THE
WOODLANDS, Texas, May 1, 2023
/PRNewswire/ --TETRA Technologies, Inc. ("TETRA" or the "Company")
(NYSE:TTI) today announced first-quarter 2023 financial results.
Brady Murphy, TETRA President and
Chief Executive Officer, stated, "First quarter results came in as
expected representing a solid start to 2023 and setting the
foundation for a very strong second quarter."
First quarter 2023 revenue of $146
million increased 12% from the first quarter of 2022 but
decreased 1% from the fourth quarter of 2022. Net income before
discontinued operations was $6.0 million, inclusive of $2.0 million of non-recurring credits, net
of charges, mainly from a favorable cash insurance settlement. This
compares to net income before discontinued operations of
$7.7 million, inclusive of
$0.6 million of non-recurring
credits, net of charges, in the first quarter of 2022 and to a net
loss before discontinued operations of $1.8 million in the fourth quarter of 2022,
inclusive of $4.3 million of
non-recurring charges and expenses. Net income per share
attributable to TETRA stockholders was $0.05 in the first quarter compared to net loss
per share of $0.01 in the fourth
quarter of 2022 and net income per share from continuing operations
of $0.06 in the first quarter of
2022.
Adjusted EBITDA for the first quarter of 2023 was $20.6 million (14.1% of revenue) compared to
$20.3 million (13.8% of revenue)
in the fourth quarter of 2022, and up slightly compared to
$20.5 million (15.7% of revenue)
in the first quarter of 2022. The first quarter of 2023 included
unrealized losses on investments of $504,000. Excluding these unrealized losses
on investments, Adjusted EBITDA for the first quarter of 2023 was
$21.1 million, the highest
Adjusted EBITDA, excluding unrealized gains or losses on
investments, since the first quarter of 2020.
Cash flow from operating activities was $9.0 million in the first quarter of 2023
compared to cash used in operating activities of $7.0 million in the fourth quarter of 2022
and compared to cash flow from operating activities of $5.9 million in the first quarter of 2022.
Adjusted free cash flow from continuing operations was a use of
$3.7 million after funding
capital expenditures of $12.5 million, net of proceeds. The first
quarter has traditionally used cash due to the timing of
significant annual payments, including property taxes and employee
incentive cash bonuses for the prior year. Inventory expanded in
the first quarter in anticipation of the second quarter seasonal
peak in the European industrial chemicals business. Working capital
at the end of the first quarter was $109 million. Working
capital is defined as current assets, excluding cash and restricted
cash, less current liabilities.
Brady Murphy further stated, "In
the first quarter, both segments increased Adjusted EBITDA and
improved Adjusted EBITDA margins quarter-over-quarter offsetting
higher corporate expenses from one-off increased legal and benefits
costs. Water & Flowback Services Adjusted EBITDA margins
improved 180 basis points from 14.9% in the fourth quarter of 2022
to 16.7% in the first quarter of 2023. Completion Fluids
& Products revenue increased 4% sequentially and Adjusted
EBITDA margins improved sequentially from 24.2% to 26.1%, primarily
driven by our European industrial chemicals business where
operations have nearly returned to the levels prior to the
Russia and Ukraine conflict with stronger pricing in
place. First quarter results also reflect a full quarter
contribution from the fluids business acquisition late last year in
the North Sea, which performed above expectations. In March 2023, we signed a purchase and sale
agreement to expand our completion fluids operational capacity in
Brazil. The acquisition is
expected to close during the second quarter of 2023, subject to
government approvals. This investment, in addition to the
Gulf of Mexico and North Sea
investments from the prior quarter, will complete our planned
expansions in three of our key offshore markets in advance of what
we believe to be an extended offshore upcycle.
"Completion Fluids & Products first-quarter 2023 revenue of
$69 million increased 4% sequentially as a result of strong
sales in the Middle East and a
full quarter contribution from our North Sea business acquisition.
Revenue decreased $4.2 million
or 6% year-on-year. Adjusted EBITDA of $18 million increased
$2.0 million sequentially with
Adjusted EBITDA margins of 26.1% compared to 24.2% in the fourth
quarter of 2022. The improvement in Adjusted EBITDA margin was
largely attributed to improved pricing within the industrial
chemicals business and favorable variances from high utilization in
our manufacturing operations. Net income before taxes and
discontinued operations for the quarter was $18.4 million (26.7% of revenue) compared to
$10.5 million (15.8% of revenue)
in the fourth quarter of 2022. The first quarter included
$20,000 in net unrealized gains from
investments compared to $499,000 in
net unrealized losses from investments in the fourth quarter of
2022. Excluding unrealized gains and losses from investments for
both periods, Adjusted EBITDA margins increased sequentially by 110
basis points.
"Water & Flowback Services first-quarter 2023 revenue of
$77 million improved $20 million (or 36%) year-on-year
driven primarily by a 40% growth in our domestic TETRA
SandStormTM advanced cyclone technology business as well
as from the investments in the Early Production Facilities (EPFs)
in Argentina. Revenue decreased
$4.1 million (or 5%)
quarter-over-quarter due to the timing of customer completion
schedules. Net income before taxes and discontinued operations was
$6.4 million while Adjusted
EBITDA of $12.9 million (16.7%
of revenue) improved by $5 million or 57% year-on-year, and
$0.8 million or 7%
quarter-over-quarter. Water & Flowback Services Adjusted EBITDA
margins of 16.7% improved 180 basis points. We remain focused on
margin expansion, returns on capital and generating cash flow.
Second Quarter Guidance
"Heading into the second quarter, we are anticipating the
highest Completion Fluids & Products revenue and Adjusted
EBITDA quarter in over seven years, driven by improved offshore
activity and supported by our recent acquisitions in key markets as
well as the return of our strong European industrial chemicals
business, which has built an inventory to address the upcoming peak
season demand. The outlook for international and offshore markets
activity growth remains very strong. We are currently executing a
TETRA CS Neptune® fluids job in the North Sea with line
of sight to additional TETRA CS Neptune® fluids
opportunities. If multiple jobs materialize, it will be the first
quarter since the introduction of TETRA CS Neptune®
where we execute at least two jobs within the same quarter for
different customers.
We also expect continued growth and margin expansion for our
Water & Flowback Services segment as our expanded TETRA
SandStormTM advanced cyclone technology fleet remains at
high utilization with pricing continuing to improve. The third EPF
in Argentina is expected to come
online in the second quarter and we continue to drive operational
efficiencies via automation in our water management business, all
of which support our goal of achieving Adjusted EBITDA margins in
the 18.5% to 20.5% range for the segment by the end of the
year.
With this background, we expect second quarter revenue to be
between $165 million and $175 million, net income before taxes and
discontinued operations to be between $11.5
million and $13.5 million and
Adjusted EBITDA to be between $27
million and $30 million,
excluding any impacts from gains or losses on investments.
Target total-year 2023 capital expenditures are projected to be
between $30 million to $35 million.
Low Carbon Initiatives Update
"We continue to make progress on our low carbon initiatives and
are currently drilling our second test well in our estimated 5,000
acre section in Southwest Arkansas
with the intent to improve the accuracy of our lithium and bromine
resource estimates and progress from a preliminary economic
assessment for bromine towards a feasibility study. We are also in
the process of selecting an Engineering, Procurement and
Construction (EPC) provider for a Front-End Engineering and Design
(FEED) study for our lithium project, which has an estimated
inferred resources of 234,000 tons of lithium carbonate equivalent.
Our water desalination initiative also continues to progress as we
are making some engineering enhancements to our proprietary
pre-treatment process that feeds our exclusive desalination
technology. We are targeting to complete a commercial plant design
by the end of the year."
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 income (loss) per share, Adjusted
EBITDA, and Adjusted EBITDA Margin (Adjusted EBITDA as a percent of
revenue) on consolidated and segment basis, adjusted income (loss),
adjusted free cash flow, net debt and net leverage ratio. Please
see Schedules E through J for reconciliations of these non-GAAP
financial measures to the most directly comparable GAAP
measures.
First Quarter Results and Highlights
A summary of key financial metrics for the first quarter are as
follows:
First Quarter
2023 Results
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
(in thousands, except
per share amounts)
|
Revenue
|
$
146,209
|
|
$
147,448
|
|
$
130,037
|
Net income (loss)
attributable to TETRA
stockholders
|
6,040
|
|
(1,904)
|
|
7,720
|
Income (loss) before
discontinued operations
|
6,045
|
|
(1,829)
|
|
7,734
|
Adjusted
EBITDA
|
20,587
|
|
20,341
|
|
20,477
|
GAAP net income (loss)
attributable to TETRA
stockholders
|
0.05
|
|
(0.01)
|
|
0.06
|
Adjusted income per
share
|
0.03
|
|
0.02
|
|
0.06
|
GAAP net cash provided
by (used in) operating
activities
|
8,985
|
|
(6,991)
|
|
5,934
|
Adjusted free cash
flow
|
$
(3,716)
|
|
$
(14,228)
|
|
$
(2,903)
|
Free Cash Flow, Balance Sheet and Income Taxes
Cash from operating activities was $9.0
million in the first quarter and adjusted free cash flow
from continuing operations was a use of $3.7
million, including the impact of annual property taxes and
incentive cash payments paid during the first quarter. Adjusted
free cash flow from operating activities does not reflect the
favorable impact of a $2.85 million
cash settlement received in the first quarter on a claim from a
prior year. Additionally, we increased inventory levels in
Europe in preparation for the peak
second quarter in our European industrial chemicals business.
Liquidity at the end of the first quarter was $87 million, a slight improvement over the fourth
quarter. Liquidity is defined as unrestricted cash plus
availability under our revolving credit facilities. At the end of
the first quarter, unrestricted cash was $17
million and availability under our credit agreements was
$70 million. Long-term debt, with a
September 2025 maturity, was
$163 million, while net debt was
$144 million. TETRA's net leverage
ratio was 2.0X at the end of the first quarter of 2023. In
April 2023, TETRA received 400,000
shares of Standard Lithium Ltd (SLI), increasing our holding of SLI
shares to 800,000. As of April 28,
2023, TETRA held $8.9 million
in total marketable securities between its holdings in CSI
Compressco and SLI.
Non-recurring Charges and Expenses
Non-recurring charges and expenses are reflected on Schedule E
and include cash proceeds from a $2.85 million insurance settlement received
during the first quarter that we did not reflect in adjusted free
cash flow, $0.7 million of costs
associated with our Arkansas brine
resource project, $0.4 million
of cumulative adjustments to long-term incentives, and favorable
$0.3 million stock appreciation
right credits. Unrealized losses on investments totaling
$0.5 million are included in
both our reported and adjusted earnings.
Conference Call
TETRA will host a conference call to discuss these results
tomorrow, May 2, 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 8547466, 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 Income
(Loss) From Continuing Operations
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 From Continuing Operations
Schedule I: Non-GAAP Reconciliation to Net
Leverage Ratio
Schedule J: Non-GAAP Reconciliation of Adjusted
EBITDA - Second Quarter Guidance
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. 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
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
(in thousands, except
per share amounts)
|
Revenues
|
$
146,209
|
|
$
147,448
|
|
$
130,037
|
|
|
|
|
|
|
Cost of sales,
services, and rentals
|
104,066
|
|
107,037
|
|
93,688
|
Depreciation,
amortization, and accretion
|
8,670
|
|
8,758
|
|
7,679
|
Impairments and other
charges
|
—
|
|
542
|
|
—
|
Insurance
recoveries
|
(2,850)
|
|
—
|
|
(3,750)
|
Total cost of
revenues
|
109,886
|
|
116,337
|
|
97,617
|
Gross profit
|
36,323
|
|
31,111
|
|
32,420
|
|
|
|
|
|
|
Exploration and
appraisal costs
|
720
|
|
3,135
|
|
1,930
|
General and
administrative expense
|
23,191
|
|
23,846
|
|
20,643
|
Interest expense,
net
|
5,092
|
|
4,900
|
|
3,324
|
Other income,
net
|
(214)
|
|
393
|
|
(2,411)
|
Income (loss) before
taxes and discontinued operations
|
7,534
|
|
(1,163)
|
|
8,934
|
Provision for income
taxes
|
1,489
|
|
666
|
|
1,200
|
Income before
discontinued operations
|
6,045
|
|
(1,829)
|
|
7,734
|
Loss from discontinued
operations, net of taxes
|
(12)
|
|
(75)
|
|
(15)
|
Net income
(loss)
|
6,033
|
|
(1,904)
|
|
7,719
|
Less: loss attributable
to noncontrolling interest
|
7
|
|
—
|
|
1
|
Net income (loss)
attributable to TETRA stockholders
|
$
6,040
|
|
$
(1,904)
|
|
$
7,720
|
|
|
|
|
|
|
Basic per share
information:
|
|
|
|
|
|
Net income (loss)
attributable to TETRA stockholders
|
$
0.05
|
|
$
(0.01)
|
|
$
0.06
|
Weighted average shares
outstanding
|
128,940
|
|
128,082
|
|
127,259
|
|
|
|
|
|
|
Diluted per share
information:
|
|
|
|
|
|
Net income (loss)
attributable to TETRA stockholders
|
$
0.05
|
|
$
(0.01)
|
|
$
0.06
|
Weighted average shares
outstanding
|
129,975
|
|
128,082
|
|
129,211
|
Schedule B:
Condensed Consolidated Balance Sheet (Unaudited)
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
16,683
|
|
$
13,592
|
Trade accounts
receivable
|
117,604
|
|
129,631
|
Inventories
|
83,941
|
|
72,113
|
Prepaid expenses and
other current assets
|
18,587
|
|
23,112
|
Total current
assets
|
236,815
|
|
238,448
|
Property, plant, and
equipment, net
|
105,251
|
|
101,580
|
Other intangible
assets, net
|
32,005
|
|
32,955
|
Operating lease
right-of-use assets
|
33,973
|
|
33,818
|
Investments
|
13,902
|
|
14,286
|
Other assets
|
13,638
|
|
13,279
|
Total long-term
assets
|
198,769
|
|
195,918
|
Total assets
|
$
435,584
|
|
$
434,366
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Trade accounts
payable
|
$
49,334
|
|
$
49,121
|
Current portion of
long-term debt
|
2,162
|
|
3
|
Compensation and
employee benefits
|
19,700
|
|
30,958
|
Operating lease
liabilities, current portion
|
8,249
|
|
7,795
|
Accrued
taxes
|
8,961
|
|
9,913
|
Accrued liabilities
and other
|
22,127
|
|
25,557
|
Current liabilities
associated with discontinued operations
|
914
|
|
920
|
Total current
liabilities
|
111,447
|
|
124,267
|
Long-term debt,
net
|
160,510
|
|
156,455
|
Operating lease
liabilities
|
27,716
|
|
28,108
|
Asset retirement
obligations
|
13,828
|
|
13,671
|
Deferred income
taxes
|
2,059
|
|
2,038
|
Other
liabilities
|
3,871
|
|
3,430
|
Total long-term
liabilities
|
207,984
|
|
203,702
|
Commitments and
contingencies
|
|
|
|
TETRA stockholders'
equity
|
117,387
|
|
107,625
|
Noncontrolling
interests
|
(1,234)
|
|
(1,228)
|
Total equity
|
116,153
|
|
106,397
|
Total liabilities and
equity
|
$
435,584
|
|
$
434,366
|
Schedule C:
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
(in
thousands)
|
Operating
activities:
|
|
|
|
|
|
Net income
(loss)
|
$
6,033
|
|
$
(1,904)
|
|
$
7,719
|
Adjustments to
reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
Depreciation,
amortization, and accretion
|
8,670
|
|
8,758
|
|
7,679
|
Impairment and other
charges
|
—
|
|
542
|
|
—
|
Loss (gain) on
investments
|
505
|
|
(339)
|
|
(1,100)
|
Equity-based
compensation expense
|
1,276
|
|
3,519
|
|
1,104
|
Provision for
(recovery of) credit losses
|
(21)
|
|
11
|
|
61
|
Amortization and
expense of financing costs
|
884
|
|
998
|
|
780
|
Insurance recoveries
associated with damaged equipment
|
(2,850)
|
|
—
|
|
(3,750)
|
Gain on sale of
assets
|
(170)
|
|
(190)
|
|
(218)
|
Other non-cash
credits
|
(100)
|
|
480
|
|
(101)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
12,626
|
|
(23,187)
|
|
(13,185)
|
Inventories
|
(11,313)
|
|
1,236
|
|
4,579
|
Prepaid expenses and
other current assets
|
4,496
|
|
(764)
|
|
2,510
|
Trade accounts payable
and accrued expenses
|
(11,179)
|
|
5,636
|
|
9
|
Other
|
128
|
|
(1,787)
|
|
(153)
|
Net cash provided by
(used in) operating activities
|
8,985
|
|
(6,991)
|
|
5,934
|
Investing
activities:
|
|
|
|
|
|
Purchases of property,
plant, and equipment, net
|
(12,784)
|
|
(7,378)
|
|
(9,305)
|
Proceeds from sale of
property, plant, and equipment
|
289
|
|
217
|
|
416
|
Insurance recoveries
associated with damaged equipment
|
2,850
|
|
—
|
|
3,750
|
Other investing
activities
|
(1,552)
|
|
(1,063)
|
|
(453)
|
Net cash used in
investing activities
|
(11,197)
|
|
(8,224)
|
|
(5,592)
|
Financing
activities:
|
|
|
|
|
|
Proceeds from
long-term debt
|
52,756
|
|
12,130
|
|
1,533
|
Principal payments on
long-term debt
|
(47,362)
|
|
(9,191)
|
|
(811)
|
Payments on financing
lease obligations
|
(258)
|
|
(128)
|
|
—
|
Net cash provided by
financing activities
|
5,136
|
|
2,811
|
|
722
|
Effect of exchange rate
changes on cash
|
167
|
|
749
|
|
236
|
Increase (decrease) in
cash and cash equivalents
|
3,091
|
|
(11,655)
|
|
1,300
|
Cash and cash
equivalents at beginning of period
|
13,592
|
|
25,247
|
|
31,551
|
Cash and cash
equivalents at end of period
|
$
16,683
|
|
$
13,592
|
|
$
32,851
|
|
|
|
|
|
|
Supplemental cash flow
information:
|
|
|
|
|
|
Interest
paid
|
$
4,513
|
|
$
4,091
|
|
$
3,096
|
Income taxes
paid
|
1,358
|
|
745
|
|
741
|
(Decrease) increase in
accrued capital expenditures
|
(2,411)
|
|
3,646
|
|
(2,164)
|
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 income (loss) per
share from continuing operations; consolidated and segment Adjusted
EBITDA; segment Adjusted EBITDA as a percent of revenue ("Adjusted
EBITDA margin"); adjusted income (loss) from continuing operations,
adjusted free cash flow from continuing operations; net debt, and
net leverage ratio. 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
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 income (loss) from continuing operations is defined as
the Company's income (loss) before noncontrolling interests and
discontinued operations, excluding certain special or other charges
(or credits), and including noncontrolling interest attributable to
continued operations. Adjusted income (loss) from continuing
operations 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 income (loss) per share is defined as the Company's
diluted net income (loss) per share attributable to TETRA
stockholders excluding certain special or other charges (or
credits). Adjusted income (loss) 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 (loss) before taxes and
discontinued operations, excluding impairments, exploration and
pre-development costs, 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 and
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 from continuing operations is defined as
cash from operations less discontinued operations Adjusted EBITDA
and discontinued operations capital expenditures, 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 from continuing operations do 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.
Schedule E: Non-GAAP
Reconciliation of Adjusted Income (Loss) From Continuing Operations
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
(in thousands, except
per share amounts)
|
|
|
|
|
|
|
Income (loss) before
taxes and discontinued operations
|
$
7,534
|
|
$
(1,163)
|
|
$
8,934
|
Provision (benefit) for
income taxes
|
1,489
|
|
666
|
|
1,200
|
Noncontrolling interest
attributed to continuing operations
|
7
|
|
—
|
|
1
|
Income (loss) from
continuing operations
|
6,038
|
|
(1,829)
|
|
7,733
|
Insurance
settlement
|
(2,850)
|
|
—
|
|
(3,750)
|
Exploration and
pre-development costs
|
720
|
|
3,135
|
|
1,930
|
Adjustment to long-term
incentives
|
353
|
|
131
|
|
784
|
Former CEO stock
appreciation right expense (credit)
|
(307)
|
|
(57)
|
|
472
|
Transaction, legal and
other expenses
|
82
|
|
576
|
|
—
|
Impairments and other
charges
|
—
|
|
542
|
|
—
|
Adjusted
income
|
$
4,036
|
|
$
2,498
|
|
$
7,169
|
|
|
|
|
|
|
Diluted per share
information
|
|
|
|
|
|
Net income (loss)
attributable to TETRA stockholders
|
$
0.05
|
|
$
(0.01)
|
|
$
0.06
|
Adjusted
income
|
$
0.03
|
|
$
0.02
|
|
$
0.06
|
Diluted weighted
average shares outstanding
|
129,975
|
|
128,082
|
|
129,211
|
Schedule F: Non-GAAP
Reconciliation of Adjusted EBITDA (Unaudited)
|
|
|
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
|
Former CEO stock
appreciation right
expense
|
—
|
|
—
|
|
(307)
|
|
—
|
|
(307)
|
Transaction and other
expenses
|
—
|
|
—
|
|
82
|
|
—
|
|
82
|
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
|
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
December 31, 2022
|
|
Completion
Fluids &
Products
|
|
Water &
Flowback
Services
|
|
Corporate
SG&A
|
|
Other and
Eliminations
|
|
Total
|
|
(in thousands, except
percents)
|
Revenues
|
$
66,219
|
|
$
81,229
|
|
$
—
|
|
$
—
|
|
$
147,448
|
Net income (loss)
before taxes and
discontinued
operations
|
10,456
|
|
4,924
|
|
(11,221)
|
|
(5,322)
|
|
(1,163)
|
Impairments and other
charges
|
342
|
|
200
|
|
—
|
|
—
|
|
542
|
Exploration and
pre-development costs
|
3,135
|
|
—
|
|
—
|
|
—
|
|
3,135
|
Adjustment to long-term
incentives
|
—
|
|
—
|
|
131
|
|
—
|
|
131
|
Former CEO stock
appreciation right expense
|
—
|
|
—
|
|
(57)
|
|
—
|
|
(57)
|
Transaction,
restructuring and other expenses
|
576
|
|
—
|
|
—
|
|
—
|
|
576
|
Interest (income)
expense, net
|
(304)
|
|
140
|
|
—
|
|
5,064
|
|
4,900
|
Depreciation,
amortization and accretion
|
1,787
|
|
6,808
|
|
—
|
|
163
|
|
8,758
|
Equity-based
compensation expense
|
—
|
|
—
|
|
3,519
|
|
—
|
|
3,519
|
Adjusted
EBITDA
|
$
15,992
|
|
$
12,072
|
|
$
(7,628)
|
|
$
(95)
|
|
$
20,341
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as a %
of revenue
|
24.2 %
|
|
14.9 %
|
|
|
|
|
|
13.8 %
|
|
Three Months Ended
March 31, 2022
|
|
Completion
Fluids &
Products
|
|
Water &
Flowback
Services
|
|
Corporate
SG&A
|
|
Other and
Eliminations
|
|
Total
|
|
(in thousands, except
percents)
|
Revenues
|
$
73,194
|
|
$
56,843
|
|
$
—
|
|
$
—
|
|
$
130,037
|
Net income (loss)
before taxes and
discontinued
operations
|
19,292
|
|
2,682
|
|
(10,346)
|
|
(2,694)
|
|
8,934
|
Insurance
settlement
|
(3,750)
|
|
—
|
|
—
|
|
—
|
|
(3,750)
|
Exploration and
pre-development costs
|
1,930
|
|
—
|
|
—
|
|
—
|
|
1,930
|
Adjustment to long-term
incentives
|
—
|
|
—
|
|
784
|
|
—
|
|
784
|
Former CEO stock
appreciation right expense
|
—
|
|
—
|
|
472
|
|
—
|
|
472
|
Interest (income)
expense, net
|
(323)
|
|
—
|
|
—
|
|
3,647
|
|
3,324
|
Depreciation,
amortization and accretion
|
1,948
|
|
5,543
|
|
—
|
|
188
|
|
7,679
|
Equity-based
compensation expense
|
—
|
|
—
|
|
1,104
|
|
—
|
|
1,104
|
Adjusted
EBITDA
|
$
19,097
|
|
$
8,225
|
|
$
(7,986)
|
|
$
1,141
|
|
$
20,477
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as a %
of revenue
|
26.1 %
|
|
14.5 %
|
|
|
|
|
|
15.7 %
|
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.
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
(in
thousands)
|
Unrestricted
cash
|
$
16,683
|
|
$
13,592
|
|
|
|
|
Term Credit
Agreement
|
$
155,282
|
|
$
154,570
|
Asset-Based Credit
Agreement
|
5,229
|
|
1,885
|
Argentina Credit
Agreement
|
1,700
|
|
—
|
Swedish Credit
Facility
|
461
|
|
3
|
Net debt
|
$
145,989
|
|
$
142,866
|
Schedule H: Non-GAAP Reconciliation
to Adjusted Free Cash Flow (Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
(in
thousands)
|
Cash from operating
activities
|
$
8,985
|
|
$
(6,991)
|
|
5,934
|
Capital expenditures,
net of proceeds from asset sales
|
(12,495)
|
|
(7,161)
|
|
(8,889)
|
Payments on financing
lease obligations
|
(258)
|
|
(128)
|
|
—
|
Distributions from CSI
Compressco LP (1)
|
52
|
|
52
|
|
52
|
Adjusted Free Cash
Flow
|
$
(3,716)
|
|
$
(14,228)
|
|
$
(2,903)
|
|
|
(1)
|
Following the GP Sale
on January 29, 2021, TETRA retained an investment CSI Compressco
representing a 3.7% limited partner interest as of March 31,
2023.
|
Schedule I: Non-GAAP
Reconciliation to Net Leverage Ratio (Unaudited)
|
|
|
Three Months
Ended
|
|
Twelve
Months Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
September
30, 2022
|
|
June 30,
2022
|
|
March 31,
2023
|
|
(in
thousands)
|
Net income (loss)
before taxes and
discontinued
operations
|
$
7,534
|
|
$
(1,163)
|
|
$
2,115
|
|
$
1,280
|
|
$
9,766
|
Insurance
recoveries
|
(2,850)
|
|
—
|
|
—
|
|
—
|
|
(2,850)
|
Exploration and
pre-development costs
|
720
|
|
3,135
|
|
936
|
|
634
|
|
5,425
|
Adjustment to long-term
incentives
|
353
|
|
131
|
|
1,899
|
|
1,464
|
|
3,847
|
Transaction,
restructuring and other
expenses
|
82
|
|
576
|
|
82
|
|
556
|
|
1,296
|
Impairments and other
charges
|
—
|
|
542
|
|
—
|
|
2,262
|
|
2,804
|
Former CEO stock
appreciation right
expense (credit)
|
(307)
|
|
(57)
|
|
(168)
|
|
(14)
|
|
(546)
|
Adjusted interest
expense, net
|
5,092
|
|
4,900
|
|
3,999
|
|
3,610
|
|
17,601
|
Adjusted depreciation
and amortization
|
8,670
|
|
8,758
|
|
8,634
|
|
7,746
|
|
33,808
|
Equity compensation
expense
|
1,293
|
|
3,519
|
|
1,098
|
|
1,159
|
|
7,069
|
Adjusted EBITDA
(Schedule F)
|
$
20,587
|
|
$
20,341
|
|
$
18,595
|
|
$
18,697
|
|
$
78,220
|
Acquisition trailing
EBITDA
|
—
|
|
503
|
|
915
|
|
706
|
|
2,124
|
Non-cash (gain) loss on
investments
|
504
|
|
(286)
|
|
548
|
|
710
|
|
1,476
|
Gain on sale of
assets
|
(170)
|
|
(190)
|
|
(262)
|
|
(500)
|
|
(1,122)
|
Other debt covenant
adjustments
|
—
|
|
249
|
|
17
|
|
214
|
|
480
|
Debt covenant
adjusted EBITDA
|
$
20,921
|
|
$
20,617
|
|
$
19,813
|
|
$
19,827
|
|
$
81,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2023
|
|
|
|
|
|
|
|
|
|
(in thousands,
except ratio)
|
Term credit
agreement
|
|
|
|
|
|
|
|
|
$
163,072
|
ABL credit
agreement
|
|
|
|
|
|
|
|
|
6,200
|
Argentina credit
agreement
|
|
|
|
|
|
|
|
|
1,700
|
Swedish credit
agreement
|
|
|
|
|
|
|
|
|
461
|
ABL letters of credit
and guarantees
|
|
|
|
|
|
|
|
|
8,268
|
Total debt and
commitments
|
|
|
|
|
|
|
|
|
179,701
|
Unrestricted
cash
|
|
|
|
|
|
|
|
|
16,683
|
Debt covenant net debt
and commitments
|
|
|
|
|
|
|
|
$
163,018
|
Net leverage
ratio
|
|
|
|
|
|
|
|
|
2.0
|
Schedule J: Non-GAAP
Reconciliation of Adjusted EBITDA - Second Quarter
Guidance
|
|
|
|
Second Quarter
2023
|
|
(in
millions,
except
percents)
|
Revenues
|
|
$165 -
$175
|
Net income before taxes
and discontinued operations
|
|
11.5 - 13.5
|
Adjusted interest
expense, net
|
|
5.5 - 6.0
|
Adjusted depreciation
and amortization
|
|
8.5 - 8.8
|
Equity-based
compensation expense
|
|
1.5 - 1.7
|
Adjusted
EBITDA
|
|
$27.0 -
$30.0
|
|
|
|
Adjusted EBITDA as a %
of revenue
|
|
16.3% -
17.1%
|
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SOURCE TETRA Technologies, Inc.