0000928054-26-000047
SEC filingFirst-quarter 2026 total revenue rose 27% YoY to $70.1M, driven by ProFrac volumes and PWRtek rental income, partially offset by lower contract shortfall fees.
For the three months ended March 31, 2026, total revenue rose 27% to $70.1 million from $55.4 million in the prior-year period. The increase was led by higher sales volumes under the ProFrac supply agreement and $7.3 million in PWRtek rental revenue, partially offset by a $4.8 million decrease in accrued Contract Shortfall Fees and lower external customer product sales. Gross profit increased 25% to $15.5 million, while gross margin narrowed 30 basis points to 22.2% as cost of sales grew at a slightly faster rate (27%) than revenue. Selling, general and administrative expenses rose 10% to $6.9 million, driven by higher salaries, stock compensation, and professional fees. Income from operations improved 36% to $7.6 million, with operating margin expanding 70 bps to 10.8%. Net income, however, fell 13% to $4.7 million, as income tax expense surged to $1.6 million (from $0.1 million) and interest and other expense increased $1.2 million, largely due to the PWRtek Note.
The Chemistry Technologies segment generated $59.7 million in revenue, up 13% year-over-year, as a $14.2 million increase in related-party revenue (higher product volumes) more than offset a $7.3 million decline in external customer revenue (lower product volumes). CT segment operating income decreased $3.8 million to $5.1 million, reflecting a $3.6 million drop in gross profit from lower volumes and higher input costs. The Data Analytics segment posted a dramatic turnaround, with revenue soaring to $10.4 million from $2.6 million, driven by the new PWRtek lease agreement (related-party service revenue of $6.9 million) and a 42% increase in external service revenue. DA operating income swung to a $6.1 million profit from a ($0.1 million) loss, greatly benefiting from the high-margin rental income. Corporate and Other operating loss widened 15% to $3.7 million on higher administrative costs.
Management expects total revenue to grow in both the CT and DA segments through the remainder of 2026 versus the prior year. For the DA segment specifically, the Lease Agreement with ProFrac is anticipated to contribute approximately $27.0 million in full-year 2026 revenue, compared with $27.5 million in total DA revenue for all of 2025. In the CT segment, the company anticipates stable demand for its chemistry during 2026, supported by customer commitments and an improving outlook for natural gas activity in the Haynesville basin. The company has begun deploying equipment under its first power-services contract for federal disaster recovery, which is expected to drive sequential DA revenue growth in the second quarter. Key strategic priorities include deeper integration between CT and DA segments, international expansion in the Middle East and Argentina, and continued innovation in real-time analytics and field-gas-to-power solutions.
Cash and equivalents stood at $5.7M, relatively flat from $5.7M at year-end 2025. Total debt increased to $44.3M, comprising $4.7M under the ABL (up $1.3M) and $39.6M net of deferred costs on the related party note payable (unchanged at $40M gross). The ABL provides up to $20M with a borrowing base; as of March 31, 2026, availability was $5.4M. Shareholders' equity rose to $118.2M from $113.1M, driven by net income and the exercise of the April 2025 Warrant (6M shares issued). Inventory net increased to $14.3M from $10.6M, with $0.4M additional reserve for excess/obsolescence. Deferred revenue grew to $1.7M from $0.7M.
The most notable commitment is the OSP Agreement with ProFrac, which requires Flotek to purchase or rent $12.5M of equipment for its Data Analytics segment. As of March 31, 2026, $0.7M had been utilized, leaving $11.8M of the Equipment Credit remaining. The Lease Agreement with ProFrac GDM guarantees minimum rental income of $111.8M through April 2030 (first five years at fixed rates). Additionally, operating and finance lease payment obligations total $8.2M (undiscounted). Debt principal on the related party note ($40M) is due in 2030, with no scheduled payments before then.
No share buybacks or dividends were declared. The company increased ABL borrowings by $1.3M net to fund working capital. Capital expenditures were $1.0M (1.4% of sales), primarily for the DA segment ($2.1M in long-lived asset additions, partially offset by a $17k reduction in CT). The company also received $44k from employee stock purchases and $6k from stock option exercises. Interest expense totaled $1.3M, mainly on the related party note ($1.0M).
The Chemistry Technologies segment generated $59.7M in total revenue (up 13% YoY), with operating income of $5.1M (8.6% margin). Related party revenue accounted for 75% of CT sales. The Data Analytics segment saw explosive growth: total revenue jumped to $10.4M from $2.6M, driven by $6.8M of rental revenue from the power generation equipment leased to ProFrac. DA operating income swung to $6.1M (59.1% margin) from a loss of $0.1M. Geographic breakdown: U.S. contributed 97.6% of total revenue ($68.4M), UAE $1.2M, and other countries $0.4M. Major customer concentration: ProFrac (related party) accounted for 74.1% of revenue, with no other customer above 10%.
Operating cash flow (CFO) of $21K was drastically lower than net income of $4.7M, signaling poor cash conversion quality. The primary driver was a massive $9.8M increase in related-party accounts receivable, which consumed cash. Other working capital headwinds included a $4.1M inventory build and a $2.8M rise in trade receivables, partially offset by a $4.2M increase in accounts payable and $1.5M in accrued liabilities. Non-cash add-backs (depreciation, amortization, stock compensation, deferred tax) totaled $5.9M, but were overwhelmed by the working capital drain.
Capital expenditures of $1.0M rose 68% year-over-year, indicating stepped-up investment. Free cash flow (not explicitly stated) would be deeply negative given CFO of only $21K and capex of $1.0M. Financing activities provided $892K, primarily from net asset-based loan proceeds of $1.3M ($55.1M borrowings less $53.8M repayments), offset by $456K in tax withholding payments for share-based compensation. No dividends or share repurchases were reported.
The $9.8M related-party receivable increase is a notable anomaly that warrants further investigation into the nature and collectability of that balance. The company ended the period with $5.8M in cash and restricted cash, down from $5.8M at the start.