Flotek Industries, Inc. (FTK) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Flotek Industries Inc. Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nick Bigney, Flotek's Senior Vice President, General Counsel and Chief Compliance Officer. Please go ahead.

Thank you, and good afternoon, everybody. Thank you for participating with us today on this call. Joining with me today for this call are the other members of Flotek's management team: John Gibson, Chairman, Chief Executive Officer and President; Ryan Ezell, Chief Operating Officer; Michael Borton, Chief Financial Officer; and James Silas, Interim President of Data Analytics and Senior Vice President of Research and Innovation. On today's call, we will be sharing and discussing a presentation relating to our recent contract with ProFrac. We will be showing the presentation via the webcast, and a copy of the presentation has been filed with the SEC and will also be available on our website after the call. Following the presentation, we will answer your questions. Before we begin, please note that any comments we make on today's call or in the presentation regarding projections or our expectations for future events are forward-looking statements. Forward-looking statements are based on our current expectations and 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 our current expectations. We advise listeners to review our SEC filings, and in particular, the risk factors discussed in those filings. Our presentation today also does not contain all the information that should be considered in this transaction, and we intend to file a proxy statement with the SEC. We advise that you read that once available as well. And with that, I will now turn it over to John.

Well, thank you very much, Nick. If you were listening closely to Nick's introduction, you would have noted the promotion of Ryan Ezell to Chief Operating Officer. Congratulations, Ryan. Ryan's earned this opportunity and is the right choice to lead the flawless execution of the proposed contract amendment that we will be presenting to you today. Now, first thing I'd like to cover sort of why do this call? This journey began with an indication of interest from a non-oil and gas company that really valued our specialty chemical competencies and our new NYSE listing. During the evaluation of this proposal, we received other indications as well. We hired Piper Sandler to advise the company on the proposal. And the contract that we're discussing today was actually on a parallel path and predates the receipt of the indication of interest from the non-oil and gas company. As the contract evolved, it became clear that the contract was our best path to increasing shareholder value. The rapid evolution may have caused some confusion since the final contract required ProFrac to complete the acquisition of FTSI and they needed FTSI shareholder approval for that. That transaction has closed, which greatly simplifies our conversation today. We intend to explain the current contract and the proposed amendment to the contract, which requires your approval -- the approval of our shareholders. We also wish to express our excitement over the opportunity and our confidence and our ability to execute this transformational contract. Now, let's take a look at page 4, Nick, if you can take us to that slide. Just to give you a quick overview of the company. The company was actually founded in 1985. We've got about 140 employees. And during our history, we've served clients in over 15 countries. We've got 2 research centers; one in Houston, Texas and one in Marlow, Oklahoma, and our headquarters is here in Houston. We have 2 main divisions. That's the oil and gas chemistry, which also does solar-related chemistry, agriculture and industrial chemicals. And then we have a data analytics group that handles the sensors and obtains data on flowing hydrocarbon streams that allows automation and robotization of those streams in both the up, mid and south stream parts of the business. On our next slide, I just -- I'm going to work from the bottom up on page 5. Environmental Leadership is our DNA. We're really focused on creating solutions that reduce the impact of our industry on air, water, land and people. This is a core to what we're trying to do. We're nontoxic, biodegradable chemistry, and we're working towards improving all of our solutions in that area. The second thing that we've been working on for 2 years now and underpins our ability to really serve this contract and be successful is flawless execution. Ryan is going to walk you through that, but I would say one example would be our zero TRIR, our safety performance in 2021, that is flawless execution. Ryan will explain how we're going to build on that. We're also focused on profitability. With this new proposed amendment, it will take us to where our G&A is less than 10% of revenue, and we should have industry-leading margins in our Chemistry business. We also want to exhibit capital discipline as a part of our philosophy. We believe that we will be able to support this proposed amendment with our current infrastructure, we do not need to build additional facilities or invest in additional facilities to deliver the contract. We also want to move to what I would call backlog or sustainable revenue as a part of our philosophy. The more of it that we can have contracted, the more predictability and the greater ability for us to develop and deliver very predictable results. And then finally, one of the things I've learned in this industry is that you need to look full cycle. And it is the reason that we used an equity approach to grow the company as quickly as we can as opposed to using a debt approach because we think that we now are in a position to go full cycle and have a very successful result. With that, I'm going to turn it over to Ryan Ezell, our new Chief Operating Officer, to walk you through the details of the current contract and the proposed amendment. And Ryan, take it away.

Thank you, John, for the introduction and thank you to everyone joining on the call today. Here at Flotek, we are laser-focused on executing our strategy to be the collaborative partner of choice for sustainable chemistry and data solutions. The execution of this strategy helps support our vision to reduce the environmental impact of energy on air, water, land and people. And as a part of that vision and strategy, we are proud to bring forth the collaboration partnership with ProFrac. This partnership is the integration of world-class service quality and safety with a keen focus on reduced emissions, green chemistry and responsible energy production. When we look at the 2 organizations between ProFrac and Flotek, what we see is unique distinctions between the 2 in that we have Flotek bringing the bio-based high-performance non-toxic chemistry that's been utilized on virtually every continent in over 11,000 wells and our ISO FDA and EPA certified facilities, combined with ProFrac's efficiency regards to emissions, service quality and huge footprint, which now gives us our ability to have leverage, scale and scope to influence markets for responsible energy production. And when we take a look at the strategic framework, we ask ourselves, well, how does the spirit of agreement work? And we look at it, Flotek will be the primary supplier of all downhole chemicals needed for ProFrac's hydraulic fracturing operations, particularly those here in the United States. There's been a defined baseline level of chemicals to be supplied per fleet and this is part of our current supply agreement as well as the proposed amendment that we'll be discussing for the vote here at a later date. In an exchange for this commitment to the supply agreement, Flotek issued convertible notes to ProFrac, and in turn, ProFrac guaranteed these minimum purchase volumes to help underpin this issuance of equity. Now the details of each one of these agreements was presented in 8-K and the links to those provided in the deck as well. When we look at our current supply agreement, which is already contracted, this agreement was executed on February 2, 2022, for a term of 3 years. The minimum fleet is 10 and for us or the higher of 33% of the total fleet, which on the conservative side, we look at a projected annual revenue of over $75 million a year. What's great about this contract is it's not exclusive and requires minimal G&A for growth of our organization and more importantly, has a contract protection value of almost $50 million. We'll initialize this contract effective as of April 1 of this year. And in turn, ProFrac has the opportunity to nominate 2 Directors and upon conversion will represent about 16% ownership in Flotek going forward. When we look at the proposed supply agreement amendment, which is what we're going to be requiring or asking our shareholders to vote on coming forward was negotiated on February 17, 2022, and we anticipate a closing date in Q2 of 2022 as well subsequent to the shareholder vote. This will allow us to have an additional 7 years added to the current supply agreement for a total of 10 years and increased the fleet minimum from 10 up to 30 fleets. This raises the projected annual revenue of what we refer to as backlog revenue to over $217 million per year. When we look at it on the scope of steel, a minimum required for SG&A and no additional growth CapEx only what we consider to be wear and tear maintenance. This is a massive opportunity for Flotek to grow and continue to evolve and scale and scope of how to lead the industry in green chemistry production and help lead for responsible ability for all chemistry applications. Again, the contract is nonexclusive. And upon shareholder approval, ProFrac will receive $50 million in convertible notes for consideration of the amendment and can add an additional 2 Directors, upon which conversion they will have greater than 40% ownership in Flotek. Now when we look at the next slide, what we see is the impact of the revenue comparison. At the forefront, you see the current contracted amendment with ProFrac that was executed on February 2, which has a total value of about $225 million. Upon approval from shareholders, Flotek has the opportunity to gain an incremental $1.8 plus billion of revenue in backlog over the next decade, which is a huge opportunity for the organization to continue to grow and put us in a positive EBITDA position. Again, CapEx is minimal as well as minimal required SG&A. So when you look at such a scope of work, how do we ensure operational alignment and manage risk? Well, Flotek isn't new to this game. We've been delivering chemistry for over 25 years. And in the past cycles, we've seen large volumes have been able to adapt to that. Our current asset footprint for our blending and manufacturing facilities in Marlow as well as what we have in Midland, Texas and other geographical areas allow us to adapt and move in this type of location. When you look at our technical capabilities in the laboratory side, we have over 50,000 square feet of technical capabilities that we can apply to such an operation. More importantly, we're leveraging 2 decades of experience with collaborative supply chain partnerships that have a global footprint to help secure supply and the successful ramp-up of this project. More importantly, when you look at our specialty chemical blending facilities, we have an annual blending capacity of over 60 million gallons on the traditional CapEx expense. And when you look at what we'll be supplying at that facility, we're still only going to use about 50% of the current capacity, which gives us additional room to grow without large CapEx outlier expenditures. And more importantly, we also offer what is considered unique to Flotek is prescriptive chemistry management. These are Flotek field engineers that will be on site in the various basins for the ramp-up of this project and for successful launch to delivering service quality and safety. And the execution of these various points over the current DNA of what we have is what John mentioned is our laser focus on execution allowed us to achieve a zero Recordable Incident Rate in 2022. We also had zero hours of NPT in 2022, which exemplifies our keen focus for successful service quality to our customer base. And we also look at the main themes that we see here is our ability to collaborate with an industry leader like ProFrac to help lead us into the future for responsible energy production. And with that, I'll turn it back over to John.

Thanks very much, Ryan. Let's just hit a few of the investment highlights, and we'll get to questions. We're very excited about working with ProFrac. It's a shared value combination, and that's really the core of any success in a partnership, collaboration is the commitment to green products and solutions that reduce the environmental impact of the energy. They're doing this with their fleet. We're doing it with their chemistry. I think it's a great partnership there. We do see that we're going to have improved financial performance from the increase in economies of scale and scope, both for our organic business and for the proposed contract. We have a key -- we're really excited about having a contract with a leading OFS company, and I think this is going to provide EBITDA visibility for multiple years as a result of the committed volume contract. We've got the right team here to do this. We've built a $1 billion team here over the last couple of years. We've got depth on the bench. We know that we'll be able to execute this. We have the infrastructure. We have the people. We have really robust intellectual property portfolio that's been built up over quite a long time under Dr. Silas, and we're going to be leveraging that portfolio of patents, over 125. We've got state-of-the-art laboratory facilities that will be engaged in ensuring success for our new partner in ProFrac. It also -- we estimate try to be conservative that we will be a positive EBITDA in Q4 of '22. And we're going to engineer our costs so that we will be profitable for the remainder of the contract. That's our commitment. If we go to our last slide here and our request for approval, I'd like to tell you that and reiterate what Ryan said, if we take a look at both sets of bars, the current supply agreement and the proposed supply agreement amendment, you're looking at something that generates revenues of over $2 billion for our company over a decade with the approval. Our Board and our management recommend approval of this amendment. We think this is going to give us a strong platform to go forward. And we've also engaged Stephens and we've been advised by Stephens that the transaction is fair to the company. And the details of the fairness opinion will be provided in the proxy. We're very excited about this. We think we're going to be able to minimize our cost and structure our costs so that as we become profitable, we'll stay profitable for the whole of the contract and we're excited about the ramp-up. We're excited about the partnership, and we're excited to answer any questions for you. So I'd like to open it up for questions.

[Operator Instructions] Our first question will come from Don Crist of Johnson Rice.

Just one point of clarification on Slide 10, the graph that shows the revenues. Those 2 lines, the green and the blue, should be additive, right? So there's not a big step-up between '24 and '25 or '25 and '26, right?

Correct.

Okay. And then moving on to kind of a logistics question. I know you have the facilities in Texas and Marlow. Are there any logistics concerns or needs if ProFrac is going to have fleets up in the Northeast or in the Bakken or any other kind of basin that you all have to maybe build another facility or anything like that?

Ryan, please take care of that.

No, that's a great question. And what we've been able to do is we mentioned quite a few of the strategic partnerships that we have. In the Northeast, we've actually identified potential crews up there in the coming weeks. We already have secured yard space to stage chemicals as well as we are -- we'll be sourcing some directly from rail and logistics organizations in the geography to minimize logistics cost and help us do on-time delivery as well as have what I would consider to be a security of supply to be able to stage up there. So we've already got those things in place and working with one of our strategic partners in doing so. And we do it in basins as well.

Okay. Yes, and you kind of touched on my next question is any chemicals that you may be sourcing from third parties? I'm guessing you already are working on those agreements in the background to make sure surety of supply for ProFrac.

Absolutely. We've spent quite a bit of time, I would say, in the last 12 months as we started down this pursuit of our supply agreements to get things in place to be able to execute this type of contract and what we want to do because when you look at our strategy, we've been talking about for the past couple of quarters of reopening our activity, working with direct and indirect channels being in end use E&P operator as well as some of the other service companies. We spent a great deal of time on our category management, our sourcing strategy as well as our logistics strategy to be able to provide cost-effective chemistry in every basin. And that's been a huge focus for us that -- helping us not only lean up our cost but also get to where we've got flawless service delivery in those geographies.

Okay. And one final one for me. Now that the volumes of chemicals are ramping up considerably as you move forward with this initial agreement and then potentially the amendment -- are you seeing significant discounts from the suppliers that you're dealing with now to possibly lever your cost going forward?

We are. The intent and one of the things that we've really worked towards is being able to consolidate and leverage our spend. I think that's the beauty of this contract, which allows us to create that scale and scope. And so there's 2 fronts that we're working on that. One is just pure, what I would consider to be portfolio management, product line management of how we rationalize our portfolio and get the full effect of our spend as well as the increased leverage of the volume itself. And those are the 2 things that we do believe we're going to be able to leverage for some margin expansion as we ramp up and we start to see that consistent flow of products, and we're seeing that benefit itself already. And that transcends not only in this current contract, but also the significant growth we're getting in our overall core chemistry business as well.

The next question comes from Mike Heim of NOBLE Capital.

A handful of questions left. First of all timing questions a little bit. You kind of indicated we've closed on the first part and the pipe, and getting towards cash year. And you're saying that we need some approvals in the second quarter and then we'll have another $50 million coming in then. So what are you going to do with the $80 million excess cash in addition to what you had already?

Okay. So I might be misunderstanding the question a bit, Mike. But what we're doing is we are providing $50 million in equity for the new contract to ProFrac and the pipe is the pipe. Any additional working capital we bring in would be something that we're working on today with Piper Sandler to get the additional funding for the working capital that we require within the business philosophy we presented earlier where we want low or no debt, et cetera. So the $50 million would be the equity transfer to ProFrac in exchange for the contract. So is that clear?

Let me shift questions then. And was ProFrac a customer of Flotek before this arrangement?

No, we did not have -- well, not directly. We had done some work with some of the other end-use E&P operators. We also have done work with their recent acquisition of FTSI. We had a pretty long history with them in the past. But most of it had not been direct. They had been using some other -- another primary supplier here in the past. And that's part of the transition we've been working in the past, I would say, 6 weeks to make those transitions.

It's reasonable to view this all as incremental revenues to your historical business?

100%.

Yes. It is another thing. I mean, if you took a look at the number of frac crews in the industry, you had realized the significant market share gain that this gives to us by working with them. And now we're seeing other frac fleets come to us for business. And we thought that would happen because with the economy of scale and scope that we have, we're going to have excellent pricing and the ability to work with -- such it's non-exclusive with many other frac companies as well. So that's happening. But the number of frac fleets has not grown that much. And so we really have sort of taken share from others in order to establish this position.

Should we assume similar operating margins to historical business or other customers?

Yes. I think it's going to be a little bit of a blend of both, right, depending on the product mix by basin and/or what service delivery model we're seeing. But what we're anticipating in terms of comparison to our core business, most of the margins is more by product type and basin than it is the overall component, but we are seeing similar margins, that is correct. But we are -- I do suspect, as we leverage this volume, we will see -- we are starting to see some enhancement just from the sheer scale and scope that we can leverage.

I mean it enhances the whole of our chemistry margins, particularly on the organic side because we're buying the same raw materials. These same materials apply to our Industrial Chemicals business as well in large part. And so I mean, this -- we're going to bring sort of scale and scope to the whole of our business as we go forward. I think there's a lot of room for margin expansion, and we're going to be working on that.

And you indicated that the first component was effective April 1. And the second, you need some approvals. Do you think that will be in place by the end of the second quarter?

Nick, why don't you talk about proxy timing with them?

Yes. So we do believe that we'll have the special meeting for the shareholder approval by the end of Q2. There's a little bit of variation there depending on how the SEC views it, do they want to review or not, but we believe that it will be by the end of Q2.

The next question comes from Jeff Robertson of Water Tower Research.

John, on the ramp-up with ProFrac, can you talk about the timing of getting your chemicals into their crews that starts April 1, I think, with the first contract, but how long would you think to be into the minimum number of crews that would support that agreement?

A lot of variables there. I'm going to turn it over to Ryan for most of the answer, but I'm delighted with the fact that Ryan and his team and the ProFrac team have already had meetings to begin the planning because this is a big lift. And so we've got the planning underway. The collaboration is incredibly high. It's going to take a lot of teamwork and the ramp is -- and planning has already begun. And with that, I'll turn it over to Ryan to give you some details.

Yes. So the way we've looked at it is from the initial announcement that we had on February 2, within 3 days of that announcement, we were in Willow Park meeting with ProFrac's team discussing how we're going to look at the various basins, the product portfolio need to be there, lining up supply chain, et cetera. And so we've already charted out most of the operations. We've now identified out of their core fleet, which was the base ProFrac fleet identified a ramp-up schedule for all of those crews and the chemistries that are being provided for those and put together time lines for those. Some of them will start basically as they are closing down their current supply agreement depending on the path. They're going to -- all those various fleets will be coming on within the next, I would say, 4 to 6 weeks. So we expect a solid ramp up in April for a majority. And then as the recently acquired FTSI fleets, those will be moving over. As you know, the typical -- a lot of that has to do with integration internally there with ProFrac, but what we've seen so far is a very lean, efficient integration and run programs. So we expect those to start taking place here in Q2 as well. I hope that gives a little bit of clarity, but we've got some very defined scope in terms of what our game charts is for the onboarding of the various fleets in the various basins.

Will you onboard in each basin that ProFrac is working or will you stay in the Permian, for example, or in East Texas or the Mid-Continent initially?

The initial fleets that we have will be -- will pretty much in the next coming weeks, we'll have one operating in almost every basin, and they're ramping up on where the activities, they're moving pad to pad right now. So it will kind of be spread out between East Texas, West Texas, a little bit in the South Texas, the Northeast, so they're going to be spread out pretty good, which is exciting for us. We've been working diligently on this ramp-up and know how our supply chain and logistics works and it's exciting times for us to be able to ramp up and get going.

So is it reasonable to think that for the capacity that is not going to be consumed with the ProFrac contract distributing into these basins with that contract will help -- or in other words, you could piggyback some of the remaining 48% capacity into the basin with what you'll be doing a ProFrac to other customers?

Absolutely, absolutely. I mean we've got -- the way it's set up is pretty unique in the way that the sourcing projects work because of the way we do specialty blending with some of our other partners seeing some of the, I will say, basic chemistries the way we source everything. It's going to be a pretty smooth move for us up to it. It's a matter of identifying and then projected lead times, which most of our stuff here in North America. We've got some relatively aggressive lead times on those things. So I'm pretty excited about our ability to be able to do it.

I'll be a little bit optimistic here. I mean our contract cost for 30 crews or 70% of their total crews, they've got 45 crews fleets available. Our goal -- the reason we keep saying flawless execution is we have a contractual relationship for the 30. There's an opportunity to get the other 15, but we've got to do that with flawless execution, value creation for the end customer and the ability to deliver in all these basins. We have every intention of being on every crew, but we've got to earn it. And that's what we're going to be doing over the next 12 months is demonstrating the reason why this industry should depend upon ProFrac and Flotek to deliver value into each of these basins. And we've got the intellectual property do it, the teams to do it, and we're excited about it.

John, will this put you in touch with other operators so you may not have had customer relationships with and give you the opportunity to cross-sell other Flotek chemicals to them?

That's an exciting point, too. I mean I think this goes both ways. We have customers that -- that they're not working with that we may be able to introduce them, and then they have customers that we're not working with, they'll introduce us. And the biggest value comes the more that we know about the reservoir and the greater the performance that we can get on their wells. And so what we bring to ProFrac, I think, is a tremendous understanding of reservoir characterization, combined with their understanding of fracking and the ability to execute that frac. And so I think the combined talents really have an upside for our customers, which is going to drive the business even more strongly.

And last question. Have any of the customers in the industrial chemistry side of the business noticed what you're doing with ProFrac in terms of a long-dated supply agreement?

Absolutely. I mean when we look at -- the way we've looked at it is a big part of our strategy is chemistry as a common value creation platform. And when we look at some of these other verticals, whether it be in some of the ones in energy production, we look at some of the more what we call renewable resource around geothermal, solar, what we're doing on the industrial side of the business. This allows us, actually, I would say, preferential buying power on this total leveraged footprint because a lot of the surfactant technology we'll use, the co-solvents, all those things transcend well in that other part of the business. And more importantly, it's creating value for our shareholders. This allows the diversification of revenue that could potentially drive a better multiple on our valuation components in combination with our growth potential of what we're doing in the responsible energy side.

The next question comes from Joe Von Meister of Intermarket.

John, not to be a stickler, but I'm looking at the slide on -- you have it a couple of times, but revenue impact comparison, Slide 10 and the little blue bars in '23 and '24 look like they go to $50 million and the bars in '22 and '25 are less. So that's less than $225 million. I assume that's a mistake.

Probably just a graphical problem there, Joseph. It's not a mistake. I mean the number of cruise volumes are calculated out to $225 million, $230 million.

It's the split.

Yes, but the bars add up to $150 million maybe or $100 million something. The $50 million and $50 million and maybe $30 million and $10 million, I don't know. It's not -- that's what I'm talking about. But I don't know. I'll take a look at that before you put that slide out again. So our friends at ProFrac are going public? That's a question.

Yes.

And the value proposition that they're offering is all ESG to the extent fracking can be ESG?

No, I mean -- executing stimulation in the field is difficult and requires a lot of expertise and competence they bring that. But they also have brought a commitment to dual fuel fleets and probably best that's there and that's one for me to refer you to reading their S-1 and -- because I don't want to cause any issues for them, and I'm excited about their S-1, I think they are, too. But the best place to go and get information on them is probably to refer back to their S-1, which has been filed.

Right. I wasn't really getting to that. What I was getting to is you have basically a green frac fleet with non-harmful completion chemicals or oil field stimulation chemicals being used, citrus-based chemicals. So that -- and obviously, they're making a big commitment to you guys. That's got to get the attention of other folks in the industry. So I'm just wondering -- what's driving this? Have they been asked by big customers to try to produce a greener footprint in the services they offer and they brought you in as part of that? And then the other question I had is when are we going to see your Q4 results?

End of March, we'll be filing the 10-K and we'll have an earnings call there. We were just -- there was enough complexity in this. We thought to call it just focused on this proposed contract amendment was meritorious, where we can answer a few questions and be an advocate for you guys voting for it. But your question, let's see if I can address that. It's a good question, why us, why now? And when you take a look at how strong this market is at the moment and how important focus on environmental issues has become, then a partnership between companies that have shared values around the environment is absolutely critical. And so you see leaders in the marketplace that are doing equitable origin for their reserves. Toby Rice, EQT. I mean, here's a great place to go and look at where the market is going, and they're both thought leaders and industry leaders. And so what we're doing is creating with ProFrac an OFS capability that really serves leadership like EQT in what they need and where the market is going with regard to the totality of a commitment to reducing the impact of hydrocarbons. We think hydrocarbons are critical for the future, but we think responsible production of them is going to be where the market goes, and we want to be a big part of that responsible production and maintaining that social license to operate. And that's why I think they really -- they see an opportunity to work with a green chemistry company like us as well. So I think that's what's driving it, Joseph.

I think it's really exciting.

Yes. No, me too. I mean, it's -- I'm pretty pumped up about it. But my goal is to get you as pumped up as I am.

So can you tell us what you think the contribution margins are going to be on this business on average?

Probably shouldn't comment on that. I'm still working through how you go in and talk about your margins when you also are going to be working with your largest customer at the same time. So give us a short time to figure that out. But I do know that as we go forward, our intent is to present margins for the divisions, and we're working with the auditors to make sure that's a part of our Qs as we come up on Q2, particularly.

Can you comment on any of your other businesses in the fourth and outlook in the first quarter at this point?

I probably can, but I really don't want to keep this call on track on the proposed amendment for the vote, Joseph, and we'll address all of those when we have our earnings call.

So we're being asked to vote to approve the share issuance. Is that what this is?

Yes. That's exactly correct. And I mean, I just -- we're basically asking for a vote to pick up $225 million and plus in revenue a year for a decade. And that's really our ask. And so we're going to sort of stay the course on that. And so if we can get to another question on that, probably be the best.

So the ownership by ProFrac after this is all said and done, you say 40%, but it is that 45% or below 40%, assuming the conversion at $1.088?

Nick, go ahead and grab that one. And we will probably need to move to the next caller. We've got quite a queue here, and we really are getting pretty close to the end.

So yes, Joseph, the answer depends a little bit on who converts when at what time. There's a number of variables in there, but roughly somewhere between 40% to say, 46%, 47% is my expectation, in that range.

Yes. I just wanted to hear that number.

The next question comes from Seth Downing of McKenna & Associates.

Can you -- a lot of the questions have been answered, so I'll make this quick. Can you just real quick recap the process for shareholders here on a go-forward and approval? Can you just unpack that a little bit in the SEC Q&A here to getting the deal done?

Let Nick answer that.

You bet. So we'll be filing a preliminary proxy statement here, hopefully in the next few days. SEC will need to review that. If they don't review it, then we're off and running towards a vote that I would hope would be sort of late April, early May, as early as we can make it. If they review it, it adds about another 2 to 3 weeks, but still my expectation is within May. Once we have the vote, it will work just like an annual shareholder vote, we'll have the answer in real-time. We'll release it via an 8-K and we'll close, I would hope, within a matter of days after the vote, certainly no more than a couple 3. So that's really the process. It's not especially complicated, believe it or not. The variations are just whether the SEC wants to take a look, which they sometimes do.

Okay, great. And then final parting shock. Can you just talk about -- it's been touched on, but can you expand on just what other pipeline might be beyond ProFrac and are there any limitations around the agreement to prevent you from going to others cross-selling?

They were very excited about the fact that it would be non-exclusive and that the scale and scope would be beneficial to the whole of the industry. They're also committed to non-toxic biodegradable chemistry, and they want to support us in that endeavor because they think that the social license to operate for the whole of the industry makes the tide rise. And so we are serious about being the chemical company, and it is non-exclusive, and we have a lot of opportunity on the organic side, and we'll cover the organic side during the conference call when we're wrapping up the 10-K, talk about our growth in Q4 over Q3, et cetera, but we'll hold up on that until we get to that conference call. We're just really focused on what we're trying to get approved here, which is going to come quickly. And I want to make sure you had all the data for that.

This concludes our question-and-answer session. I would like to turn the conference back over to John Gibson for any closing remarks.

Thank you. I appreciate all of you that were on the call, quite a long list today. We're super excited about this. I mean we have now gotten the confidence in the next decade of what's possible with approval of this contract. And we think it underpins our ability to develop and deliver even better chemistry and better margins as a result of having this foundational contract available to us. We believe if we do an outstanding job that we're going to really get in with ProFrac and grow it from the minimum contracted, which is 30%, we have the opportunity to get all the way to 45%. There's no limit there. And we think that it's also the direction of the whole of the industry is going to be to move to chemistries like what we're providing, and we want to have a leadership position in that and reach out beyond that, beyond ProFrac and to other frac fleets. And we're also interested in adjacent markets, and we're going to -- we'll talk about the remainder of our business in the call coming up to go over the 10-K. But we think this is a fantastic opportunity. You won't see another one like this in oilfield services. It's unique. It's creative. It's a result of a pretty scrappy management team trying to build a great company here of what was a huge and positive foundation of green chemistry. And we look forward to getting the proxy out and getting approval and moving ahead with this.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.