TTI
$3.96
Tetra Technologies
$.08
2.06%
Earnings Details
3rd Quarter September 2022
Monday, October 31, 2022 5:00:00 PM
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Summary

Tetra Technologies (TTI) Recent Earnings

Tetra Technologies (TTI) reported 3rd Quarter September 2022 earnings of $0.02 per share on revenue of $135.0 million. The consensus earnings estimate was $0.03 per share on revenue of $132.6 million. Revenue grew 41.4% on a year-over-year basis.

Tetra Technologies Inc together with its subsidiaries provides oil and gas services. The Company' business segments are Fluids, Production Testing, Compression, Offshore Services and Maritech.

Results
Reported Earnings
$0.02
Earnings Whisper
-
Consensus Estimate
$0.03
Reported Revenue
$135.0 Mil
Revenue Estimate
$132.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

TETRA TECHNOLOGIES, INC. ANNOUNCES THIRD QUARTER 2022 FINANCIAL RESULTS

THE WOODLANDS, Texas, Oct. 31, 2022 /PRNewswire/ -- TETRA Technologies, Inc. ("TETRA" or the "Company") (NYSE:TTI) today announced third-quarter 2022 financial results.

Third-quarter 2022 revenue of $135 million increased 41% from the third quarter of 2021 but decreased 4% from the second quarter of 2022 reflecting the seasonality of our European industrial chemicals business.  Net income before discontinued operations was break even, inclusive of $2.7 million of non-recurring charges and expenses.  This compares to net income before discontinued operations of $1.8 million in the second quarter of 2022, inclusive of $4.9 million of non-recurring charges and expenses.  Net income per share from continuing operations was also break even in the third quarter compared to $0.01 in the second quarter of 2022.  Adjusted net income per share from continuing operations was $0.02 compared to $0.05 in the second quarter of 2022 and to $0.01 in the third quarter of 2021.

Adjusted EBITDA for the third quarter was $18.6 million (13.8% of revenue) compared to $18.7 million (13.3% of revenue) in the second quarter of 2022, and up 24% year-on-year from $15.0 million in the third quarter of 2021.  The third quarter of 2022 included unrealized losses on investments of $548,000.  Excluding these unrealized losses on investments, Adjusted EBITDA for the third quarter of 2022 was $19.1 million.

Cash flow from operating activities was $2.1 million in the third quarter of 2022 compared to $17.9 million in the second quarter of 2022.  Adjusted free cash flow from continuing operations was a use of $9.8 million, primarily driven by a build of inventory to support new and previously announced deepwater contract awards.

Brady Murphy, TETRA President and Chief Executive Officer, stated, "I am pleased with our third quarter results as our energy services business continues to improve while also reaching a major milestone with a very positive Inferred Resources report for bromine and lithium in our Arkansas brine leased acreage.  Adjusting for our seasonal decrease in our European industrial chemical business, revenue increased 7.5% from the second quarter led by our Water & Flowback Services segment, which increased 15% quarter-on-quarter.  This growth was despite relatively flat frac activity in the third quarter compared to the second quarter, and while inflationary pressures continue, both segments increased Adjusted EBITDA margins quarter-on-quarter.  Annualized third quarter Water & Flowback Services revenue of $303 million matches our full year 2018 revenue on approximately 35% less active frac crew activity, demonstrating the significant market penetration success with our differentiated technologies and integrated water management strategy. 

"Water & Flowback Services revenue of $76 million improved $29 million or 62% year-on-year, and $9.9 million or 15% quarter-on-quarter.  Income before taxes was $6.5 million while Adjusted EBITDA of $13.2 million improved by $8 million or 158% year-on-year, and $3.2 million or 33% quarter-on-quarter.  This marks the highest Adjusted EBITDA since the fourth quarter of 2018.  Water & Flowback Services Adjusted EBITDA margins of 17.4% were up 230 basis points reflecting the margin expansion efforts driven by investments in automation, new technologies and the benefit of our early production facilities being online for the full quarter in Argentina which are longer-term projects with stable and predictable margins and cash flows.  Our fleet of TETRA SandStormTM advanced cyclone equipment remains at high utilization with continued market penetration and positive pricing progression.

"During the quarter, we announced exclusive technology agreements with KMX Technologies LLC and Hyrec Holdings Company for recycling produced water from oil and gas wells for the purpose of beneficial re-use.  These strategic relationships will allow us to create new, sustainable markets for produced water, reduce the industry's reliance on disposal and preserve precious freshwater resources.  We are currently mobilizing a produced water beneficial reuse pilot project for one of the largest North American shale operators with many other opportunities in discussion. 

"Completion Fluids & Products third-quarter 2022 revenue of $59 million increased year-on-year by 22% and decreased from the second quarter of 2022 by 21% as the prior quarter benefited from the seasonal uplift for our European industrial chemicals business.  Income before taxes for the quarter was $12.4 million and Adjusted EBITDA margins were 24.9%, up from 23.7% in the second quarter.  We remain very positive on the longer-term outlook for the offshore and deepwater markets and our strong market position is validated by the 2022 Kimberlite Annual Completion Fluids & Wellbore Cleanup Tools Supplier Performance Report.  The Kimberlite report indicated that TETRA holds the second highest market share in completion fluids in the Gulf of Mexico at 30%.  Within the report, Kimberlite mentions 'TETRA Technologies continues to be positioned as the top performing supplier in the Gulf of Mexico and receives the highest customer loyalty ratings as measured by the Net Promoter Score.' This was further supported by a multi-year contract renewal for one of the most active deepwater supermajors in the Gulf of Mexico that was executed in the third quarter.

"As the offshore and deepwater markets continue to improve, our pipeline of TETRA CS Neptune® completion fluid opportunities continue to grow as well.  We are currently executing a smaller TETRA CS Neptune® completion fluid job in the UK and have a job in Norway confirmed and expected to be delivered in the first quarter of 2023.

"Despite improved Adjusted EBITDA margins in the third quarter, supply chain and inflation continue to be challenging issues, especially with certain chemicals and raw materials.  The previously announced supply chain constraint impacting a European supplier is improving but we are not yet back to full production levels, although we believe we will be well positioned for the second quarter peak season.  In North America key raw material prices are still very inflated and as we exhaust our yearly contractual supply of bromine, we are fulfilling demand with spot market bromine which impacts our margins.  These further support progressing our evaluation as to whether to develop our own source of bromine from our brine acreage in Arkansas. 

"Our Low Carbon initiatives continue to move forward with a lot of positive results and momentum.  Sales of our high purity zinc bromine solution, TETRA PureFlow® ultra-pure zinc bromide clear brine fluid, increased during the third quarter by 42% compared to the second quarter of 2022.  As mentioned previously, with the growing demand for bromine for deepwater projects and for zinc bromide electrolytes for long-duration battery storage, our bromine needs are expected to expand well beyond our current long-term supply agreement.  Along with additional supply, we anticipate that producing our own bromine from our leased acreage may be more cost-effective than our current sources, creating an opportunity for margin enhancement in addition to significant incremental volumes.  During the quarter we announced the completion of our maiden inferred bromine and lithium brine resource estimation report.  The technical report reflects that the brine resource underlying the approximately 40,000 gross acres where TETRA holds the bromine mineral rights is estimated to contain an inferred resource of 5.25 million short tons (4.763 million metric tonnes) of elemental bromine.  We are on track to complete and announce a bromine initial economic assessment before the end of the year which will highlight the economics of the potential investment and a corresponding business plan.

"The technical report also stated that the Li-brine resource underlying the south-southeast portion of the property is estimated to contain 234,000 short tons of LCE (Lithium Carbonate Equivalent).  We expect the initial economic assessment for lithium to be completed in the fall of 2023.  Furthermore, we remain active in applying for government grants and loans as the supply of bromine and lithium are critical to the current and future global energy needs.

"As we look towards the coming years there is a lot to be excited about, both for our current business as well as the clear line of sight opportunities in our low carbon energy business.  We continue to work diligently to set the stage for significant shareholder value creation."

This press release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"): Adjusted income (loss) per share from continuing operations, Adjusted EBITDA, and Adjusted EBITDA Margin (Adjusted EBITDA as a percent of revenue) on consolidated and segment basis, adjusted income/(loss) from continuing operations, adjusted free cash flow from continuing operations, net debt and net leverage ratio.  Please see Schedules E through I for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.

Third Quarter Results and Highlights

A summary of key financial metrics for the third quarter are as follows:

Third Quarter 2022 Results


Three Months Ended


September 30,
2022


June 30, 2022


September 30,
2021


(in thousands, except per share amounts)

Revenue

$                    135,012


$                    140,716


$                       95,474

Net income attributable to TETRA stockholders

278


1,745


2,513

Income (loss) before discontinued operations

(63)


1,759


2,495

Adjusted EBITDA before discontinued operations

18,595


18,697


15,022

GAAP EPS from continuing operations

0.00


0.01


0.02

Adjusted income per share from continuing operations

0.02


0.05


0.01

GAAP net cash provided by operating activities

2,145


17,869


2,817

Adjusted free cash flow from continuing operations

$                        (9,774)


$                         6,418


$                         1,000

Completion Fluids & Products third-quarter 2022 revenue of $59 million decreased 21% from the second quarter of 2022 due to the seasonal impact for our European industrial chemicals business, partially offset by an increase in international markets and higher shipments of TETRA PureFlow® ultra-pure zinc bromide clear brine fluid.  Completion Fluids & Products income before taxes was $12.4 million in the third quarter (20.9% of revenue) compared to $15.3 million (20.4% of revenue) in the second quarter of 2022.  Adjusted EBITDA of $14.7 million, which included a $0.2 million unrealized gain from investments, decreased $3.0 million sequentially.  Completion Fluids & Products Adjusted EBITDA margins were 24.9% in the third quarter compared to 23.7% in the second quarter of 2022.  Excluding the unrealized gains and losses from investments for both periods, Adjusted EBITDA margins increased sequentially by 50 basis points.  Third-quarter margins were negatively impacted by inflationary pressures as we continue to see increased pricing for raw materials.

Water & Flowback Services revenue was $76 million in the third quarter of 2022, an increase of 15% from the second quarter of 2022.  Income before taxes was $6.5 million.  Adjusted EBITDA of $13.2 million (17.4% of revenue) increased 33% sequentially and was up 158% from the third quarter of 2021 due to stronger activity in the North America onshore business as well as growth in Latin America.  Adjusted EBITDA margins improved 230 basis points from the second quarter of 2022 to 17.4% as we continue to see some pricing improvements to help offset inflationary pressures.

Free Cash Flow, Balance Sheet and Income Taxes

Cash from operating activities was $2.1 million in the third quarter and adjusted free cash flow from continuing operations was a use of $9.8 million.  Liquidity at the end of the third quarter was $92 million.  Liquidity is defined as unrestricted cash plus availability under our revolving credit facilities.  At the end of the third quarter, unrestricted cash was $25 million and availability under our credit agreements was $67 million.  Long-term debt, with a September 2025 maturity, was $154 million, while net debt was $129 million.  TETRA's net leverage ratio continued to improve and was 1.7X at the end of the third quarter of 2022.

With the strong rebound in activity, TETRA now expects to be profitable for income tax purposes in 2022 on a pre-tax basis in the United States.  As of year-end 2021, TETRA has accumulated US federal net operating losses that can offset more than $440 million of future US profits and can offset approximately $190 million of various state profits.  In addition, TETRA has tax loss carry forwards that can offset approximately $40 million of various international pretax earnings.  As activity from our two segments continues to improve and from future profits that are expected to be generated from our bromine and lithium assets as we further expand into the battery storage markets, these tax loss carryforwards should provide significant value in the net income to cash flow conversion.

Non-recurring Charges and Expenses

Non-recurring charges and expenses are reflected on Schedule E and include $1.7 million of cumulative adjustments to long-term incentives and appreciation right expenses, $0.9 million of costs associated with the brine resource project, and $0.1 million of transaction and other expenses.  The $0.5 million of unrealized losses on investments are included in both our reported and adjusted earnings.

Conference Call

TETRA will host a conference call to discuss these results tomorrow, November 1, at 10:30 a.m. Eastern Time.  The phone number for the call is 1-888-347-5303.  The conference call will also be available by live audio webcast and may be accessed through the Company's investor relations website at http://ir.tetratec.com/events-and-webcasts.  A replay of the conference call will be available at 1-877-344-7529 conference number 2427423, for one week following the conference call and the archived webcast will be available through the Company's website for thirty days following the conference call.

Investor Contact

For further information, please contact Elijio Serrano, CFO, TETRA Technologies, Inc. at (281) 367-1983 or via email at eserrano@tetratec.com or Rigo Gonzalez, Manager of Corporate Finance and Investor Relations, at (281) 364-2213 or via email at rgonzalez@tetratec.com.

Financial Statements, Schedules and Non-GAAP Reconciliation Schedules (Unaudited)

Schedule A: Consolidated Income Statement

Schedule B: Condensed Consolidated Balance Sheet

Schedule C: Consolidated Statements of Cash Flows

Schedule D: Statement Regarding Use of Non-GAAP Financial Measures

Schedule E: Non-GAAP Reconciliation of Adjusted Income (Loss) From Continuing Operations

Schedule F: Non-GAAP Reconciliation of Adjusted EBITDA

Schedule G: Non-GAAP Reconciliation of Net Debt

Schedule H: Non-GAAP Reconciliation to Adjusted Free Cash Flow From Continuing Operations

Schedule I: Non-GAAP Reconciliation to Net Leverage Ratio

Company Overview

TETRA Technologies, Inc. is an energy services and solutions company operating on six continents with a focus on bromine-based completion fluids, calcium chloride, water management solutions, frac flowback, and production well testing services.  Calcium chloride is used in the oil and gas, industrial, agricultural, road, food, and beverage markets.  TETRA is evolving its business model by expanding into the low carbon energy markets with its chemistry expertise, key mineral acreage, and global infrastructure.  Low carbon energy initiatives include commercialization of TETRA PureFlow®, an ultra-pure zinc bromide clear brine fluid for stationary batteries and energy storage; advancing an innovative carbon capture utilization and storage technology with CarbonFree to capture CO2 and mineralize emissions to make commercial, carbon-negative chemicals; and development of TETRA's lithium and bromine mineral acreage to meet the growing demand for oil and gas products and energy storage.  Visit the Company's website at www.tetratec.com for more information.

Cautionary Statement Regarding Forward Looking Statements

This news release includes certain statements that are deemed to be forward-looking statements.  Generally, the use of words such as "may," "see," "expectation," "expect," "intend," "estimate," "projects," "anticipate," "believe," "assume," "could," "should," "plans," "targets" or similar expressions that convey the uncertainty of future events, activities, expectations or outcomes identify forward-looking statements that the Company intends to be included within the safe harbor protections provided by the federal securities laws.  These forward-looking statements include statements concerning economic and operating conditions that are outside of our control, including statements concerning recovery of the oil and gas industry; customer delays for international completion fluids related to global shipping and logistics issues; potential revenue associated with prospective energy storage projects or our pending carbon capture partnership; inferred mineral resources of lithium and bromine, the potential extraction of lithium and bromine from the leased acreage, the economic viability thereof, the demand for such resources, and the timing and costs of such activities; the ability to obtain an initial economic assessment regarding our lithium and bromine acreage; projections concerning the Company's business activities, financial guidance, profitability, estimated earnings, earnings per share, and statements regarding the Company's beliefs, expectations, plans, goals, future events and performance, and other statements that are not purely historical.  With respect to the Company's disclosures of inferred mineral resources, including bromine and lithium carbonate equivalent concentrations, it is uncertain if further exploration will ever result in the estimation of a higher category of mineral resource or a mineral reserve.  Inferred mineral resources are considered to have the lowest level of geological confidence of all mineral resources.  Investors are cautioned that mineral resources do not have demonstrated economic value.  Inferred mineral resources have a high degree of uncertainty as to their existence and to whether they can be economically or legally commercialized.  A significant amount of exploration must be completed in order to determine whether an inferred mineral resource may be upgraded to a higher category.  Therefore, you are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally commercialized, or that it will ever be upgraded to a higher category.  These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.  Such statements are subject to a number of risks and uncertainties, many of which are beyond the control of the Company.  Investors are cautioned that any such statements are not guarantees of future performances or results and that actual results or developments may differ materially from those projected in the forward-looking statements.  Some of the factors that could affect actual results are described in the section titled "Risk Factors" contained in the Company's Annual Reports on Form 10-K, as well as other risks identified from time to time in its reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission.

Schedule A: Consolidated Income Statement (Unaudited)








Three Months Ended


September 30,
2022


June 30,
2022


September 30,
2021


(in thousands, except per share amounts)

Revenues

$                    135,012


$                    140,716


$                       95,474







Cost of sales, services, and rentals

96,905


102,599


71,419

Depreciation, amortization, and accretion

8,634


7,748


8,308

Impairments and other charges


2,262


Total cost of revenues

105,539


112,609


79,727

Gross profit

29,473


28,107


15,747







Exploration and appraisal costs

936


634


General and administrative expense

23,833


23,620


18,714

Interest expense, net

3,999


3,610


4,083

Other income, net

(1,410)


(1,037)


(10,132)

Income before taxes and discontinued operations

2,115


1,280


3,082

Provision (benefit) for income taxes

2,178


(479)


587

Income (loss) before discontinued operations

(63)


1,759


2,495

Income from discontinued operations, net of taxes

319


(34)


18

Net income (loss)

256


1,725


2,513

Less: loss attributable to noncontrolling interest

22


20


Net income (loss) attributable to TETRA stockholders

$                            278


$                         1,745


$                         2,513







Basic per share information:






Income (loss) from continuing operations

$                           0.00


$                           0.01


$                           0.02

Income from discontinued operations

$                           0.00


$                           0.00


$                           0.00

Net income attributable to TETRA stockholders

$                           0.00


$                           0.01


$                           0.02

Weighted average shares outstanding

128,407


127,992


126,733







Diluted per share information:






Income (loss) from continuing operations

$                           0.00


$                           0.01


$                           0.02

Income from discontinued operations

$                           0.00


$                           0.00


$                           0.00

Net income attributable to TETRA stockholders

$                           0.00


$                           0.01


$                           0.02

Weighted average shares outstanding

128,407


130,099


128,694

 

Schedule B: Condensed Consolidated Balance Sheet (Unaudited)



September 30,
2022


December 31,
2021


(in thousands)


(unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$            25,247


$            31,551

Trade accounts receivable

105,656


91,202

Inventories

71,558


69,098

Prepaid expenses and other current assets

21,831


18,539

Total current assets

224,292


210,390

Property, plant, and equipment, net

95,025


88,976

Other intangible assets, net

33,667


36,958

Operating lease right-of-use assets

33,415


36,973

Investments

13,313


11,233

Other assets

13,774


13,736

Total long-term assets

189,194


187,876

Total assets

$          413,486


$          398,266





LIABILITIES AND EQUITY




Current liabilities:




Trade accounts payable

$            46,162


$            37,943

Current portion of long-term debt

14


Compensation and employee benefits

29,213


20,811

Operating lease liabilities, current portion

7,858


8,108

Accrued taxes

8,334


7,085

Accrued liabilities and other

19,004


21,810

Liabilities of discontinued operations

919


1,385

Total current liabilities

111,504


97,142

Long-term debt, net

153,873


151,936

Operating lease liabilities

27,724


31,429

Asset retirement obligations

13,368


12,984

Deferred income taxes

1,284


1,669

Other liabilities

3,977


4,543

Total long-term liabilities

200,226


202,561

Commitments and contingencies




TETRA stockholders' equity

102,969


99,704

Noncontrolling interests

(1,213)


(1,141)

Total equity

101,756


98,563

Total liabilities and equity

$          413,486


$          398,266

 

Schedule C: Consolidated Statements of Cash Flows (Unaudited)



Three Months Ended


September 30,
2022


June 30,
2022


September 30,
2021


(in thousands)

Operating activities:






Net income (loss)

$                   256


$                1,725


$                2,513

Adjustments to reconcile net income (loss) to net cash provided by
  operating activities:






Depreciation, amortization, and accretion

8,634


7,748


8,309

Impairment and other charges


2,262


Loss (gain) on investments

549


710


(6,190)

Equity-based compensation expense

1,098


1,159


1,057

Provision for (recovery of) doubtful accounts

(213)


183


(87)

Amortization and expense of financing costs

805


793


891

Warrants fair value adjustment



(3,164)

Gain on sale of assets

(261)


(501)


(204)

Other non-cash credits

(112)


(212)


(183)

Changes in operating assets and liabilities:






Accounts receivable

(2,080)


(1,396)


448

Inventories

(10,226)


(60)


(3,007)

Prepaid expenses and other current assets

(1,500)


(4,792)


(485)

Trade accounts payable and accrued expenses

5,884


11,176


3,936

Other

(689)


(926)


(1,017)

Net cash provided by operating activities

2,145


17,869


2,817

Investing activities:






Purchases of property, plant, and equipment, net

(12,266)


(11,107)


(2,131)

Proceeds from sale of CSI Compressco, net of cash divested



548

Proceeds from sale of property, plant, and equipment

295


778


262

Other investing activities

(390)


2


(392)

Net cash used in investing activities

(12,361)


(10,327)


(1,713)

Financing activities:






Proceeds from long-term debt

28


134


Principal payments on long-term debt

(25)


(2,456)


(8,157)

Payments on financing lease obligations


(1,174)


Repurchase of common stock



(461)

Financing costs and other financing activities



(263)

Net cash provided by (used in) financing activities

3


(3,496)


(8,881)

Effect of exchange rate changes on cash

(872)


(565)


(739)

(Decrease) increase in cash and cash equivalents

(11,085)


3,481


(8,516)

Cash and cash equivalents at beginning of period

36,332


32,851


50,379

Cash and cash equivalents at end of period

25,247


36,332


41,863







Supplemental cash flow information:






Interest paid

$               3,522


$               4,960


$               7,350

Income taxes paid

1,055


729


822

(Decrease) increase in accrued capital expenditures

(5,813)


(452)


846

 

Schedule D: Statement Regarding Use of Non-GAAP Financial Measures

In addition to financial results determined in accordance with U.S. GAAP, this press release may include the following non-GAAP financial measures for the Company: adjusted income (loss) per share from continuing operations; consolidated and segment Adjusted EBITDA; segment Adjusted EBITDA as a percent of revenue ("Adjusted EBITDA margin"); adjusted income (loss) from continuing operations, adjusted free cash flow from continuing operations; net debt, and net leverage ratio. The following schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP measures.  The non-GAAP financial measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with U.S. GAAP, as more fully discussed in the Company's financial statements and filings with the Securities and Exchange Commission.

Management believes that the exclusion of the special charges from the historical results of operations enables management to evaluate more effectively the Company's operations over the prior periods and to identify operating trends that could be obscured by the excluded items.

Adjusted income (loss) from continuing operations is defined as the Company's income (loss) before noncontrolling interests and discontinued operations, excluding certain special or other charges (or credits), and including noncontrolling interest attributable to continued operations.  Adjusted income (loss) from continuing operations is used by management as a supplemental financial measure to assess financial performance, without regard to charges or credits that are considered by management to be outside of its normal operations.

Adjusted earnings (loss) per share from continuing operations is defined as the Company's diluted earnings (loss) per share excluding certain special or other charges (or credits), discontinued operations and noncontrolling interest attributable to discontinued operations.  Adjusted diluted earnings (loss) per share is used by management as a supplemental financial measure to assess financial performance, without regard to charges or credits that are considered by management to be outside of its normal operations.

Adjusted EBITDA (and Adjusted EBITDA as a percent of revenue) is defined as earnings before interest, taxes, depreciation, amortization, impairments and certain non-cash charges, non-recurring adjustments and discontinued operations.  Adjusted EBITDA (and adjusted EBITDA margin) is used by management as a supplemental financial measure to assess the financial performance of the Company's assets, without regard to financing methods, capital structure or historical cost basis and to assess the Company's ability to incur and service debt and fund capital expenditures.

Adjusted free cash flow from continuing operations is defined as cash from operations less discontinued operations EBITDA and discontinued operations capital expenditures, less capital expenditures net of sales proceeds and cost of equipment sold, less payments on financing lease obligations and including cash distributions to TETRA from CSI Compressco and cash from other investments.  Management uses this supplemental financial measure to:

  • assess the Company's ability to retire debt;
  • evaluate the capacity of the Company to further invest and grow; and
  • to measure the performance of the Company as compared to its peer group.

Adjusted free cash flow from continuing operations do not necessarily imply residual cash flow available for discretionary expenditures, as they exclude cash requirements for debt service or other non-discretionary expenditures that are not deducted.

Net debt is defined as the sum of the carrying value of long-term and short-term debt on its consolidated balance sheet, less cash, excluding restricted cash on the balance sheet.  Management views net debt as a measure of TETRA's ability to reduce debt, add to cash balances, pay dividends, repurchase stock, and fund investing and financing activities.

Net leverage ratio is defined as debt excluding financing fees & discount on term loan and including letters of credit and guarantees, less cash divided by trailing twelve months adjusted EBITDA for credit facilities.  Adjusted EBITDA for credit facilities consists of adjusted EBITDA described above, plus equity compensation expense, less non-cash (gain) loss on sale of investments, (gain) loss on sales of assets and excluding certain special or other charges (or credits).  Management primarily uses this metric to assess TETRA's ability to borrow, reduce debt, add to cash balances, pay distributions, and fund investing and financing activities.

 

Schedule E: Non-GAAP Reconciliation of Adjusted Income (Loss) From Continuing Operations (Unaudited) 



Three Months Ended


September 30,
2022


June 30,
2022


September 30,
2021


(in thousands, except per share amounts)







Income (loss) before taxes and discontinued operations

$                2,115


$                1,280


$                3,082

Provision (benefit) for income taxes

2,178


(479)


587

Noncontrolling interest attributed to continuing operations

22


20


Income (loss) from continuing operations

(85)


1,739


2,495

Exploration and appraisal costs

936


634


Adjustment to long-term incentives

1,731


1,450


656

Transaction, legal and other expenses

82


556


1,350

Impairments and other charges


2,262


Former CEO stock appreciation right expense



(466)

Restructuring charges



295

Stock warrant fair value adjustment



(3,164)

Adjusted income (loss) from continuing operations

$                2,664


$                6,641


$                1,166







Diluted per share information






Income (loss) from continuing operations

$                  0.00


$                  0.01


$                  0.02

Adjusted income (loss) from continuing operations

$                  0.02


$                  0.05


$                  0.01

Diluted weighted average shares outstanding

128,407


130,099


128,694

 

Schedule F: Non-GAAP Reconciliation of Adjusted EBITDA (Unaudited)



Three Months Ended September 30, 2022


Completion Fluids & Products


Water & Flowback Services


Corporate SG&A


Other and Eliminations


Total


(in thousands, except percents)

Revenues

$      59,163


$      75,849


$                  —


$                  —


$    135,012

Net income (loss) before taxes and

discontinued operations

12,357


6,482


(11,968)


(4,756)


2,115

Impairment expense





Exploration and appraisal costs

936





936

Adjustment to long-term incentives



1,731



1,731

Transaction and other expenses


82




82

Adjusted income (loss) before taxes and
discontinued operations

$      13,293


$        6,564


$        (10,237)


$          (4,756)


$        4,864











Adjusted interest (income) expense, net

(436)


(2)



4,437


3,999

Adjusted depreciation and amortization

1,846


6,626



162


8,634

Equity compensation expense



1,098



1,098

Adjusted EBITDA

$      14,703


$      13,188


$          (9,139)


$              (157)


$      18,595











Adjusted EBITDA as a % of revenue

24.9 %


17.4 %






13.8 %

 


Three Months Ended June 30, 2022


Completion Fluids & Products


Water & Flowback Services


Corporate SG&A


Other and Eliminations


Total


(in thousands, except percents)

Revenues

$      74,798


$      65,918


$                  —


$                  —


$    140,716

Net income (loss) before taxes and

discontinued operations

15,261


1,644


(11,542)


(4,083)


1,280

Impairment expense

220


2,042




2,262

Exploration and appraisal costs

634





634

Adjustment to long-term incentives



1,450



1,450

Transaction and other expenses


556




556

Adjusted income (loss) before taxes and
discontinued operations

$      16,115


$        4,242


$        (10,092)


$          (4,083)


$        6,182











Adjusted interest (income) expense, net

(283)


(2)



3,895


3,610

Adjusted depreciation and amortization

1,873


5,705



168


7,746

Equity compensation expense



1,159



1,159

Adjusted EBITDA

$     17,705


$        9,945


$          (8,933)


$                (20)


$      18,697











Adjusted EBITDA as a % of revenue

23.7 %


15.1 %






13.3 %

 


Three Months Ended September 30, 2021


Completion Fluids & Products


Water & Flowback Services


Corporate SG&A


Other and Eliminations


Total


(in thousands, except percents)

Revenues

$      48,691


$      46,783


$                  —


$                  —


$      95,474

Net income (loss) before taxes and

discontinued operations

14,675


(1,807)


(8,408)


(1,378)


3,082

Adjustment to long-term incentives



656



656

Transaction and other expenses

630


693


27



1,350

Former CEO stock appreciation right expense



(466)



(466)

Restructuring and severance expenses

254


41




295

Stock warrant fair value adjustment




(3,164)


(3,164)

Adjusted income (loss) before taxes and
discontinued operations

15,559


(1,073)


(8,191)


(4,542)


1,753











Adjusted interest (income) expense, net

(165)


2



4,246


4,083

Adjusted depreciation and amortization

1,712


6,192



225


8,129

Equity compensation expense



1,057



1,057

Adjusted EBITDA

$      17,106


$        5,121


$          (7,134)


$                (71)


$      15,022











Adjusted EBITDA as a % of revenue

35.1 %


10.9 %






15.7 %

 

Schedule G: Non-GAAP Reconciliation of Net Debt (Unaudited)

The following reconciliation of net debt is presented as a supplement to financial results prepared in accordance with GAAP.


September 30,
2022


December 31,
2021


(in thousands)

Non-restricted cash

$                     25,247


$                       31,551





Swedish Credit Facility

14


Asset-Based Credit Agreement


67

Term Credit Agreement

$                    153,873


$                    151,869

Net debt

$                    128,640


$                    120,385

 

Schedule H: Non-GAAP Reconciliation to Adjusted Free Cash Flow From Continuing Operations (Unaudited)



Three Months Ended


Nine Months Ended


September 30,
2022


June 30,
2022


September 30,
2021


September 30,
2022


September 30,
2021


(in thousands)

Cash from operating activities

$             2,145


$          17,869


2,817


$          25,948


$          10,424

Discontinued operations operating activities
  (adjusted EBITDA)





(416)

Cash from continued operating activities

2,145


17,869


2,817


25,948


10,840

Less: Continuing operations capital
  expenditures, net of proceeds from asset
  sales

(11,971)


(10,329)


(1,869)


(31,189)


(10,624)

Payments on financing lease obligations


(1,174)



(1,174)


Distributions from CSI Compressco LP (1)

52


52


52


157


104

Cash received from other investments





2,354

Adjusted Free Cash Flow From Continuing
  Operations

$           (9,774)


$             6,418


$             1,000


$           (6,258)


$            2,674

(1) Following the GP Sale on January 29, 2021, TETRA retained an investment CSI Compressco representing a 3.7% limited partner interest as of September 30, 2022.

 

Schedule I: Non-GAAP Reconciliation to Net Leverage Ratio (Unaudited)



Three Months Ended


Twelve
Months
Ended


September 30,
2022


June 30,
2022


March 31,
2022


December 31,
2021


September 30,
2022


(in thousands)

Net income (loss) before taxes and

discontinued operations

2,115


$              1,280


$               8,934


$               (758)


$            11,571

Insurance settlement



(3,750)



(3,750)

Exploration and appraisal costs

936


634


1,930



3,500

Adjustment to long-term incentives

1,731


1,450


784


495


4,460

Transaction, legal and other expenses

82


556



62


700

Impairments and other charges


2,262



132


2,394

Former CEO stock appreciation right expense



472


107


579

Restructuring expenses




381


381

Stock warrant fair value adjustment




(56)


(56)

Provision for (recovery of) doubtful accounts

(213)




(230)


(443)

Adjusted income before taxes and discontinued operations

$              4,651


$              6,182


$               8,370


$                 133


$            19,336











Adjusted interest expense, net

3,999


3,610


3,324


4,003


14,936

Adjusted depreciation and amortization

8,634


7,746


7,679


7,886


31,945

Equity compensation expense

1,098


1,159


1,104


1,052


4,413

Non-cash (gain) loss on investments

548


710


(1,100)


14,030


14,188

Gain on sale of assets

(262)


(500)


(218)


(3)


(983)

Other debt covenant adjustments

230


214


143


(236)


351

Debt covenant adjusted EBITDA

$            18,898


$            19,121


$            19,302


$            26,865


$            84,186




















September 30,
2022










(in thousands,
except ratio)

Term credit agreement









$         163,071

Swedish credit agreement









14

ABL letters of credit and guarantees









4,714

Total debt and commitments









167,799

Unrestricted cash









25,247

Net debt and commitments









$         142,552

Net leverage ratio









1.7

 

 

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SOURCE TETRA Technologies, Inc.