Flotek Industries (FTK) Q4 2025 earnings call transcript

I would now like to turn the conference call over to Mike Critelli, Director of Finance and Investor Relations. Please go ahead. Thank you, and good morning. We're thrilled to have you with us for FLOTEK's fourth quarter and full year 2025 earnings conference call. Today, I'm joined by Ryan Ezell, Chief Executive Officer, and Bon Clement, Chief Financial Officer. We'll begin with prepared remarks on our operations and financial performance, followed by Q&A. Yesterday, we released our Q4 and full-year 2025 results, along with an updated investor presentation, both available on the Investor Relations section of our website. This call is being webcast with a replay available shortly after. Please note that the comments made on today's call may include forward-looking statements, which include our projections or expectations for future events.

Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from those projected in forward-looking statements. We advise listeners to review our earnings release and most recent 10K and 10Q filings for a more complete description of risk factors that could cause actual results to materially differ from those projected in forward-looking statements. Please refer to the reconciliations provided in the earnings press release and investor presentation, as management will be discussing non-GAAP metrics on this call.

With that, I will turn the call over to our CEO, Ryan Izzell. Thank you, Mike. Good morning, everyone. We appreciate your interest in FLOTEK and your participation today as we review our Q4 and full year 2025 operational and financial results. In the fourth quarter, we saw North American operators maintain the cautious posture initiated in the second quarter as they continue to navigate the return of OPEC plus fair capacity and persistent global trade volatility. Despite the dynamic geopolitical and macroeconomic challenges that have injected uncertainty within the market, the FLOTEK team remains steadfast in the execution of our corporate strategy, We are now in the next year of the growth of our growth and growth growth strategy, driving transformation and delivering our third consecutive year of significant gross profit and adjusted EBITDA improvement.

Through the powerful convergence of innovative, real-time data and chemistry solutions, as shown on slide three, FLOTEK has laid the foundation for a data-driven growth trajectory built on diverse recurring revenue, high-margin services, and proprietary technologies that create value for our customers and improve returns for our shareholders. Transitioning to slide 4, FLOTEK extended its track record of transforming the company into a data as a service business model as our industrial pivot continues to gain momentum while expanding the total addressable market for future growth of the company. Furthermore, we delivered standout performance throughout 2025, resulting in increased market share in both of our complementary business segments. Data analytics grew exponentially while chemistry outpaced the market in a challenging environment through an unwavering commitment to safety, service quality, innovation, and total value creation.

With that, I would like to touch on some key highlights for the quarter referenced on slide 7 that Vaughn will discuss later in the call. Q4 in full year 2025 saw the highest quarterly and annual revenues since 2017. The data analytics segment achieved its highest ever quarterly and annual revenue in company history. A gross profit climbed 24% versus the fourth quarter of 2024 and 52% as compared to full year 2024. The data analytics gross profit accounted for 48% of the total company gross profit during the fourth quarter of 2025 as compared to only 8% in the quarter a year ago. Adjusted EBITDA grew over 123% year-over-year, while 2025 net income improved 191%.

Finally, we completed the onboarding of our PowerTech assets and the strategic entry into power services in 2025. This sets the stage for high margin recurring revenue growth in 2026 and beyond. All of these results were achieved with zero lost time incidences in the field of operations, with our prescriptive chemistry management and Raceland MTI team surpassing over 10 years without a lost time incident. I want to thank all of our employees for their hard work and commitment to safety and service quality in achieving these outstanding results.

Now turning to the larger picture for the energy and infrastructure sector, we share the viewpoint that despite the near-term volatility and uncertainty created by the ongoing conflicts in the Middle East, the fundamentals for hydrochloric demand will continue to grow over the medium to long term. A rebalance of supply and demand is expected due to the combination of steeper decline rates from large percentages of unconventionals, diminishing overall reservoir quality, and minimal exploration success will create potential tailwinds for energy and infrastructure services. Substantial investment will be required to maintain current production levels, while additional spending would be needed to meet the expanding power demand driven by AI, data centers, and industrial reassuring, combined with the reliability of the demand.

We will now turn the call over to the FWOE. Our legacy pressure pump customers continue to capitalize on the portfolio diversification opportunity provided by the demand for remote power generation. FLOTEK is poised to support these emerging customers with products and services that help protect their assets while optimizing their operational performance and fuel efficiency. The multi-year waiting list for turbines and reciprocating engines protecting these capital-tensive investments is critical, along with enabling reliability standards that exceed greater than 99% uptime requirements. Now, transitioning from the micro look, let's dive into the details starting with slide 11 of the earnings deck. I want to spotlight the remarkable progress in our data analytics segment which saw service revenues increase 381% in Q4 2025 versus Q4 2024, elevating gross profit to 73% in Q4 2025 versus only 39% in the same quarter a year ago.

This transformational growth in data-driven service revenue is empowered by three upstream technology applications. Power services, digital valuation, and flare monitoring. All of which are fueling significant advancements for our organization while generating recurring revenue backlog. The first is our power services, which has evolved from a novel analytical approach into a transformative solution for the energy infrastructure sector that we call PowerTech. What began as advanced analytics has grown into a comprehensive end-to-end fuel management platform, redefining performance standards and operations within the sector. Looking at slide 13, at the heart of PowerTech is our VARACS analyzer, which goes beyond data collection to deliver custody transfer grade measurements. It provides precise BTU, methane number, and volume reporting for royalties, invoicing, and performance guarantees.

Complementing this, our patented conditioning and distribution trailers actively remove liquids and contaminants, conditioning high BTU hydrocarbon fees to meet exact turbine or engine performance specifications. But PowerTech is more than just a technology. It's about control. Our cloud-based portal enables the monitoring of live VCU trends, H2S alerts, Coriolis flow meter readings, and automated CNG blend controls combined with custom alarm thresholds to automatically isolate all-spec hydrocarbon fees and protect high-value turbines or reciprocating engines from catastrophic damage, thus minimizing downtime and operational risk while enhancing safety. More importantly, our velocity of measurement enables direct communication to the OEM engine to automatically adjust engine operation parameters and optimize engine performance. We don't believe there is another analyzer technology capable of executing at this level of real-time automation today.

Finally, our 35-plus data analytics patents position FLOTEK as a leader across the natural gas value chain. When considering our capabilities, we deliver unmatched monitoring, control, and safety for field gas operations. On March 3, 2026, FLOTEK announced its first contract within the utilities infrastructure sector seen on slide 14. Leveraging our proprietary PowerTech platform, FLOTEK will partner with leading distributed power service providers to coordinate the installation of up to 50 megawatts of state-of-the-art power generation equipment, The impact of the area was struck by a destructive wind event which caused significant damage to local power infrastructure. This deployment harnesses real-time data analytics for unparalleled efficiency, ensuring resilient power that drives the community recovery forward. Under the contract, FLOTEK will supply and mobilize cutting edge smart conditioning skids and advanced gas distribution equipment alongside natural gas powered GENSATs.

The gas distribution skid provides independent fuel control to each GENSAT, allowing seamless maintenance without interrupting the power flow and guaranteeing uptime even in the harshest conditions. This week, we have boots on the ground evaluating the site selection and continuing to work with engineers and customers to determine the site design, exact power demand, and full deployment schedule.

Now, let's transition to SLIDE 15, where we'll dive into our second upstream application, Digital Valuation. This groundbreaking use case sets a new standard in the oil and gas industry, delivering unprecedented transparency and minimizing enterprise risk for producing wells like never before Thank you for joining us today. The EXPECT measurement unit is designed to enable more accurate volume and compositional data, thereby delivering greater transparency for royalty owners, operators, and midstream companies than traditional methods. We believe the EXPECT speed, accuracy, durability, and qualification under the rigorous measurement standards outlined in GPA 2172 will provide a significant advantage in discussions with prospective customers We will be able to help our customers as we aggressively expand this manufacturing field deployment.

Since completing our EXPECT pilot program in the third quarter of 2025, we exited the year with over $120,000 per month in recurring high margin revenue. Furthermore, 2026 is off to a great start with multiple opportunities on the horizon, each of which can more than double our deployed active EXPECT units. Let move to our third upstream application the Verical flare monitoring solution We continue to experience strong operational demand in the fourth quarter of 2025 with total flare monitoring revenue for the full year exceeding million As we proactively navigate the evolving regulatory landscape particularly the EPA FLIR monitoring and methane emission standards we are deepening strategic partnerships with leading operators and FLIR technology developers This collaborative approach not only ensures seamless compliance but also delivers substantial operational efficiencies, meaningful methane reductions, and enhanced environmental performance for our clients.

It's clear that our transformational strategy to grow the data analytics segment through upstream applications is gaining traction. We increased our upstream revenues from $2.1 million in 2024 to over $21 million in 2025, with gross profits expanding from $1.2 million in 2024 to $18.4 million in 2025. But what is most important is what it means for our stakeholders and investors. Our DASH-driven strategy ensures predictable recurring revenue and cash flow, delivering stability and long-term value. Our proprietary data technologies and superior measurement accuracy enable velocity and decision control that establish a high barrier to entry, secure client loyalty, and support our value-based service model.

Finally, long-term high-margin subscriptions position FLOTEK for sustained growth and margin expansion, driving significant shareholder value over time. Now lastly, looking at our chemistry technology segment continues to deliver robust performance, driven by the differentiation of our prescriptive chemistry management services and our expanding international presence. Slide 18 highlights the resilient performance of our chemistry segments, which delivered a 25% increase in total revenue for full year 2025 compared to 2024, excluding OSP payments. Despite a 24% decline in the average North American frack we count over the same period from 201 at year-end 2024 to 154 at year-end 2025, according to primary vision data. While we anticipate potential near-term commodity price volatility, we see encouraging indicators for call sheet optimism in the back half of 2026 and beyond, and we continue to closely monitor operational and supply chain risks for international operations amid the ongoing conflicts in the Eastern Hemisphere.

It's evident that our chemistry team has executed our strategy flawlessly despite We will be able to get the near-to-medium-term headwinds. While uncertainties around near-term activity levels persist due to macro factors that could affect the completion of the chemistry market, we remain focused on defining these challenges, delivering differentiated chemistry and data services to provide our customers with industry-leading returns on their investment.

Looking ahead, I am more confident than ever in FLOTEK's momentum and our ability to drive sustained, profitable growth as we execute our transformative corporate strategy. We are firmly positioning FLOTEK as a high-growth technology leader in the energy and infrastructure sectors, accelerating innovation through the powerful integration of real-time data analytics and advanced chemistry solutions tailored precisely to our customers' evolving needs. Now I will turn the call over to Brian to provide key financial highlights.

Brian Gould Thanks, Ryan. Good morning, everybody. Our fourth quarter results cap an exceptional year in which we generated meaningful value for our shareholders. As highlighted in yesterday's presentation on slide 7, we achieved several important milestones, including our highest quarterly revenue since 2017, driven in part by the largest quarterly contribution from Profract in the more than four-year history of our supply agreement, and the first quarter in which our data analytics The continued expansion of data analytics revenue is translating directly into enhanced profitability. As Ryan noted, in the fourth quarter, DA accounted for 48% of total company gross profit, a significant increase from just 8% in the prior year period. Two really impressive metrics stand out as highlighted on slide 11.

One, our data analytics gross profit for 2025 totaled just over $18 million, which represents more than two times the gross profit. The first, the data analytics revenue during the fourth quarter exceeded DA revenue for the entire year of 2024. Both of these metrics highlight the exceptional growth that we realized in 2025 from our DA segment.

Regarding total company revenues during the quarter, they were up 33% from the year-ago quarter and benefited from a $22 million or approximately 80% increase in related party revenue as compared to the fourth quarter of last year. Approximately $15 million of the PROFRAC revenue increase was chemistry-related, while $6.7 million was associated with the PowerTech lease agreement. External customer chemistry revenue declined 30% from the year-ago quarter due in large part to slowing activity levels in November and December. However, external chemistry revenues were still up an outstanding 26% for the full year versus 2024, despite the numerous headwinds in the upstream completion markets that Ryan touched upon earlier. Data analytics had another solid quarter with product revenue and service revenue up significantly from the year ago, driving the segment's highest quarterly and annual revenue ever.

Data analytics segment revenue represented 15% of total company revenue in the fourth quarter, up from just 5% in the year-ago quarter. PowerTech revenues totaled $15.8 million during 2025, and as shown on slide 11, since closing the PowerTech acquisition in the second quarter, these assets have been a clear catalyst for margin and profitability expansion, driving improvements not only within the DA segment, but also at the corporate level. As a reminder, based on the contractual terms in the lease agreement, PowerTech revenues in 2026 are expected to be north of $27 million, or an approximate 70% increase from 2025. So we continue to expect these assets to be a significant contributor to our 2026 results. Gross profit increased 24% and 52% respectively, as compared to the year-ago quarter and fiscal year.

Fourth quarter gross profit is a percentage of revenue total of 22.5% and was impacted by a combination of product mix as well as the approximate $5 million sequential reduction related to the shortfall penalty, which is a byproduct of the huge quarter of revenue we achieved with Profract. SG&A expenses increased compared to the fourth quarter of last year, primarily reflecting higher personnel costs, including stock compensation, as well as elevated professional fees, A portion of which relate to the company's first-time integrated audit requirements. Importantly, as revenues scale, G&A declined to 11% of revenue from 13% in the prior year quarter, demonstrating improving operating leverage and the efficiency of our cost structure as the business grows. Net income for the quarter totaled $3 million or $0.08 per diluted share compared to $4.4 million or $0.14 per diluted share in the prior year quarter.

It's worth pointing out that the current quarter net income and diluted earnings per share as compared to the year-ago quarter were impacted by higher depreciation and interest costs, which are primarily related to the PowerTech acquisition, as well as higher effective tax rate driven by non-cash adjustments related to the company's valuation allowance on deferred tax assets. The effective tax rate for the fourth quarter was approximately 35% compared to 7% in the year-ago period. We do expect the effective tax rate to normalize closer to 21% going forward, and we do not expect to pay cash taxes over the next few years other than minor amounts related to state income taxes. Earnings per share for the 2025 periods as compared to the year-ago periods also included a higher share count as a result of the 6 million share warrant issued in connection with the PowerTech acquisition.

Although the warrant has not been exercised, the shares have been included in both basic and diluted share accounts since the acquisition closed in the second quarter. As noted in yesterday's release, as of the end of 2025, we elected to change our calculation of adjusted EBITDA to better align with the SEC's guidance on non-GAAP financial metrics. What this means is that for external reporting purposes, we will no longer add back non-cash amortization of contract assets to our adjusted EBITDA. All adjusted EBITI references in the earnings release reflect the revised computational methodology. To compute adjusted EBITI consistent with our prior methodology for purposes of comparison to our original adjusted EBITI guidance, simply add the non-cash amortization of contract assets as disclosed in the press release to the revised adjusted EBITI balances shown.

That math suggests that adjusted EBITDA for the fourth quarter of 2025 under our previous methodology was approximately $10.1 million. Using the revised calculation, adjusted EBITDA was up 40% versus the year-ago quarter and grew 123% for the full year. Using either methodology, we were near the top end of the original or revised methodology guidance range on adjusted EBITDA. Wrapping up my comments, touching briefly on the balance sheet, we ended the year with $5.7 million in cash and $3.3 million drawn on our ABL. You'll note that total assets increased to just over $220 million at year end, primarily as a result of the release of the valuation allowance, allowing this to reflect our deferred tax assets on the balance sheet.

With that, I'll turn the call back to Ryan for closing remarks. Thanks, Bond. Our 2025 results build upon our now multi-year track record of consistently posting improved financials as we successfully transform the organization to enter a new data-driven frontier. Our data analytics segment continues to deliver explosive growth with triple-digit revenue increases, expanding recurring revenue streams, and a robust multi-year backlog that provides strong visibility into future cash flows and margin expansion. Combined with our resilient prescriptive chemistry management services, FLOTEK's ability to execute strategic wins, advance asset integrations, and differentiate on a technology and returns basis will enable further capture of market share and delivery of continued top and bottom line improvement. We remain fully committed to shaping the industry's digitalized, sustainable future by leveraging chemistry as the common value collection platform, unlocking higher returns for our customers and generating compelling opportunities for shareholder value creation.

With our proven execution, expanding high-margin capabilities, and clear pathway to scale growth, FLOTEK is poised for an exciting next phase of value delivery to our investors. Operator, we're now ready to open the floor for questions.

Yeah, Jeff, I'll be glad to provide a little bit of color on that, because we're pretty excited about the advancements that we made. I will refer back to some of the comments I made on our end of quarter call at Q3 was, we set up our PowerTech advancement of our business development units around three major steps. One is proving the validation of the measurement, then moving to levels of various control and integration, and then therefore the final thing we do is full distribution and conditioning. I'm proud to say that we've moved into seven new customers successfully on the measurement side with executed POs and successful field trials. And now we're moving into longer term duration contracts and looking at placing our new advanced NGS or Smart Skids as well as ESD.

We have right now ongoing about six different operations in the field on top of our most recent announcement on the industrialized infrastructure component for utilities So it's going really, really well. We've also kind of brought forward what we're looking at on capital spend at building new pieces of equipment to go out to location. And so, from that standpoint, I think, you know, we're still on track to hit that run rate of doubling the size of the fleet by the end of the year, if not maybe a little bit sooner on those opportunities. And I think that, you know, I think the unique capabilities of our technology in some of these harsh conditions is opening up some unique pathways for us to hit some of these really stranded, you know, disaster relief power locations.

And that's been an interesting opportunity for us to unlock here at FLOTEK. Great. I appreciate that. And on a related question, what the business model or kind of contract approach, if you will, on this utility infrastructure deal, do you guys view that as kind of a one-off specific to this customer need, or is that something you guys view as more repeatable for some of the other opportunities that you're discussing with customers? No, I believe it's 100% repeatable, Jeff. I think that, you know, where our wheelhouse of strength is, is the monitoring, conditioning, and the setting up of the power generation equipment to be not only successful, but operate safely. And the fact that we can do this as some of the harshest conditions on the planet for field gas, no matter isolation or how we look at it with a field gas, is that this allows us to work with some of the larger suppliers of power to pull them through jointly with what we do and work alongside of them and provide this power.

So I think there's going to be a multitude of opportunities very similar to this. And we're hoping that the development of working with some additional power providers opens up some additional opportunities for us inside the data center and some of the more established infrastructure components around AI. And right now, I would say that the horizon looks that direction. It's worked to our liking so far, and we hope to have some more exciting updates on that as it progresses throughout Q1. Sounds great, Ryan. I appreciate the details. I will turn it back. Thank you.

Yeah, so I'll tell you, we're going to be probably surprised to continue to update on this. We've got a lot of these remote power gen processes. We're looking at it a little bit on a conservative ramp. Our team has been on location all week. We are expecting to start to see this revenue probably in the starting parts to the middle part of Q2, which would be initial mobilization and setup. So the power will probably be split over two locations. One is providing power to the current community and its infrastructure and some of the services there, particularly like the hospitals and things. And then there's a secondary location that will be powering additional housing that will be built to recover from what was destroyed.

So it will kind of come in, I think, two phases. But I think for us, we expect most of that to start the mobilization pieces and I'll go here in Q2. It starts to build throughout the year. It does appear that on our initial onset is that I think this will have a high probability of progressing past the six months just for the sheer fact it will take longer than that to build the temporary structures of houses. Plus, they're looking at a full installation of an additional power plant at the end. So, we're expecting this to get extended and be a good contract win for us. And the unique model is that we were initially approached because of our unique capability in terms of conditioning any types or variable types of gas, so that they can provide safe fuel source for operational gensets.

And I think that allowed us to help go out and work with finding these power providers to bring and pull through. So I think we'll see some similar model opportunities in these kind of disaster relief components. I don't know how much that model works when we look at data centers, because usually those are the big megawatt type installations. But for these remote areas, it's a favorable business model for us to help work with the power providers on doing that. On the other side, we would just be on the pure conditioning aspect. Okay. Okay. Got it. And then just to clarify, I think you said the PowerTech contract that you had was $27 million in revenue.

Did that include some of this new award, or would the new award be incremental to that? Yeah, the new award is incremental. That is just the original work that we have on a dry lease program for five years, There's 27 annual on those, plus an extension in year six at a market rate. The new industrial, or I should say utility services contract is a completely add on top of that. Okay, great. Thank you. I'll turn it over. Thank you.

Hey, Jerry. How are you? I'm doing well, thanks.

Yeah, you know, Jerry, this is a really kind of exciting platform for us when we look at applications inside of PowerTech. Without dropping any specific names, but I will say the majority of the OEMs that we're working with are the nameplate companies that you see on the majority of these power gen sites, particularly on the reciprocating engine side. But essentially, what we have is, whether you're using a VARACS or an EXPECT unit, is that because most of these engines like to see a gas quality measurement once a day or once every few days, just to see that if they're in an operating realm where they set set points for potential adjustment, our capabilities allow data to be fed directly to the OEM engine every five seconds.

And so this allows a closing in of set points operational efficiency to where they really get tuned and dialed in to the best operational parameters to not only improve fuel efficiency, emission standards, but also reduce R&M costs for the engines. And so for us, you know, there's potential for one unit to feed multiple engines, or we reduce it down to a simplified version of our expect units per engine. And so these projects have been solely focused on engine optimization and improving the overall performance. We will still be able to independently run our gas conditioning upstream, you know, up from that to where we conditioned the gas prior to coming to the engine. So technically, it's a separate revenue stream.

We've got projects with four different OEMs on that at various levels. The longest standing one has been in the works and research for about 18 months, And this progressed pretty far down the road into advanced field trials. And we're hoping to have a little bit more clarity on what a potential long-term relationship looks like there and what that may come like here in 2026. We've referenced some of these in a recent social media post with some of the successes of testing here at FLOTEK. So we're excited about that. I do believe those will start to be monetized here probably by mid-year, not the back half of the year, as a potential addition onto a lot of these reciprocating engine operations.

Yeah, you're 100% correct. The value proposition is there's what the NGS, ESDs, and NGSD do on the broad variety of conditioning, perfect, you know, horrible gas into much better operational parameters. And then there's what these individual units do per engine in optimizing timing, firing sequence, fuel mixture, and everything to work them at their optimum rate to, you know, minimize derating or different components there. And then also, you know, help them in terms of the potential to reduce R&M maintenance throughout the year. Got it.

It could be asking too much. I think it's our intent. You know, we're going to get at probably where we are at the end of Q1. We're going to come back with where we are updated on the total number of, when I look at power techs, I would say the number of types of skids that we have out and operating, and then also combined with where we're doing measurements to improve distribution and PRV, pressure reduction, valve units, etc. And we'll start talking a little bit more about these growth numbers, but what I would say is that if you look at what our initial contract we had with the original PowerTech assets, we're progressing nicely to get to that doubling of the fleet in A25.

But we'll probably, as we start to initiate our guidance like we traditionally do at the end of Q1, we'll give an update on where that stands so it'll help you align the guidance on there.

Thank you. Thanks. Thank you.

Yes. We actually received, we had all 30 units by, I'm going to say November timeframe of Q4s when we had taken them all in. So, the number we are talking about, Don, is, so we have 30 individual units that make up what we call 15 pairs of operating assets. And our goal is to double that number based on the 30 or 15 pairs.

We've seen great progress. We sold out of the 2C units by February, and so we've advanced capital bills on a multitude of those as well as EXPEC units. And we've advanced capital to those to start really because we're seeing some strong deployments. Where traditionally, Don, when we first had acquired or brought the data analytics division in, we were selling these things one to two off at a time. We're now starting to receive POs of double-digit numbers at a time. And some of the unique things about the way our operating with system VARACS works, some of the advancements we made in the software really helps to integrate these units And show day to day, you know, within the hour of value creation of those.

And so we're seeing significant adoption and absorption of those. And so I would say we're at a supply constraint yet, but what we are doing is we're making aggressive steps to rapidly expand that ahead of what we were thinking about this time in the year. And so we're allocating capital at bottom. I'll let you kind of comment on that.

Yeah, Don, I mean, certainly I think 26 is going to be the largest year of CapEx we've had in quite a long time. I think our CapEx in 2025 is somewhere around $2 million. You know, just rough numbers, we would expect CapEx for 2026 to be somewhere between $10 and $15 million. Obviously, from a funding perspective, we've got the OSP, and then as it relates to equipment financing, we're evaluating options there as well.

Well, it won't double it. The OSP, because remember, we had a $7 million offset related to the PowerTech transaction, which was effectively deferred consideration. So when you look at what the net OSP is at the end of the year, it's right at $20 million, but it surely goes a long way and satisfies from a cash equipment perspective.

Yeah, so what I would say is I kind of stage these in pieces. So, number one, the current operations have been going very well. We've had our operations teams on the ground, and we've picked up some of that unconventional work that we've been speaking of, particularly in the kingdom. It's picked up and running very well, probably to the upper end of our expectations, and we're seeing solid growth there. And just as we're starting to see that, we're starting to see, as you can imagine, the supply constraints in all the traditional sailing vessel methods that we would deliver, Whether it coming from inside the GCC and or us bringing other chemicals in, some of our specialty stuff, have been a bit strained as of late, particularly due to the stress and harm moves, pressure, etc. We are identifying alternative pathways that will probably in the near term have a little bit of additional costs, Don, because they have to be touched twice.

But again, our goal is to be a solid working partner for our customers there, and we've been kind of ahead of this by about, you know, technically probably a month or two because we were concerned that this might happen. But I do think right now our supply is relatively stable at this point, but there's no doubt that we're going to be all hands on deck and we're going to utilize the multi-years of experience that we have in a global supply chain. And, you know, our expertise of being on the ground there and from the past to understand about how we get there and level out. But I do think we're going to have to use an alternative delivery method in the traditional sailing routes that we were doing, which will probably include a trans, you know, cross-country trucking methodology.

We've done this before, Don, on some of the initial MOBE out of there. We had some issues around COVID when we first sent chemicals in. So we're familiar with this alternative pathway. It's just not the best on the margin profile, but we'll make it work in the near term to make sure that we stay growing with that revenue opportunity.

Yeah, we haven't seen much disruption in KSA. We have seen a few things that we were doing on the data analytics side, some measurement installs in UAE and a few of those get pushed back a few weeks just because of the location and different pieces. But right now, you know, we're having calls, Leon and the team are having calls basically every morning and we're steadily running in KSA right now because the majority of this Jaferra field is used locally for energy inside the country. And so it'll keep running pretty steady. And our bigger customers there, like, I say it's business as usual, all things considered with instability, you know, to their neighboring countries, but they are full speed ahead right now.

And I'll just say those, you know, we'll caveat that a little bit. That's based upon what we know today, Don.

All right, man. Thank you.

You know, Josh, that is a great question, and probably as in-depth as I can maybe look at the hazy crystal ball, right? But let me talk about things that I do see in the industry. You know, I talked about them a little bit in terms of when you look globally around, you're going to see, we still see the potential for demand to increase in that medium to long term, if not a little bit sooner. And you see that supply rebalance. But what we are seeing is that there is definitely a reduction in this, where there isn't a decline curve contribution because you have such a large percentage of unconventional contributing to that stack. And so, and you're also seeing a little bit of decline in reservoir quality, which would tell me what they're focused on is getting the most out of what work they are doing, which means leaning in towards advanced technology, Technology, efficiency-creating technologies, or stuff that improves overall performance.

All those things lay into the wheelhouse of what we do well by providing real-time data measurements, making choices based on that in our prescriptive engineering process with our PCM business. So all those things work really well for what we want to do. And not only that, when you look at product margin basis, they typically run at a little bit better margin for us throughout the cycle piece in that. I think the interesting part is there's no doubt when you look at the products that we sold in Q4 this year, we saw the frack fleet get to the lowest that it was since probably Q221 coming out of COVID. We saw commodity prices around the same thing, but our revenue was eight times more than it was then, and we made significantly better gross profit.

And so we've shown that resiliency through the cycle. And what I believe is we're going to continue in this near term to see a little bit of softness in the demand for the chemistry parts. But I think we see that upside potential maybe in the back half of the year to start to answer some of the call here. And I think that'll require some of the advanced technologies that FLOTEK is poised to position. Now, the level of that, Josh, I mean, that's hard to say right now, but I do think I do see a little bit of silver lining in the back half of the year and as we look at 27.

Yeah, I'll just add one thing, Josh. I think it's going to be interesting to see how producers react relative to the hedge market. I mean, obviously the curve is still pretty backwardated, but I think just generally even looking out past the spike out to the latter months, Those numbers are probably a good bit higher than what expectations were for oil coming into the year. So, you know, if operators have the opportunity and go ahead and lock in those prices over a longer term, I mean, obviously that underwrites higher capex.

Yes, sir. All right. Congrats on a strong year and a continued execution. On your expected data analytics drive to be more than half of the company profitability, If we think about that qualitatively, how sensitive is that mixed target to the timing of a few large PowerTech wins? Or is that 50% threshold achieved even if a couple of projects slipped right to the calendar? Yeah, I mean, if you look at the fourth quarter, we were effectively there at 40% gross margins or gross profit from data analytics. So, just thinking about how the Powertech lease agreement, which we talked about, will be 70% higher in 2026 versus 2025 just due to longer duration for the full year versus a partial year last year, we feel extremely confident we're going to exceed 50% in 2026 on the DA side.

Mike Rattelli Thanks, Jenny. Join us at some of our upcoming investor events. On March 23rd and 24th, we will be at the 30th Annual Roth Conference at Dana Point, California, taking one-on-one meetings with investors and participating in energy industry fireside chats. From May 26th to the 28th, you can catch us at the Louisiana Energy Conference taking meetings and giving an investor presentation. For all other events and the latest info, look at the events section of our website. Yeah, and we'd like to thank everyone for joining us today and stay with us as we continue on our convergence of real-time data and chemistry solutions. Thank you.