Tetra Technologies ((TTI)) has held its Q4 earnings call. Read on for the main highlights of the call.
TETRA Technologies’ recent earnings call painted a positive picture for the company, emphasizing significant improvements in EBITDA margins, record-breaking performance in the industrial chemicals sector, and successful strategic investments. Despite facing challenges in the Water and Flowback segment and U.S. land operations, TETRA remains optimistic about strong cash flow and liquidity prospects for 2025, with positive highlights overshadowing any setbacks.
Improved Adjusted EBITDA Margins
TETRA Technologies reported an improvement in adjusted EBITDA margins, reaching 17% in Q4 2024, up from 16.6% in Q3 and 15.8% in Q4 2023. This improvement reflects the company’s efficient operations and strategic focus on enhancing profitability.
Record Industrial Chemicals Performance
The industrial chemicals division achieved its highest revenue and adjusted EBITDA in TETRA’s history, with a revenue growth of over 9% in 2024 compared to 2023. This milestone underscores the strength and growth potential of this business segment.
Strategic Investments Yielding Returns
TETRA’s capital investments in Brazil and the Gulf of America are proving fruitful, supporting large projects expected to yield returns exceeding initial investments by the first half of 2025. These strategic moves are set to bolster the company’s financial performance further.
Significant Deferred Tax Asset Utilization
The company successfully eliminated the valuation allowance for deferred taxes, allowing for approximately $345 million of US taxable income to be offset, which translates into a cash tax saving of $97.5 million. This financial maneuver enhances TETRA’s cash flow and financial flexibility.
Positive Cash Flow Projections for 2025
TETRA projects net income before taxes between $19 million and $34 million and adjusted EBITDA between $55 million and $65 million for the first half of 2025. The company anticipates generating over $50 million of free cash flow from its base business in 2025, indicating robust financial health.
Successful Financing and Strong Liquidity
As of February 2025, TETRA reported cash on hand of $37 million and total liquidity of almost $207 million. This strong liquidity position supports the company’s strategic initiatives and operational needs.
Challenges in Water and Flowback Segment
The Water and Flowback segment faced a more severe than normal year-end completion slowdown, impacting EBITDA margins, which stood at 13.8%. Despite this challenge, TETRA remains focused on improving this segment’s performance.
Decline in U.S. Land Operations
TETRA experienced a decline in U.S. land operations due to operator consolidation and low natural gas prices, with rig count and frac fleets down by 17% and 30% respectively over the past two years. This decline presents a challenge that the company is working to address.
Slightly Negative Free Cash Flow in 2024
The base business free cash flow was slightly negative in 2024, attributed to significant investments in fixed assets and inventory for offshore business. These investments are expected to pay off in the long term, supporting future growth.
Forward-Looking Guidance
Looking ahead, TETRA Technologies provided guidance for the first half of 2025, projecting net income before taxes between $19 million and $34 million and adjusted EBITDA between $55 million and $65 million. The company expects significant year-over-year increases in revenue and EBITDA, driven by strong Gulf of Mexico market activity, a three-well Neptune project, the start of Brazil Deepwater work, and increased Eos Electrolyte deliveries. TETRA plans to maintain its improved EBITDA margins and focus on produced water treatment and recycling, aiming for over $50 million of free cash flow in 2025. Strategic initiatives, including the TETRA OASIS Total Desalination Solution and potential bromine and lithium projects, are expected to contribute to long-term growth.
In conclusion, TETRA Technologies’ earnings call highlighted a positive outlook with significant improvements in key financial metrics and strategic initiatives poised to drive future growth. Despite some challenges, the company’s strong liquidity and strategic investments position it well for continued success in 2025 and beyond.