Flotek Industries, Inc. Announces First Quarter 2018 Results

"Since the beginning of 2018, we have introduced several new products targeted at addressing the specific needs of operators today and in the future. In late April, we introduced MicroSolv™, a new patented line of microemulsion technologies designed to deliver cost-effective performance, surpassing conventional surfactants by a significant margin, and is positioned to benefit our clients in a cost conscious operating environment. Earlier this year, we introduced StimLube^® MAX, a patent pending high-viscosity, friction reducing solution that offers fast polymer hydration and friction reduction coupled with sustaining viscosity over broad brine loadings.

"Finally, RheoFlo^® CAT300 is our patented cationic Pressure reducing Fluid^® (PrF^®) technology customized to perform in both high brine and high iron environments, which enables clients to manage the variable waters used in their frac fluid systems. In the Northeast, for example, we see that brine levels in the water can change significantly from one frac stage to the next; our technology offers an excellent solution to managing this challenge, while simplifying operations.

"The steps we have aggressively undertaken in recent quarters to address our cost structure, our customer alignment and our product development are set to positively impact our Company as we look ahead through 2018 and beyond. Our first quarter cash SG&A was down 30% year-over-year, or down approximately $24 million in annualized cost reductions. Although our evolution has been, and may continue to be, turbulent in the near term, we are making the right changes to our organization such that Flotek is positioned for growth and profitability in the long run."

First Quarter 2018 Results
For the three months ended March 31, 2018, Flotek reported revenue of $60.5 million, a decrease of $19.4 million, or 24.3%, compared to $80.0 million in the same period of 2017. Revenue decreased $12.0 million, or 16.5%, compared to fourth quarter of 2017.

Flotek reported income (loss) from continuing operations for the three months ended March 31, 2018 of $0.1 million, an increase of $0.8 million compared to ($0.7) million in the same period of 2017. Income (loss) from continuing operations increased $7.8 million compared to fourth quarter 2017. On a GAAP basis, Flotek reported income (loss) per share (fully diluted) from continuing operations for the three months ended March 31, 2018 of $0.00 compared to ($0.01) for the three months ended March 31, 2017.

Excluding select items, comprised primarily of inventory write-down totaling $0.8 million, net of tax, or $0.01 per share, adjusted EPS from continuing operations was $0.01 for the three months ended March 31, 2018, compared to ($0.00) for the three months ended March 31, 2017. (See our Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings at the conclusion of this release.)

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") for the three months ended March 31, 2018, was ($4.1) million, compared to $2.6 million for the three months ended March 31, 2017. Adjusted EBITDA for the three months ended March 31, 2018, which excludes select items comprised primarily of stock compensation expense, loss on sale of assets, executive retirement/severance expense and inventory write-down, was ($1.0) million compared to first quarter 2017 adjusted EBITDA of $6.5 million and fourth quarter 2017 adjusted EBITDA of $7.7 million. Management believes that adjusted EBITDA provides useful information to investors to better assess and understand operating performance and cash flows. (See our Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings at the conclusion of this release.)

A summary income statement reflecting first quarter results can be found at the conclusion of this release, as well as GAAP reconciliation tables.

First Quarter 2018 – Segment Highlights

* Percentages may be different when calculated due to rounding.
** Segment adj. EBITDA excludes stock based compensation, loss on sale of assets, R&I allocations and select items.

Energy Chemistry Technologies Highlights (ECT):

• First quarter revenue decreased 25.7% sequentially to $41.1 million, and decreased 32.4% year-over-year.
• First quarter adjusted EBITDA margins decreased 12.7 percentage points sequentially to 13.7% and decreased 9.6 percentage points year-over-year. The declines in both comparable periods were driven primarily by lower revenues and a higher proportion of PCM^® work which encompass an overall lower margin product mix.
• Five new patents granted during the first quarter 2018, further bolstering the Company's intellectual property portfolio.
• Three new product introductions in 2018: MicroSolv™, our line of microemulsion technologies designed to deliver cost-effective performance; StimLube^® MAX, our high-viscosity, friction reducing technologies; and RheoFlo^® CAT300, our cationic PrF^® technology customized to perform in high brine and high iron environments.

Consumer and Industrial Chemistry Technologies Highlights (CICT):

• First quarter revenue increased 13.0% sequentially to $19.4 million, and increased 1.3% year-over-year.
• First quarter adjusted EBITDA margins increased by 303 basis points sequentially to 17.2% due to higher margin product mix in Flavor and Fragrance compounds. First quarter adjusted EBITDA margins decreased 622 basis points year-over-year.
• Completed the first distillation campaign on the newly installed distillation column.

Balance Sheet and Liquidity
Net Debt increased $13.5 million from $23.4 million at year end to $36.9 million at quarter end, but decreased $11.0 million year-over-year from $47.9 million at the end of the first quarter 2017. Working capital requirements were $10.5 million for the first quarter 2018, primarily driven by seasonal inventory builds in the CICT segment. Total liquidity at quarter end was $38.1 million. The balance on our credit facility as of March 31, 2018 was $39.7 million, compared to $28.0 million at year end 2017.  We expect to continue to fund working capital as customary with our inventory purchases during the front half of 2018 and continue to work closely with our lender to assure financial flexibility and stability.

Flotek Outlook
In commenting about Flotek's outlook, Mr. Chisholm added, "While we saw improvement as we progressed through the quarter, our current cadence remains below our internal expectations. Our efforts are focused on our sales and marketing strategy, and expanding our product portfolio and client base. We continue to see an increase in inbound requests directly from operators for our PCM^® platform, which provides unparalleled control and reliability of our clients' fluids systems and positively impacts their cash returns. Within our business, visibility remains challenged in the ECT top line as we adapt to changes in industry dynamics. Thus, given what we see in the market today, we continue to respond to new market channels but we do not expect an immediate snap back. In our CICT segment, we expect second quarter revenues to increase in the low single digit range on both a sequential and year-over-year basis. We do not foresee any material increases to our cash SG&A moving forward."

Conference Call Details
Flotek will host a conference call on Thursday, May 10, at 9:30 AM CT (10:30 AM ET) to discuss its operating results for the three months ended March 31, 2018. To participate in the call, participants should dial 800-931-3971 approximately 5 minutes prior to the start of the call. The call can also be accessed from Flotek's website at www.flotekind.com.

About Flotek Industries, Inc.
Flotek develops and delivers prescriptive chemistry-based technology, including specialty chemicals, to clients in the energy, consumer industrials and food & beverage industries. Flotek's inspired chemists draw from the power of bio-derived solvents to deliver solutions that enhance energy production, cleaning products, foods & beverages and fragrances. In the oil and gas sector, Flotek serves major and independent energy producers and oilfield service companies, both domestic and international. Flotek Industries, Inc. is a publicly traded company headquartered in Houston, Texas, and its common shares are traded on the New York Stock Exchange under the ticker symbol "FTK." For additional information, please visit Flotek's web site at www.flotekind.com.

Forward-Looking Statements
Certain statements set forth in this Press Release constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Flotek Industries, Inc.'s business, financial condition, results of operations and prospects. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Press Release.

Although forward-looking statements in this Press Release reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, demand for oil and natural gas drilling services in the areas and markets in which the Company operates, competition, obsolescence of products and services, the Company's ability to obtain financing to support its operations, environmental and other casualty risks, and the impact of government regulation.

Further information about the risks and uncertainties that may impact the Company are set forth in the Company's most recent filings on Form 10-K (including without limitation in the "Risk Factors" Section), and in the Company's other SEC filings and publicly available documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Press Release. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Press Release.

Flotek Industries, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share data)
	March 31, 2018		December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$             2,865		$                    4,584
Accounts receivable, net of allowance for doubtful accounts of $694 and $733 at March 31, 2018 and December 31, 2017, respectively	45,331		46,018
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