TETRA Technologies (TTI) Q2 2024 earnings summary

Executive summary

• Achieved 14% sequential revenue growth in Q2 2024 to $172 million, with a 32% increase in adjusted EBITDA, driven by international offshore activity and European industrial chemicals peak, despite lower US onshore completions.

• Secured a three-well CS Neptune fluids project in the Gulf of Mexico, scheduled to begin late Q4 2024, marking the first multi-well deepwater project since 2019 and expected to materially impact financials over the next 6-9 months.

• Strategic initiatives in water desalination, battery electrolyte, bromine, and lithium are progressing, with transformational potential for future growth; technical resources report completed for Arkansas projects.

• Net income for Q2 2024 was $7.6 million ($0.06 per share), down from $18.2 million in Q2 2023, with total adjusted free cash flow of $9.4 million and base business adjusted free cash flow of $19.2 million.

• Revenue for the first six months of 2024 was $322.9 million, flat year-over-year, with growth in Completion Fluids & Products offset by declines in Water & Flowback Services.

Financial highlights

• Q2 2024 revenue was $171.9 million, down slightly from $175.5 million in Q2 2023, but up 14% sequentially; gross profit was $43.3 million (25.2% margin), up from $31.1 million sequentially.

• Adjusted EBITDA for Q2 was $30.2 million, representing 17.6% of total revenue, including $1.1 million in foreign exchange losses.

• Net income attributable to stockholders for Q2 2024 was $7.6 million ($0.06 per diluted share), with a Q2 2024 effective tax rate of 38.8%.

• Free cash flow from base business was $19 million, a $45 million sequential improvement; total adjusted free cash flow was $9.4 million after Arkansas investments.

• Liquidity stood at $180 million at quarter-end, with a net leverage ratio of 1.6x and net debt of $142 million.

Outlook and guidance

• Revenue for Q3 and Q4 expected to be flat to Q2, with continued focus on maintaining EBITDA margins above 15% amid flat onshore activity.

• The three-well Gulf of Mexico project is expected to start in Q4 2024, with completions extending into H1 2025 and a meaningful step up in revenue and EBITDA from the first well.

• Strong free cash flow expected in Q3 as inventory and receivables from the European peak season are monetized.

• Anticipates publishing a definitive feasibility study for bromine from the Evergreen Brine Unit in late 2024, with ongoing lithium feasibility and economic assessments.

• Significant momentum projected into 2025, supported by offshore, battery electrolyte, and water desalination markets.