Yahoo Finance Tetra Technologies Inc (TTI) (Q1 2024) Earnings Call Transcript Highlights: Robust Growth and ...
Adjusted EBITDA: $106 billion for FY 2023, up 37% from 2022.
Adjusted Free Cash Flow: $41.1 million for FY 2023, 61.6% higher than 2022.
Revenue - Completion Fluids & Products: $313 million for FY 2023, up 15% year-over-year.
Adjusted EBITDA - Completion Fluids & Products: Increased by $22 million or 32%.
Revenue - Industrial Chemicals: Grew over 18% from 2022.
Revenue - Water & Flowback Services: $33 million increase or 12% for FY 2023.
Adjusted EBITDA - Water & Flowback Services: Increased by $10 million or 23%.
Net Leverage Ratio: 1.1 times as of FY 2023.
Net Debt Reduction: Reduced by 27% in FY 2023.
Liquidity: $212 million as of February 26, inclusive of $75 million delayed draw feature.
Market Capitalization: Holdings of Standard Lithium and CSI Compressco total approximately $12 million.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Tetra Technologies Inc reported a strong year in 2023 with adjusted EBITDA growing by 37% from 2022 and operating income up by 183%.
The company achieved significant growth in its Completion Fluids & Products segment, with revenue growing by $40 million or 15% and adjusted EBITDA growing by $22 million or 32%.
Tetra Technologies Inc's Industrial Chemicals business posted its highest revenue and adjusted EBITDA in history, with a revenue growth of over 18% from the previous year.
The company has secured a second quarter job in the North Sea for Tetra CS Neptune and is in discussions for additional projects in the Gulf of Mexico, indicating potential growth in 2024.
Tetra Technologies Inc has successfully improved its balance sheet, reducing net debt by 27% and achieving a net leverage ratio of 1.1 times.
Negative Points
Despite overall growth, the company experienced higher than usual year-end activity slowdowns in some segments.
The Water & Flowback Services segment saw a decline in rig activity and active frac fleets for most of 2023, although revenue was up due to market share gains.
The company faces uncertainties with regulatory specifications for using produced water for industrial, farming, and other applications, which could impact project timelines and costs.
Significant investments are required for the bromine and lithium projects in Arkansas, with capital expenditures expected to continue into the next year.
While the company is focusing on high-return projects, this strategic decision may limit the potential for higher growth in other segments like Water & Flowback Services.
Q & A Highlights
Q: Could you go over the timing of the CapEx requirements for the bromine project and the associated costs? A: (Brady Murphy, President, CEO, Director) We aim to complete the bromine cost analysis in the next few months and propose it to the Board. The lithium project, potentially our JV, might follow in late Q3 or Q4. (Elijio Serrano, CFO, SVP) For the bromine side, we'll start ordering long lead items soon and begin civil work this year, with significant construction expected next year. Lithium investments will be shared with our partner, keeping this year's expenditures below our base business's free cash flow.
Q: Could you discuss the ownership and CapEx related to the first desalination water reuse plant and its expected uses? A: (Brady Murphy, President, CEO, Director) We will own the desalination technology and equipment, while our partner will fund the civil works and site construction costs. This project targets 20-25,000 barrels per day of produced water for over five years. The water will meet freshwater specifications suitable for various applications.
Q: Can you provide more details on the beneficial produced water project and its progress? A: (Brady Murphy, President, CEO, Director) We've established strategic partnerships and tested various produced water samples. We're in commercial discussions for a project in South Texas and a pilot in the Permian Basin, expecting to launch both this year. The interest from customers is significant due to the current environmental focus.
Q: What are your expectations for the rebound in the Industrial Chemicals segment, given the destocking in Q4? A: (Brady Murphy, President, CEO, Director) Despite the destocking at year-end, order flow has reversed sharply at the start of the year. We anticipate a strong Q2 aligned with historical trends, supported by ongoing offshore completion fluids activities.
Q: How do you view the potential for the Water & Flowback segment given the current U.S. land outlook? A: (Brady Murphy, President, CEO, Director) Despite a 50% lower rig count, our 2023 revenue exceeded 2018 levels by 12%, showing our ability to grow amidst declining completion activity. This growth is driven by technology like Sandstorm and a focus on produced water. (Elijio Serrano, CFO, SVP) We're focusing on automation and technology to enhance margins and reduce onsite personnel, aiming for high EBITDA margins.
Q: What are the growth expectations for the global deepwater market and the Completion Fluids business in 2024? A: (Elijio Serrano, CFO, SVP) We anticipate double-digit growth, driven by Neptune projects and new rigs in the Gulf of Mexico. Our contracts with these rigs' customers should significantly contribute to this growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
