasing 20% sequentially, reflecting the quality of
the incremental revenue and the Company's focus on managing working
capital. Working capital at the end of the second quarter was
$107 million, a slight improvement from the $109 million from the end of the first quarter
2023, despite the $29 million sequential revenue increase.
Working capital is defined as current assets, excluding cash and
restricted cash, less current liabilities.
"During the second quarter we achieved several company
highlights. Completion Fluids & Products division second
quarter 2023 revenue of $98 million increased 31% year-on-year
and 42% sequentially. Net income before taxes for the quarter
was $32.0 million (32.5% of
revenue) and compares to $15.3 million (20.4% of revenue) in the
second quarter of 2022 and to $18.4 million (26.7% of revenue) in the
first quarter of 2023. Adjusted EBITDA of $31.8 million, without the benefit of TETRA
CS Neptune® fluids projects, was the highest since the
third quarter of 2015 and reflects an increase of 80% year-on-year
yielding a margin fall-through of 60% on the incremental revenue.
Adjusted EBITDA increased 77% sequentially and adjusted EBITDA
margins improved from 26.1% in the first quarter to 32.4% in the
second quarter. The second quarter included $750,000 in net unrealized gains from investments
compared to $20,000 in net unrealized
gains from investments in the first quarter of 2023. Excluding
unrealized gains from investments for both periods, Adjusted EBITDA
margins increased sequentially by 570 basis points.
"Our industrial calcium chloride business achieved its strongest
quarter in our history reflecting the seasonal peak in Europe, high production volumes, and supply
chain benefits that yielded higher margins. Completion Fluids &
Products' strong results were also supported by increasing offshore
activity as revenue related to offshore was up 30% versus the first
quarter of 2023 and was up 50% versus the same period last year.
Our strong offshore results have benefited from our recent
investments to expand fluids capacity in the North Sea,
Brazil and Gulf of
Mexico.
"Water & Flowback Services second quarter 2023 revenue of
$77 million improved 17% year-on-year while revenue remained
flat sequentially as our focus has shifted toward stronger margins
and improved free cash flow. Approximately 40% of the growth in
revenue year-over-year was driven by international operations,
mainly Argentina, while a larger
base of TETRA SandStormTM advanced cyclone technology
fleet in operation also contributed to the growth. Net income
before taxes for the quarter was $8.0
million (10.4% of revenue) and compares to $1.6 million (2.5% of revenue) in the second
quarter of 2022 and to $6.4 million
(8.3% of revenue) in the first quarter of 2023. Adjusted EBITDA of
$14.2 million improved by
$4.3 million (43%) year-on-year and
by $1.3 million (10%)
quarter-over-quarter. Water & Flowback Services Adjusted
EBITDA margins improved 170 basis points from 16.7% in the first
quarter of 2023 to 18.4% in the second quarter of 2023 marking the
highest margin since the fourth quarter of 2018 as the team
continues to drive operational efficiencies and focus on margin
expansion. While we have seen some signs of softness in certain US
land segments, pricing has remained relatively stable for our
differentiated products and service offerings. We will continue to
execute on our margin expansion initiatives and continue to deploy
automation to further drive costs down. We are approaching the low
end of our target range for adjusted EBITDA margins of 18.5% -
20.5% sooner than we had previously expected.
Low-Carbon Initiatives Update
"We continue to make great progress in our low carbon energy
initiatives. In June 2023, we entered
into a memorandum of understanding ("MOU") with Saltwerx LLC
("Saltwerx"), an indirect wholly owned subsidiary of a Fortune 500
company, relating to a newly proposed brine unit in the Smackover
Formation in Southwest Arkansas
with potential bromine and lithium production from brine produced
from such unit. The binding provisions of the MOU provide, among
other things, that TETRA would file an amended brine unit
application to the Arkansas Oil & Gas Commission ("AOGC") which
expands the size of the unit area to 6,138 acres and combines brine
acreage that was previously leased separately by TETRA and
Saltwerx. We and Saltwerx have agreed to collaborate in key areas,
including upstream design and development to optimize long-term
brine production, technology development for lithium extraction,
and associated engineering studies required to develop the proposed
brine unit.
"We recently completed the drilling of our second test well in
our proposed 6,138-acre brine unit with fluid sampling tests
underway to update the prior results noted in the Inferred
Resources Study for bromine and lithium. We have also contracted
Hargrove and Associates to execute a front-end engineering and
design study ("FEED") for a lithium production facility. The
lithium plant design will be optimized to share the production
wells, injection wells, and pipelines consistent with the
previously completed FEED study for the bromine plant, which was
completed during the first quarter of 2023."
This press release includes the following financial measures
that are not presented in accordance with generally accepted
accounting principles in the United
States ("GAAP"): Adjusted net income per share, Adjusted
EBITDA, and Adjusted EBITDA Margin (Adjusted EBITDA as a percent of
revenue) on consolidated and segment basis, adjusted net income,
adjusted free cash flow, net debt, net leverage ratio and return on
capital employed. Please see Schedules E through J for
reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP measures.
Second Quarter Results and Highlights
A summary of key financial metrics for the second quarter are as
follows:
Second Quarter
2023 Results
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
|
(in thousands, except
per share amounts)
|
Revenue
|
$
175,463
|
|
$
146,209
|
|
$
140,716
|
Income before
discontinued operations
|
18,205
|
|
6,045
|
|
1,759
|
Adjusted
EBITDA
|
36,046
|
|
20,587
|
|
18,697
|
Net income attributable
to TETRA stockholders
|
0.14
|
|
0.05
|
|
0.01
|
Adjusted net income per
share
|
0.13
|
|
0.03
|
|
0.05
|
Net cash provided by
operating activities
|
28,372
|
|
8,985
|
|
17,869
|
Adjusted free cash
flow
|
$
17,711
|
|
$
(3,716)
|
|
$
6,418
|
Free Cash Flow, Balance Sheet and Income Taxes
Cash from operating activities was $28.4
million in the second quarter and adjusted free cash flow
from continuing operations was $17.7
million. Liquidity at the end of the second quarter was
$99 million, an improvement over the
first quarter. As of July 28,
liquidity has further improved to $101
million. Liquidity is defined as unrestricted cash plus
availability under our revolving credit facilities. At the end of
the second quarter, unrestricted cash was $28 million and availability under our credit
agreements was $71 million. Long-term
debt, primarily with a September 2025
maturity, was $158 million, while net
debt was $130 million. TETRA's net
leverage ratio improved to 1.5X at the end of the second quarter of
2023, down from 2.0X as of March 31,
2023. As of June 30, 2023,
TETRA held $10.2 million in total
marketable securities between its holdings in CSI Compressco and
SLI.
Non-recurring Charges and Expenses
Non-recurring credits, charges and expenses are reflected on
Schedule E and include the following:
- $4.7 million of income for
pre-FID exploration and development costs on the Arkansas bromine and lithium project incurred
by TETRA between the first quarter of 2022 through the second
quarter of 2023 that are being recovered from Saltwerx consistent
with the recently completed agreement.
- $2.3 million of costs associated
with our Arkansas bromine and
lithium project including drilling the second test well.
- $0.8 million of non-cash
impairment charges, $0.3 million of
cumulative adjustments to long-term incentives, and $0.3 million of non-cash stock appreciation right
expense.
Unrealized gains on investments totaling $0.9 million are included in both reported
and adjusted earnings.
Conference Call
TETRA will host a conference call to discuss these results
tomorrow, August 1, at 10:30 a.m. Eastern Time. The phone number for the
call is 1-888-347-5303. The conference call will also be available
by live audio webcast. A replay of the conference call will be
available at 1-877-344-7529 conference number 2982082, for one week
following the conference call and the archived webcast will be
available through the Company's website for thirty days following
the conference call.
Investor Contact
For further information, please contact Elijio Serrano, CFO, TETRA Technologies, Inc. at
(281) 367-1983 or via email at eserrano@tetratec.com or
Rigo Gonzalez, Manager of Corporate
Finance and Investor Relations, at (281) 364-2213 or via email at
rgonzalez@tetratec.com.
Financial Statements, Schedules and Non-GAAP Reconciliation
Schedules (Unaudited)
Schedule A: Consolidated Income Statement
Schedule B: Condensed Consolidated Balance Sheet
Schedule C: Consolidated Statements of Cash Flows
Schedule D: Statement Regarding Use of Non-GAAP Financial
Measures
Schedule E: Non-GAAP Reconciliation of Adjusted Net
Income
Schedule F: Non-GAAP Reconciliation of Adjusted
EBITDA
Schedule G: Non-GAAP Reconciliation of Net Debt
Schedule H: Non-GAAP Reconciliation to Adjusted Free Cash
Flow
Schedule I: Non-GAAP Reconciliation to Net
Leverage Ratio
Schedule J: Non-GAAP Reconciliation to Return on
Capital Employed
Company Overview
TETRA Technologies, Inc. is an energy services and solutions
company operating on six continents with a focus on bromine-based
completion fluids, calcium chloride, water management solutions,
frac flowback, and production well testing services. Calcium
chloride is used in the oil and gas, industrial, agricultural,
road, food, and beverage markets. TETRA is evolving its business
model by expanding into the low carbon energy markets with its
chemistry expertise, key mineral acreage, and global
infrastructure. Low carbon energy initiatives include
commercialization of TETRA PureFlow®, an ultra-pure zinc
bromide clear brine fluid for stationary batteries and energy
storage; advancing an innovative carbon capture utilization and
storage technology with CarbonFree to capture CO2 and
mineralize emissions to make commercial, carbon-negative chemicals;
and development of TETRA's lithium and bromine mineral acreage to
meet the growing demand for oil and gas products and energy
storage. Visit the Company's website at www.tetratec.com for more
information.
Cautionary Statement Regarding Forward Looking
Statements
This news release includes certain statements that are deemed to
be forward-looking statements. Generally, the use of words such as
"may," "see," "expectation," "expect," "intend," "estimate,"
"projects," "anticipate," "believe," "assume," "could," "should,"
"plans," "targets" or similar expressions that convey the
uncertainty of future events, activities, expectations or outcomes
identify forward-looking statements that the Company intends to be
included within the safe harbor protections provided by the federal
securities laws. These forward-looking statements include
statements concerning economic and operating conditions that are
outside of our control, including statements concerning recovery of
the oil and gas industry; customer delays for international
completion fluids related to global shipping and logistics issues;
potential revenue associated with prospective energy storage
projects or our pending carbon capture partnership; inferred
mineral resources of lithium and bromine, the potential extraction
of lithium and bromine from the leased acreage, the economic
viability thereof, the demand for such resources, and the timing
and costs of such activities; the ability to obtain an indicated or
measured resources report and initial economic assessment regarding
our lithium and bromine acreage; projections or forecasts
concerning the Company's business activities, financial guidance,
profitability, estimated earnings, earnings per share, and
statements regarding the Company's beliefs, expectations, plans,
goals, future events and performance, and other statements that are
not purely historical. With respect to the Company's disclosures of
inferred mineral resources, including bromine and lithium carbonate
equivalent concentrations, it is uncertain if further exploration
will ever result in the estimation of a higher category of mineral
resource or a mineral reserve. Inferred mineral resources are
considered to have the lowest level of geological confidence of all
mineral resources. Investors are cautioned that mineral resources
do not have demonstrated economic value. Inferred mineral resources
have a high degree of uncertainty as to their existence and to
whether they can be economically or legally commercialized. A
significant amount of exploration must be completed in order to
determine whether an inferred mineral resource may be upgraded to a
higher category. Therefore, you are cautioned not to assume that
all or any part of an inferred mineral resource exists, that it can
be economically or legally commercialized, or that it will ever be
upgraded to a higher category. These forward-looking statements are
based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends,
current conditions, expected future developments and other factors
it believes are appropriate in the circumstances. Such statements
are subject to a number of risks and uncertainties, many of which
are beyond the control of the Company. With respect to the
Company's disclosures of the MOU with Saltwerx, it is uncertain
about the ability of the parties to successfully negotiate one or
more definitive agreements, the future relationship between the
parties, the approval of the application and brine unit by the
AOGC, and the ability to successfully and economically produce
lithium and bromine from the brine unit. Investors are cautioned
that any such statements are not guarantees of future performances
or results and that actual results or developments may differ
materially from those projected in the forward-looking statements.
Some of the factors that could affect actual results are described
in the section titled "Risk Factors" contained in the Company's
Annual Reports on Form 10-K, as well as other risks identified from
time to time in its reports on Form 10-Q and Form 8-K filed with
the Securities and Exchange Commission. Investors should not place
undue reliance on forward-looking statements. Each forward-looking
statement speaks only as of the date of the particular statement,
and the Company undertakes no obligation to update or revise any
forward-looking statements, except as may be required by law
Schedule A:
Consolidated Income Statement (Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
|
(in thousands, except
per share amounts)
|
Revenues
|
$
175,463
|
|
$
146,209
|
|
$
140,716
|
|
|
|
|
|
|
Cost of sales,
services, and rentals
|
117,074
|
|
104,066
|
|
102,599
|
Depreciation,
amortization, and accretion
|
8,457
|
|
8,670
|
|
7,748
|
Impairments and other
charges
|
777
|
|
—
|
|
2,262
|
Insurance
recoveries
|
—
|
|
(2,850)
|
|
—
|
Total cost of
revenues
|
126,308
|
|
109,886
|
|
112,609
|
Gross
profit
|
49,155
|
|
36,323
|
|
28,107
|
Exploration and
appraisal costs
|
2,341
|
|
720
|
|
634
|
General and
administrative expense
|
26,225
|
|
23,191
|
|
23,620
|
Interest expense,
net
|
5,944
|
|
5,092
|
|
3,610
|
Other (income) expense,
net
|
(6,435)
|
|
(214)
|
|
(1,037)
|
Income before taxes and
discontinued operations
|
21,080
|
|
7,534
|
|
1,280
|
Provision (benefit) for
income taxes
|
2,875
|
|
1,489
|
|
(479)
|
Income before
discontinued operations
|
18,205
|
|
6,045
|
|
1,759
|
Discontinued
operations:
|
|
|
|
|
|
Loss from discontinued
operations, net of taxes
|
(8)
|
|
(12)
|
|
(34)
|
Net income
|
18,197
|
|
6,033
|
|
1,725
|
Less: Income
attributable to noncontrolling interest
|
18
|
|
7
|
|
20
|
Net income attributable
to TETRA stockholders
|
$
18,215
|
|
$
6,040
|
|
$
1,745
|
|
|
|
|
|
|
Basic per share
information:
|
|
|
|
|
|
Income from continuing
operations
|
$
0.14
|
|
$
0.05
|
|
$
0.01
|
Loss from discontinued
operations
|
$
0.00
|
|
$
0.00
|
|
$
0.00
|
Net income attributable
to TETRA stockholders
|
$
0.14
|
|
$
0.05
|
|
$
0.01
|
Weighted average shares
outstanding
|
129,460
|
|
128,940
|
|
127,992
|
|
|
|
|
|
|
Diluted per share
information:
|
|
|
|
|
|
Income from continuing
operations
|
$
0.14
|
|
$
0.05
|
|
$
0.01
|
Loss from discontinued
operations
|
$
0.00
|
|
$
0.00
|
|
$
0.00
|
Net income attributable
to TETRA stockholders
|
$
0.14
|
|
$
0.05
|
|
$
0.01
|
Weighted average shares
outstanding
|
129,925
|
|
129,975
|
|
130,099
|
Schedule B:
Condensed Consolidated Balance Sheet (Unaudited)
|
|
|
June 30,
2023
|
|
December 31,
2022
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
27,675
|
|
$
13,592
|
Trade accounts
receivable
|
130,386
|
|
129,631
|
Inventories
|
81,833
|
|
72,113
|
Prepaid expenses and
other current assets
|
21,058
|
|
23,112
|
Total current
assets
|
260,952
|
|
238,448
|
Property, plant, and
equipment, net
|
109,494
|
|
101,580
|
Other intangible
assets, net
|
31,102
|
|
32,955
|
Operating lease
right-of-use assets
|
36,964
|
|
33,818
|
Investments
|
16,718
|
|
14,286
|
Other assets
|
14,762
|
|
13,279
|
Total long-term
assets
|
209,040
|
|
195,918
|
Total assets
|
$
469,992
|
|
$
434,366
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Trade accounts
payable
|
$
53,673
|
|
$
49,121
|
Current portion of
long-term debt
|
1,900
|
|
3
|
Compensation and
employee benefits
|
23,117
|
|
30,958
|
Operating lease
liabilities, current portion
|
8,461
|
|
7,795
|
Accrued
taxes
|
10,898
|
|
9,913
|
Accrued liabilities
and other
|
27,368
|
|
25,557
|
Current liabilities
associated with discontinued operations
|
414
|
|
920
|
Total current
liabilities
|
125,831
|
|
124,267
|
Long-term debt,
net
|
156,007
|
|
156,455
|
Operating lease
liabilities
|
31,136
|
|
28,108
|
Asset retirement
obligations
|
13,983
|
|
13,671
|
Deferred income
taxes
|
2,000
|
|
2,038
|
Other
liabilities
|
3,978
|
|
3,430
|
Total long-term
liabilities
|
207,104
|
|
203,702
|
Commitments and
contingencies
|
|
|
|
TETRA stockholders'
equity
|
138,311
|
|
107,625
|
Noncontrolling
interests
|
(1,254)
|
|
(1,228)
|
Total equity
|
137,057
|
|
106,397
|
Total liabilities and
equity
|
$
469,992
|
|
$
434,366
|
Schedule C:
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
|
(in
thousands)
|
Operating
activities:
|
|
|
|
|
|
Net income
|
$
18,197
|
|
$
6,033
|
|
$
1,725
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation,
amortization, and accretion
|
8,457
|
|
8,670
|
|
7,748
|
Impairments and other
charges
|
777
|
|
—
|
|
2,262
|
(Gain) loss on
investments
|
(908)
|
|
505
|
|
710
|
Equity-based
compensation expense
|
1,492
|
|
1,276
|
|
1,159
|
Provision for
(recovery of) credit losses
|
741
|
|
(21)
|
|
183
|
Amortization and
expense of financing costs
|
897
|
|
884
|
|
793
|
Insurance recoveries
associated with damaged equipment
|
—
|
|
(2,850)
|
|
—
|
(Gain) loss on sale of
assets
|
(111)
|
|
(170)
|
|
(501)
|
Other non-cash
credits
|
(637)
|
|
(100)
|
|
(212)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
(13,140)
|
|
12,626
|
|
(1,396)
|
Inventories
|
2,764
|
|
(11,313)
|
|
(60)
|
Prepaid expenses and
other current assets
|
(2,254)
|
|
4,496
|
|
(4,792)
|
Trade accounts payable
and accrued expenses
|
11,622
|
|
(11,179)
|
|
11,176
|
Other
|
475
|
|
128
|
|
(926)
|
Net cash provided by
operating activities
|
28,372
|
|
8,985
|
|
17,869
|
Investing
activities:
|
|
|
|
|
|
Purchases of property,
plant, and equipment, net
|
(10,490)
|
|
(12,784)
|
|
(11,107)
|
Proceeds from sale of
property, plant, and equipment
|
208
|
|
289
|
|
778
|
Insurance recoveries
associated with damaged equipment
|
—
|
|
2,850
|
|
—
|
Purchase of
investment
|
(250)
|
|
—
|
|
—
|
Other investing
activities
|
(275)
|
|
(1,552)
|
|
2
|
Net cash used in
investing activities
|
(10,807)
|
|
(11,197)
|
|
(10,327)
|
Financing
activities:
|
|
|
|
|
|
Proceeds from credit
agreements and long-term debt
|
44,413
|
|
52,756
|
|
134
|
Principal payments on
credit agreements and long-term debt
|
(50,875)
|
|
(47,362)
|
|
(2,456)
|
Payments on financing
lease obligations
|
(431)
|
|
(258)
|
|
(1,174)
|
Net cash (used in)
provided by financing activities
|
(6,893)
|
|
5,136
|
|
(3,496)
|
Effect of exchange rate
changes on cash
|
320
|
|
167
|
|
(565)
|
Increase in cash and
cash equivalents
|
10,992
|
|
3,091
|
|
3,481
|
Cash and cash
equivalents at beginning of period
|
16,683
|
|
13,592
|
|
32,851
|
Cash and cash
equivalents at end of period
|
$
27,675
|
|
$
16,683
|
|
$
36,332
|
|
|
|
|
|
|
Supplemental cash flow
information:
|
|
|
|
|
|
Interest
paid
|
$
4,899
|
|
$
4,513
|
|
$
4,960
|
Income taxes
paid
|
654
|
|
1,358
|
|
729
|
Increase (decrease) in
accrued capital expenditures
|
5,553
|
|
(2,411)
|
|
452
|
Schedule D: Statement Regarding Use of Non-GAAP Financial
Measures
In addition to financial results determined in accordance with
U.S. GAAP, this press release may include the following non-GAAP
financial measures for the Company: adjusted net income per share;
consolidated and segment Adjusted EBITDA; segment Adjusted EBITDA
as a percent of revenue ("Adjusted EBITDA margin"); adjusted net
income, adjusted free cash flow; net debt, net leverage ratio, and
return on capital employed. The following schedules
provide reconciliations of these non-GAAP financial measures
to their most directly comparable U.S. GAAP measures. The non-GAAP
financial measures should be considered in addition to, not as a
substitute for, financial measures prepared in accordance with U.S.
GAAP, as more fully discussed in the Company's financial statements
and filings with the Securities and Exchange Commission.
Management believes that the exclusion of the special charges
and credits from the historical results of operations enables
management to evaluate more effectively the Company's operations
over the prior periods and to identify operating trends that could
be obscured by the excluded items.
Adjusted net income is defined as the Company's income before
noncontrolling interests and discontinued operations, excluding
certain special or other charges (or credits), and including
noncontrolling interest attributable to continued operations.
Adjusted net income is used by management as a supplemental
financial measure to assess financial performance, without regard
to charges or credits that are considered by management to be
outside of its normal operations.
Adjusted net income per share is defined as the Company's
diluted net income per share attributable to TETRA stockholders
excluding certain special or other charges (or credits). Adjusted
net income per share is used by management as a supplemental
financial measure to assess financial performance, without regard
to charges or credits that are considered by management to be
outside of its normal operations.
Adjusted EBITDA is defined as net income before taxes and
discontinued operations, excluding impairments, exploration and
pre-development costs, income from collaborative arrangement,
certain special, non-recurring or other charges (or credits),
interest, depreciation and amortization and certain non-cash items
such as equity-based compensation expense. The most directly
comparable GAAP financial measure is net income (loss) before taxes
and discontinued operations. Exploration and pre-development costs
represent expenditures incurred to evaluate potential future
development of TETRA's lithium and bromine properties in
Arkansas. Such costs include
exploratory drilling and associated engineering studies. Income
from collaborative arrangement represents the portion of
exploration and pre-development costs that are reimbursable by our
strategic partner. Exploration and pre-development costs and
the associated income from collaborative arrangement are excluded
from Adjusted EBITDA because they do not relate to the Company's
current business operations. Adjustments to long-term incentives
represent cumulative adjustments to valuation of long-term cash
incentive compensation awards that are related to prior years.
These costs are excluded from Adjusted EBITDA because they do not
relate to the current year and are considered to be outside of
normal operations. Long-term incentives are earned over a
three-year period and the costs are recorded over the three-year
period they are earned. The amounts accrued or incurred are based
on a cumulative of the three-year period. Equity-based compensation
expense represents compensation that has been or will be paid in
equity and is excluded from Adjusted EBITDA because it is a
non-cash item. Adjusted EBITDA is used by management as a
supplemental financial measure to assess financial performance,
without regard to charges or credits that are considered by
management to be outside of its normal operations and without
regard to financing methods, capital structure or historical cost
basis, and to assess the Company's ability to incur and service
debt and fund capital expenditures.
Adjusted free cash flow is defined as cash from operations less
capital expenditures net of sales proceeds and cost of equipment
sold, less payments on financing lease obligations and including
cash distributions to TETRA from CSI Compressco and cash from
other investments. Management uses this supplemental financial
measure to:
- assess the Company's ability to retire debt;
- evaluate the capacity of the Company to further invest and
grow; and
- to measure the performance of the Company as compared to its
peer group.
Adjusted free cash flow does not necessarily imply residual cash
flow available for discretionary expenditures, as they exclude cash
requirements for debt service or other non-discretionary
expenditures that are not deducted.
Net debt is defined as the sum of the carrying value of
long-term and short-term debt on its consolidated balance sheet,
less cash, excluding restricted cash on the balance sheet.
Management views net debt as a measure of TETRA's ability to reduce
debt, add to cash balances, pay dividends, repurchase stock, and
fund investing and financing activities.
Net leverage ratio is defined as debt excluding financing fees
& discount on term loan and including letters of credit and
guarantees, less cash divided by trailing twelve months adjusted
EBITDA for credit facilities. Adjusted EBITDA for credit facilities
consists of adjusted EBITDA described above, less non-cash (gain)
loss on sale of investments, (gain) loss on sales of assets and
excluding certain special or other charges (or credits). Management
primarily uses this metric to assess TETRA's ability to borrow,
reduce debt, add to cash balances, pay distributions, and fund
investing and financing activities.
Return on capital employed is defined as Adjusted EBIT divided
by average net capital employed. Adjusted EBIT is defined as net
income (loss) before taxes and discontinued operations, interest,
and certain non-cash charges, and non-recurring adjustments. Net
capital employed is defined as assets, excluding assets associated
with discontinued operations, plus impaired assets, less cash and
cash equivalents and restricted cash, and less current liabilities,
excluding current liabilities associated with discontinued
operations. Average net capital employed is calculated as the
average of the beginning and ending net capital employed for the
respective periods. Return on capital employed is used by
management as a supplemental financial measure to assess the
financial performance of the Company relative to assets, without
regard to financing methods or capital structure.
Schedule E: Non-GAAP
Reconciliation of Adjusted Net Income (Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
|
(in thousands, except
per share amounts)
|
|
|
|
|
|
|
Income before taxes
and discontinued operations
|
$
21,080
|
|
$
7,534
|
|
$
1,280
|
Provision (benefit) for
income taxes
|
2,875
|
|
1,489
|
|
(479)
|
Noncontrolling interest
attributed to continuing operations
|
18
|
|
7
|
|
20
|
Income from
continuing operations
|
18,187
|
|
6,038
|
|
1,739
|
Insurance
recoveries
|
(5)
|
|
(2,850)
|
|
—
|
Impairments and other
charges
|
777
|
|
(307)
|
|
—
|
Exploration and
pre-development costs
|
2,341
|
|
720
|
|
634
|
Adjustment to long-term
incentives
|
322
|
|
353
|
|
1,450
|
Former CEO stock
appreciation right expense
|
329
|
|
82
|
|
556
|
Transaction, legal, and
other expenses
|
57
|
|
—
|
|
2,262
|
Income from
collaborative arrangement
|
(4,749)
|
|
—
|
|
—
|
Adjusted net
income
|
$
17,259
|
|
$
4,036
|
|
$
6,641
|
|
|
|
|
|
|
Diluted per share
information
|
|
|
|
|
|
Net income
attributable to TETRA stockholders
|
$
0.14
|
|
$
0.05
|
|
$
0.01
|
Adjusted net
income
|
$
0.13
|
|
$
0.03
|
|
$
0.05
|
Diluted weighted
average shares outstanding
|
129,925
|
|
129,975
|
|
130,099
|
Schedule F:
Non-GAAP Reconciliation of Adjusted EBITDA
(Unaudited)
|
|
|
Three Months Ended
June 30, 2023
|
|
Completion
Fluids &
Products
|
|
Water &
Flowback
Services
|
|
Corporate
SG&A
|
|
Other and
Eliminations
|
|
Total
|
|
(in thousands, except
percents)
|
Revenues
|
$
98,222
|
|
$
77,241
|
|
$
—
|
|
$
—
|
|
$
175,463
|
Net income (loss)
before taxes and
discontinued
operations
|
31,956
|
|
8,014
|
|
(12,595)
|
|
(6,295)
|
|
21,080
|
Insurance
recoveries
|
(5)
|
|
—
|
|
—
|
|
—
|
|
(5)
|
Impairments and other
charges
|
—
|
|
—
|
|
777
|
|
—
|
|
777
|
Exploration and
pre-development costs
|
2,341
|
|
—
|
|
—
|
|
—
|
|
2,341
|
Adjustment to long-term
incentives
|
—
|
|
—
|
|
322
|
|
—
|
|
322
|
Former CEO stock
appreciation right expense
|
—
|
|
—
|
|
329
|
|
—
|
|
329
|
Transaction and other
expenses
|
—
|
|
—
|
|
57
|
|
—
|
|
57
|
Income from
collaborative arrangement
|
(4,749)
|
|
—
|
|
—
|
|
—
|
|
(4,749)
|
Interest expense,
net
|
104
|
|
27
|
|
—
|
|
5,813
|
|
5,944
|
Depreciation,
amortization and accretion
|
2,193
|
|
6,172
|
|
—
|
|
93
|
|
8,458
|
Equity-based
compensation expense
|
—
|
|
—
|
|
1,492
|
|
—
|
|
1,492
|
Adjusted
EBITDA
|
$
31,840
|
|
$
14,213
|
|
$
(9,618)
|
|
$
(389)
|
|
$
36,046
|
Adjusted EBITDA as a %
of revenue
|
32.4 %
|
|
18.4 %
|
|
|
|
|
|
20.5 %
|
|
|
Three Months Ended
March 31, 2023
|
|
Completion
Fluids &
Products
|
|
Water &
Flowback
Services
|
|
Corporate
SG&A
|
|
Other and
Eliminations
|
|
Total
|
|
(in thousands, except
percents)
|
Revenues
|
$
69,042
|
|
$
77,167
|
|
$
—
|
|
$
—
|
|
$
146,209
|
Net income (loss)
before taxes and
discontinued
operations
|
18,442
|
|
6,378
|
|
(11,059)
|
|
(6,227)
|
|
7,534
|
Insurance
recoveries
|
(2,850)
|
|
—
|
|
—
|
|
—
|
|
(2,850)
|
Exploration and
pre-development costs
|
720
|
|
—
|
|
—
|
|
—
|
|
720
|
Adjustment to long-term
incentives
|
—
|
|
—
|
|
353
|
|
—
|
|
353
|
Interest (income)
expense, net
|
(395)
|
|
27
|
|
—
|
|
5,460
|
|
5,092
|
Depreciation,
amortization and accretion
|
2,052
|
|
6,509
|
|
—
|
|
109
|
|
8,670
|
Equity-based
compensation expense
|
17
|
|
—
|
|
1,276
|
|
—
|
|
1,293
|
Transaction,
restructuring and other expenses
|
—
|
|
—
|
|
82
|
|
—
|
|
82
|
Former CEO stock
appreciation right expense
|
—
|
|
—
|
|
(307)
|
|
—
|
|
(307)
|
Adjusted
EBITDA
|
$
17,986
|
|
$
12,914
|
|
$
(9,655)
|
|
$
(658)
|
|
$
20,587
|
Adjusted EBITDA as a %
of revenue
|
26.1 %
|
|
16.7 %
|
|
|
|
|
|
14.1 %
|
|
|
Three Months Ended
June 30, 2022
|
|
Completion
Fluids &
Products
|
|
Water &
Flowback
Services
|
|
Corporate
SG&A
|
|
Other and
Eliminations
|
|
Total
|
|
(in thousands, except
percents)
|
Revenues
|
$
74,798
|
|
$
65,918
|
|
$
—
|
|
$
—
|
|
$
140,716
|
Net income (loss)
before taxes and
discontinued
operations
|
15,261
|
|
1,644
|
|
(11,542)
|
|
(4,083)
|
|
1,280
|
Exploration and
pre-development costs
|
634
|
|
—
|
|
—
|
|
—
|
|
634
|
Adjustment to long-term
incentives
|
—
|
|
—
|
|
1,450
|
|
—
|
|
1,450
|
Transaction and other
expenses
|
—
|
|
556
|
|
—
|
|
—
|
|
556
|
Impairments and other
charges
|
220
|
|
2,042
|
|
—
|
|
—
|
|
2,262
|
Interest (income)
expense, net
|
(283)
|
|
(2)
|
|
—
|
|
3,895
|
|
3,610
|
Depreciation,
amortization and accretion
|
1,873
|
|
5,705
|
|
—
|
|
168
|
|
7,746
|
Equity-based
compensation expense
|
—
|
|
—
|
|
1,159
|
|
—
|
|
1,159
|
Adjusted
EBITDA
|
$
17,705
|
|
$
9,945
|
|
$
(8,933)
|
|
$
(20)
|
|
$
18,697
|
Adjusted EBITDA as a %
of revenue
|
23.7 %
|
|
15.1 %
|
|
|
|
|
|
13.3 %
|
Schedule G: Non-GAAP
Reconciliation of Net Debt (Unaudited)
The following
reconciliation of net debt is presented as a supplement to
financial results prepared in accordance with GAAP.
|
|
|
June 30,
2023
|
|
December 31,
2022
|
|
(in
thousands)
|
Unrestricted
Cash
|
$
27,675
|
|
$
13,592
|
|
|
|
|
Term Credit
Agreement
|
$
156,007
|
|
$
154,570
|
Asset-Based Credit
Agreement
|
—
|
|
1,885
|
Argentina Credit
Agreement
|
1,900
|
|
—
|
Swedish Credit
Facility
|
—
|
|
3
|
Net debt
|
$
130,232
|
|
$
142,866
|
Schedule H: Non-GAAP Reconciliation
to Adjusted Free Cash Flow (Unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
|
June 30,
2023
|
|
June 30,
2022
|
|
(in
thousands)
|
Cash from operating
activities
|
$
28,372
|
|
$
8,985
|
|
17,869
|
|
$
37,357
|
|
$
23,803
|
Capital expenditures,
net of proceeds from asset sales
|
(10,282)
|
|
(12,495)
|
|
(10,329)
|
|
(22,777)
|
|
(19,218)
|
Payments on financing
lease obligations
|
(431)
|
|
(258)
|
|
(1,174)
|
|
(689)
|
|
(1,174)
|
Distributions from CSI
Compressco LP (1)
|
52
|
|
52
|
|
52
|
|
104
|
|
104
|
Adjusted Free Cash
Flow
|
$
17,711
|
|
$
(3,716)
|
|
$
6,418
|
|
$
13,995
|
|
$
3,515
|
|
|
(1)
|
Following the GP Sale
on January 29, 2021, TETRA retained an investment CSI Compressco
representing a 3.7% limited partner interest as of June 30,
2023.
|
Schedule I: Non-GAAP
Reconciliation to Net Leverage Ratio (Unaudited)
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
December 31,
2022
|
|
September 30,
2022
|
|
June 30,
2023
|
|
(in
thousands)
|
Net income (loss)
before taxes and
discontinued
operations
|
$
21,080
|
|
$
7,534
|
|
$
(1,163)
|
|
$
2,115
|
|
$
29,566
|
Insurance
recoveries
|
(5)
|
|
(2,850)
|
|
—
|
|
—
|
|
(2,855)
|
Impairments and other
charges
|
777
|
|
—
|
|
542
|
|
—
|
|
1,319
|
Exploration and
pre-development costs
|
2,341
|
|
720
|
|
3,135
|
|
936
|
|
7,132
|
Adjustment to long-term
incentives
|
322
|
|
353
|
|
131
|
|
1,899
|
|
2,705
|
Former CEO stock
appreciation right expense (credit)
|
329
|
|
(307)
|
|
(57)
|
|
(168)
|
|
(203)
|
Transaction,
restructuring and other expenses
|
57
|
|
82
|
|
576
|
|
82
|
|
797
|
Income from
collaborative arrangement
|
(4,749)
|
|
—
|
|
—
|
|
—
|
|
(4,749)
|
Adjusted interest
expense, net
|
5,944
|
|
5,092
|
|
4,900
|
|
3,999
|
|
19,935
|
Adjusted depreciation
and amortization
|
8,458
|
|
8,670
|
|
8,758
|
|
8,634
|
|
34,520
|
Equity compensation
expense
|
1,492
|
|
1,293
|
|
3,519
|
|
1,098
|
|
7,402
|
Adjusted EBITDA
(Schedule F)
|
$
36,046
|
|
$
20,587
|
|
$
20,341
|
|
$
18,595
|
|
$
95,569
|
Acquisition trailing
EBITDA
|
—
|
|
—
|
|
503
|
|
915
|
|
1,418
|
Non-cash (gain) loss on
investments
|
(907)
|
|
504
|
|
(286)
|
|
548
|
|
(141)
|
Gain on sale of
assets
|
(112)
|
|
(170)
|
|
(190)
|
|
(262)
|
|
(734)
|
Other debt covenant
adjustments
|
—
|
|
—
|
|
249
|
|
17
|
|
266
|
Debt covenant
adjusted EBITDA
|
$
35,027
|
|
$
20,921
|
|
$
20,617
|
|
$
19,813
|
|
$
96,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2023
|
|
|
|
|
|
|
|
|
|
(in thousands,
except ratio)
|
Term credit
agreement
|
|
|
|
|
|
|
|
|
$
163,072
|
Argentina credit
agreement
|
|
|
|
|
|
|
|
|
1,900
|
ABL letters of credit
and guarantees
|
|
|
|
|
|
|
|
|
11,455
|
Total debt and
commitments
|
|
|
|
|
|
|
|
|
176,427
|
Unrestricted
cash
|
|
|
|
|
|
|
|
|
27,675
|
Debt covenant net debt
and commitments
|
|
|
|
|
|
|
|
$
148,752
|
Net leverage
ratio
|
|
|
|
|
|
|
|
|
1.5
|
Schedule J: Non-GAAP
Reconciliation to Return on Net Capital Employed
|
|
|
Three Months
Ended
|
|
Twelve
Months Ended
|
|
|
|
June 30,
2023
|
|
March 31,
2023
|
|
December 31,
2022
|
|
September 30,
2022
|
|
June 30,
2023
|
|
|
|
(in
thousands)
|
|
|
Net income (loss)
before taxes and
discontinued
operations
|
$
21,080
|
|
$
7,534
|
|
$
(1,163)
|
|
$
2,115
|
|
$
29,566
|
|
|
Insurance
recoveries
|
(5)
|
|
(2,850)
|
|
—
|
|
—
|
|
(2,855)
|
|
|
Impairments and other
charges
|
777
|
|
—
|
|
542
|
|
—
|
|
1,319
|
|
|
Exploration and
pre-development costs
|
2,341
|
|
720
|
|
3,135
|
|
936
|
|
7,132
|
|
|
Adjustment to long-term
incentives
|
322
|
|
353
|
|
131
|
|
1,899
|
|
2,705
|
|
|
Former CEO stock
appreciation right expense (credit)
|
329
|
|
(307)
|
|
(57)
|
|
(168)
|
|
(203)
|
|
|
Transaction,
restructuring and other expenses
|
57
|
|
82
|
|
576
|
|
82
|
|
797
|
|
|
Income from
collaborative arrangement
|
(4,749)
|
|
—
|
|
—
|
|
—
|
|
(4,749)
|
|
|
Adjusted interest
expense, net
|
5,944
|
|
5,092
|
|
4,900
|
|
3,999
|
|
19,935
|
|
|
Other
adjustments
|
—
|
|
—
|
|
249
|
|
17
|
|
266
|
|
|
Adjusted
EBIT
|
$
26,096
|
|
$
10,624
|
|
$
8,313
|
|
$
8,880
|
|
$
53,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2023
|
|
June 30,
2022
|
|
|
|
|
|
|
|
|
|
(in thousands, except
ratio)
|
|
|
Consolidated total
assets
|
|
|
|
|
|
|
$ 469,992
|
|
$
416,614
|
|
|
Plus: assets impaired
in last twelve months
|
|
|
|
1,319
|
|
2,394
|
|
|
Less: cash, cash
equivalents and restricted cash
|
|
|
|
27,675
|
|
36,332
|
|
|
Adjusted assets
employed
|
|
|
|
|
|
|
$
443,636
|
|
$
382,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated current
liabilities
|
|
|
|
|
|
|
$ 125,831
|
|
$
109,567
|
|
|
Less: current
liabilities associated with discontinued operations
|
|
|
|
414
|
|
1,367
|
|
|
Adjusted current
liabilities
|
|
|
|
|
|
|
$
125,417
|
|
$
108,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net capital
employed
|
|
|
|
|
|
|
$ 318,219
|
|
$
274,476
|
|
|
Average net capital
employed
|
|
|
|
|
|
$
296,348
|
|
|
|
|
Return on net
capital employed for the
twelve months ended
June 30, 2023
|
|
|
|
18.2 %
|
|
|
|
|
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SOURCE TETRA Technologies, Inc.