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

Good morning, ladies and gentlemen, and welcome to the Flotek Second Quarter 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded on August 5, 2026. And now I would like to turn the conference over to Mike Critelli. Please go ahead.

Thank you, and good morning. We're thrilled to have you with us for Flotek's Second Quarter 2026 Earnings Conference Call. Today, I'm joined by Ryan Ezell, Chief Executive Officer; and Bond Clement, Chief Financial Officer. We'll begin with prepared remarks on our operations and financial performance followed by Q&A. Yesterday, we released our second quarter results, updated full year guidance and an updated investor presentation, all available on our Investor Relations website. This call is being webcast with a replay available shortly afterward. Please note that today's comments may include forward-looking statements. These are subject to risks and uncertainties that could cause actual results to differ materially from our projections. For a full discussion of risk factors, please review our earnings release and most recent SEC filings. Please also refer to the reconciliations in our earnings release and investor presentation for non-GAAP measures. With that, I will turn the call over to our CEO, Ryan Ezell.

Thank you, Mike, and good morning, everyone. We appreciate your interest in Flotek and your participation today as we review our second quarter 2026 operational and financial results. In the second quarter, Flotek continued its transformational growth storyline through the execution of its corporate strategy. Driven by the powerful convergence of innovative real-time data and chemistry solutions, as shown on Slide 3, Flotek has laid the foundation for a data-driven growth trajectory built on diverse recurring revenue, high-margin services and proprietary technologies that create value for our customers and improve returns for our shareholders. The strategic transition of the company into a Data-as-a-Service business model continues to gain momentum while expanding the total addressable market for the company. As a result, Flotek's Data Analytics segment grew exponentially, while our differentiated chemistry segment outpaced the market in a challenging environment through an unwavering commitment to safety, service quality, innovation and total value creation. With that, I'd like to touch on some key highlights for the second quarter that Bond will discuss later in the call. Company total revenue approached $100 million, up 70% from the second quarter of 2025 and the strongest quarterly performance in the last 10 years. Data analytics achieved its highest quarterly revenue in company history, shattering the first quarter 2026 record by 85%. Chemistry Technologies revenue increased 53% with international chemistry revenue reaching $10.6 million, representing 93% of full year 2025 international chemistry revenue of $11.4 million. Company gross profit climbed 65% versus the second quarter of 2025. It's impactful to note that data analytics accounted for 51% of company gross profit versus 26% in the prior year quarter, marking a major milestone in Flotek's transformation as it became the largest contributing segment to gross profit. Total company adjusted EBITDA grew 109% year-over-year, totaling $16.8 million. On Monday, we also announced a 10-year $400 million contract award to support PREPA's 400-megawatt Puerto Rico gas power utilities project referenced on Slide 4. Finally, the company updated its 2026 guidance with the new midpoint being 45% and 49% increases versus 2025 actuals on revenue and EBITDA, respectively. This update builds upon a multiyear trend of revenue and profitability growth as the company executes on its strategic initiatives to provide long-term resiliency and profitability as shown on Slide 6. Most importantly, these results were achieved with 0 lost time incidents in the field of operations. I want to thank all of our employees for their hard work and commitment to safety and service quality in achieving these outstanding results. Now turning to the larger picture for the energy and infrastructure sector. We continue to believe that the ongoing situation in the Middle East will have impactful and potentially long-term implications on global supply and energy security that will demand action. The industry continues to exhibit a shift in supply side dynamics that's recalibrating the risk profile of regional supply while fundamentally establishing a higher baseline for energy security. We expect increased investment in localized oil and gas developments, while geographies that do not possess resources look to rapidly diversify energy security exposure. All of these factors point towards a stronger commodity pricing environment for increased upstream activities. Layering in the expanding power demand driven by AI, data centers and industrial reshoring, combined with the reliability issues of an aging transmission infrastructure, the expectations for tailwinds within the energy sector further strengthened. Our legacy pressure pumping customers continue to capitalize on the portfolio diversification opportunity provided by the demand for remote power generation. Flotek is poised to support emerging customers with products and services that help protect their assets while optimizing their operational performance and fuel efficiency. With multiyear waiting list for turbines and reciprocating engines, protecting these capital-intensive investments is critical, along with enabling reliability standards that exceed the greater than 99% uptime requirements. Transitioning from the macro view, let's dive into details, starting with Slide 8. I want to spotlight the transformational growth in our Data Analytics segment. We saw total segment revenues up 223% year-over-year and second quarter 2026 service revenues exceeding total segment revenues from the year ago quarter. This strong growth is powered by our flagship upstream applications, power services and digital valuation, both of which are generating significant contracted wins and a robust recurring revenue backlog shown on Slide 9. Highlighting those wins are our [ RESA ] /PREPA 10-year 400-megawatt utilities power support contract, generating over $400 million per year backlog through 2036. By the first quarter of 2027, Flotek expects to support over 5 gigawatts of power through measurement or control by our proprietary PWRtek platform. This further validates the demand and scalability of our innovative technologies in the behind-the-meter power space. We're also actively engaged in a potential Phase 2 extension of the Montana Power Services contract. Finally, we had the successful utilization of our state-of-the-art Smart Skid to optimize gas quality with real-time blending of field gas and CNG for a major IOC. This is the first application of its kind. The momentum gained from these wins has expanded our expected contracted backlog to over $500 million. Power Services led this growth, further reinforcing our shift towards high-margin recurring revenue streams. The PWRtek platform has evolved from a novel analytical approach into a transformative solution for the energy and infrastructure sector. What began as advanced analytics has grown into a comprehensive end-to-end fuel management platform, redefining performance standards and operations within the sector as shown on Slide 10. Our expanding portfolio of patents and field proven use cases position Flotek as a leader across the natural gas value chain. Looking at Slide 11 and when considering the velocity of our measurement, we deliver unmatched real-time fuel monitoring, conditioning, blending and engine control to optimize performance and safety for behind-the-meter distributed power operations. The success of Flotek's power services applications is expanding rapidly as we expect to have proprietary real-time analyzers of more than 50% of the currently active North American e-frac and natural gas powered fleets by year-end. Additionally, on August 3, 2026, Flotek announced its second contract within the utilities infrastructure sector seen on Slide 4. Leveraging our patented PWRtek platform, Flotek entered into a 10-year agreement to support natural gas-fired grid enhancement initiatives for the Puerto Rico Electric Power Association, which is the electric utility for the Commonwealth of Puerto Rico. Under the agreement, Flotek expects to generate a revenue backlog of approximately $400 million through rental of gas-fired power generation equipment, together with the deployment of the company's proprietary smart conditioning and distribution systems. Flotek has partnered with Power Expectations, which leads the group executing the emergency temporary power generation project. The initiative is expected to deploy 400 megawatts of natural gas-fired power generation capacity to address Puerto Rico's ongoing energy crisis. Flotek is providing its proprietary PWRtek platform, including 400 megawatts of primary power generation capacity and 6 pairs of smart skids with advanced conditioning, real-time analytics and gas distribution systems, working alongside experienced local partners for on-ground execution and project management. Support equipment is expected to begin deployment in the fourth quarter of 2026 with the initial power generation equipment and conditioning and distribution skids expected by the end of the first quarter of 2027. Now let's transition to Slide 13, where we'll dive into our second upstream application, digital valuation. This groundbreaking use case sets a new standard in the oil and gas industry, delivering unprecedented transparency and minimizing enterprise risk from producing wells like never before through real-time digital valuation. We believe the XSPCT's speed, accuracy, durability and qualification under the rigorous measurement standards outlined in GPA-2172 will provide a significant advantage in discussions with prospective customers as we aggressively expand this manufacturing and field deployment. In March of 2026, the XSPCT Analyzer was named Product of the Year at the 2026 Analyzer Technology Conference, further exemplifying its differentiated capabilities. In the first quarter of 2026, we ended the quarter with 57 digital valuation measurement devices deployed or contracted for delivery, and that number has grown 56% to 89 as of the end of the second quarter of 2026. The execution of our transformational strategy to grow the data analytics segment through upstream applications is gaining traction. But what is most important is what it means for our stakeholders and our investors. First, our data-driven strategy ensures predictable recurring revenue and cash flow, delivering stability and long-term value. Secondly, our proprietary data technologies and superior measurement accuracy enable velocity and decision control that establish a high barrier to entry, secure client loyalty and support our value-based service model. And third, long-term high-margin subscriptions position Flotek for sustained growth and margin expansion, driving significant shareholder value over time. And lastly, our Chemistry Technologies segment continues to deliver robust performance driven by the differentiation of our prescriptive chemistry management services and our expanding international presence. Slide 16 highlights the resilient performance of our Chemistry segment, which delivered a 53% increase in total revenue for the second quarter of 2026 compared to the second quarter of 2025 despite a 5% decline in the average North American frac fleet count over the same period according to primary vision data. This was the strongest quarter of chemistry sales since 2017 and exceeded our expectations as our work in the Middle East pulled forward, driving strong performance in the month of June. International revenue totaled $10.6 million, up 172% from a year ago, with the company expecting continued growth in international chemistry sales in the second half of 2026. It's evident that our chemistry team has executed our strategy flawlessly. As we move into the second half of 2026, opportunities leveraging the convergence of prescriptive chemistry management and data services move to the forefront through high-margin services that improve operator ROI. These advanced data-driven services include smart ChemAD units, real-time flowback monitoring and implementation of prescriptive geological targeting. Looking ahead, I am more confident than ever in Flotek's momentum and our ability to drive sustained profitable growth as we execute our transformative corporate strategy. We are firmly positioning Flotek as a high-growth technology leader in the energy and infrastructure sectors, accelerating innovation through the powerful integration of real-time data analytics and advanced chemistry solutions that are tailored precisely to our customers' evolving needs. Now I'll turn the call over to Bond to provide key financial highlights.

Thanks, Ryan. Good morning, everyone. Clearly, this was an exceptional quarter compared to both the prior year and the first quarter. As Ryan indicated, second quarter revenue exceeded our expectations by a wide margin. I wanted to provide a little color as to how the quarter came together. Second quarter revenue growth benefited from a very strong month of chemistry business in June. We recognized nearly $31 million of chemistry revenue in June alone. For perspective, that represents more than 50% of the total chemistry revenue generated during the entire first quarter of 2026. On the strength of our international business, our external customer chemistry revenue in just the month of June totaled $15.2 million, which exceeded the external customer chemistry revenue for the entire first quarter. As a result, external chemistry revenue increased 111% sequentially and accounted for nearly 60% of the company's total second quarter revenue growth of $29 million compared with the first quarter. Our updated guidance builds in a more normalized pace for domestic external customer chemistry revenue in the back half of the year as compared to the second quarter due to the transactional nature of the business. However, in terms of international work, we have inventory shipments expected to arrive in country during August and potentially September that we believe will allow international revenues to remain strong. We expect both chemistry and Data Analytics segment revenue for each of the third and fourth quarters to outpace our first quarter results. Because we have not yet secured the Phase 2 extension of our Montana Power Services contract, our guidance assumes no revenue from that contract during the fourth quarter. And as noted on Slide 12, we are currently in extension discussions with the various parties to that agreement. In addition, our guidance does not yet consider any financial impact in 2026 from the Puerto Rico contract announced Monday as we continue to work on initial deployment time lines. As shown on Slide 6, we are estimating total revenue to range between $340 million and $350 million with adjusted EBITDA in the range of $47 million to $51 million. As Ryan pointed out, the midpoints of these ranges imply significant growth in each metric as compared to 2025. Just as a reminder for everyone, our adjusted EBITDA guidance does not add back noncash amortization of contract assets, which is expected to total approximately $9 million during 2026. Moving from guidance to quarterly results. Total revenues for the quarter increased $41 million year-over-year, aided by the strong June chemistry sales previously discussed, 68% of the total revenue growth as compared to the second quarter of last year was attributable to chemistry, while 32% was related to data. Chemistry segment related party revenues were up 64% from last year's quarter, while external customer revenue increased 38%. As Ryan noted, international chemistry revenue totaled $10.6 million during the quarter, which is up from $4 million a year ago and up from just $1.9 million in the first quarter. Data Analytics delivered another record quarter. Segment revenue represented 19% of total company revenue in the quarter, up from 10% in the year ago. As outlined on Slide 9, we continue to gain momentum with external customer data analytics sales. 63% of second quarter DA revenue was derived from external customers as compared to 44% in the year ago quarter. The increase in externally derived revenue was driven by our Montana Power Services contract that contributed nearly $6 million in revenue during the quarter as well as a $2.5 million sequential increase in our upstream power services business that continues to expand to external customers. Looking forward to 2027, we expect the project in Puerto Rico will meaningfully increase the percentage of revenue derived from external data customers. Total company gross profit increased 65% as compared to the year ago quarter. As a percentage of revenue, gross profit totaled 24% during the quarter, which was down less than 100 basis points versus the year ago quarter despite the nearly $7 million decline in the order shortfall penalty as compared to the second quarter of last year. G&A expenses increased 14% year-over-year. Excluding stock comp, G&A was only up 7% versus the year ago quarter. As revenues continue to scale, we see meaningful leverage in our G&A expenses. Total G&A expense declined to less than 8% of revenue in the second quarter of this year compared to nearly 12% in the year ago quarter. This marks the lowest quarterly G&A rate as a percentage of revenue that we have achieved in at least the last decade. Net income for the quarter was $10 million or $0.26 per share compared to $1.8 million or $0.05 per share in the prior year quarter. Our June 30 balance sheet reflects the increased activity during the quarter, particularly the strong month of sales in June. While our ABL balance was elevated at June 30 relative to funding working capital needs, borrowings outstanding as of this morning on our ABL have been reduced to 0. First half results were impressive with revenue up 49%, adjusted EBITDA up 81% versus the first half of last year. We've delivered strong growth while maintaining a disciplined balance sheet and low leverage. As shown on Slide 19, using the midpoint of the updated adjusted EBITDA guidance, our leverage ratio is less than 1x based on net debt outstanding as of June 30. We believe this positions us to continue executing our growth initiatives while maintaining financial flexibility. With that, I'll turn it back to Ryan for closing remarks.

Thanks, Bond. Our second quarter results extend our multiyear track record of consistent improvement as we continue transforming Flotek into a data-driven technology leader. The Data Analytics segment delivered strong growth, highlighted by triple-digit increases in service revenue, expanding recurring revenue streams and a robust multiyear contracted backlog now exceeding $500 million. Together with our resilient prescriptive chemistry management services, Flotek is well positioned to gain additional market share and drive further top and bottom line improvement with substantial upside opportunities in our data-driven services. We remain committed to shaping the industry's digital and sustainable future by leveraging chemistry as our common value creation platform. With our proven execution, expanding high-margin capabilities and clear pathway to scaled growth, Flotek is poised for the next phase of value creation for our investors. Operator, we're ready to open the floor for questions.

[Operator Instructions] So your first question comes from the line of Rob Brown of Lake Street Capital Markets.

Congratulations on all the progress. First question is on kind of the overall power infrastructure business. The Puerto Rico contract was a great add. Could you kind of comment on the overall pipeline in that business? And maybe just some color on what other kind of projects are out there in terms of the pipeline you're pursuing?

Yes. We look at it right now -- right now, I would say that our power services pipeline, particularly related to utilities, infrastructure and data centers are the highest it's been in the history of the company. And this recent award with PREPA is an example of the type of pipeline, and we have a series of different opportunities that we're in various stages of bidding and processing around that. What's exciting is we've now moved measurement devices. We're actually monitoring real-time gas-fired traditional power plants, some in the Northeast, a couple here that are moving in Texas. We've also expanded our measurement services into data center growth. It was -- I mentioned that project about the real-time blending and control for one of the major IOCs. This is an area that's going to be targeted for data center growth with some of the larger behind-the-meter power generation companies. And so we're seeing a significant pipeline there. I would say when you look at a combined value of well over $1 billion now on the pipeline potential and at various stages of bidding, negotiation, et cetera. So an exciting time to see what we're doing here at Flotek. And I think it's also important to note that since the starting of our PWRtek segment in the second quarter of last year, we've now grown. We'll be doing measurement and/or some variance of control and distribution on almost 5 gigawatts of power. So it's an exciting growth platform for Flotek and for the future as it continues to gain rapid growth and scalability.

Okay. Excellent. And then just more detail on the Puerto Rico contract. It sounds like you're doing a combination of gas control and power generation. Can you just elaborate on the power generation side when that activity kicks in and how that's going to fit into the mix of what you're doing?

Yes. I would say this was so new where we released that. We're going to be giving some updated numbers on guidance on when we think those financials begin to hit. You'll really start to see those play in, in the first quarter of '27, maybe a little bit of mobilization pieces here at the back part of Q4. Our initial 40 megawatts of prime generation will move pretty quick as kind of a baseline start-up piece there as well as all of our conditioning and distribution setup. I think what we talk about is the conservative financials around the baseline of the contract. When you look at the infrastructure needs inside Puerto Rico, they're actually out looking at growing almost 3 gigawatts of power as they're trans -- moving over from, I would say, coal and/or diesel type burn fuel facilities to nat gas. So not only is this initial 400 megawatts a great opportunity for us, I think we'll have quite a few other opportunities to expand our work there. What's unique is this is going to be an LNG transition to CNG potentially combined with, I would say, biogas, some from landfills. And so this is where you start to see the unique real-time monitoring and real-time blending technologies at Flotek become extremely differentiated and why it puts us at a forefront of being able to capture this kind of work. But I think that we'll give some further updates on timing and maybe potential scope increase as we get closer to the kickoff point in Q4.

Your next question comes from the line of Jeff Grampp of Northland Capital.

Congrats on all the recent positive news this week. I was curious to get maybe a little more back story on your involvement with this Puerto Rico contract. My understanding is this project has been in the works for a bit here and potentially, I don't -- maybe you guys were involved in some of the earlier stages while that was being negotiated. But like what's the back story on how you guys became aware of this project or how your partner became aware of you? Just kind of curious how that evolves and how you guys ultimately kind of convey that value add to win the deal.

Yes. It's an interesting evolution piece, I would say, Jeff, is that as we've begun -- we started out with this initial work in Montana, supporting some of the government-driven contracts. This has evolved in some additional pursuit around that. And some of the contacts that we have spoken to there, I would say there's a basket of various opportunities to support land service contracts, utility backup. And then when you look at the government, U.S. government support of Puerto Rico, I mean, technically, they're backing the majority of a lot of this work through the financial, FOMB, they call it Financial Management Oversight Board in combination with 3PPO and PREPA. And so we have been brought in actually initially to look at gas-fired power generation from U.S. government defense contracting sites and they were aware of our technologies. And as the opportunities expanded, as I mentioned under the umbrella of some of that 3 gigawatt gas-fired power transition there, our technology was brought into play in terms of as they want to look at not only doing that LNG to CNG transition, but also the incorporation of potential biogas and our ability to monitor real-time blend, control and distribute became an extremely strong value proposition. And this didn't happen overnight. This is a multiple quarter pursuit and testing component in there. And so kudos to the team led by Tom Redlinger and our engineering staff at pursuing this and getting it done. And I think it's going to continue to open multiple doors as people start to kind of put on the center stage the capabilities of the PWRtek platform.

Got it. I appreciate those details. For my follow-up, I wanted to understand this metric you guys put in the release, this 5 gigawatts that are under measurement or control. Can you contextualize that like from a revenue perspective? I know the revenue exposure can vary depending on the exact scope of work there. But just trying to, I guess, triangulate the financial impact of that 5 gigawatts and at the risk of being greedy, maybe if you can split that out between oil and gas exposure versus other end markets you guys are penetrating.

You're trying to give me to pull a hamstring on guidance here, Jeff. So what I'll try to do is I'll walk you through a little bit about how we get to 5 gigawatts, right? And then because it's hard to directly extrapolate the revenue because if you look at in the very appendix part of our deck, we talk about the sales pursuit where we go to measurement and then that transitions into control and then the longer-term piece of distribution. So what we've secured is we've secured measurement devices in over 50% of power generation, e-frac and natural gas-fired fleets here in the U.S. on the frac side of business. Those run anywhere from 35 to 40 megawatts per location where we do some form of measurement and/or measurement and control. Obviously, if we're doing just plain measurement versus measurement, control and distribution, the revenue streams are different. So I'm going to kind of shy away from giving direct revenue on that, but that helps you understand this. I would say it's roughly 75 plus or minus 1 or 2, I would say, measurement and/or control sites on almost 40 gigawatts per site to get your baseline number. Yes. And then we turn around and we've got -- if you take the natural gas-fired power plant facilities like CPV Fairview and a couple of other ones, those are just under 2 gigawatts of power that we're looking at. And what we're doing there traditionally is we have a measurement device looking at unconventional shale gas, we're trying to figure out do they knock condensates out or what do they do there. Most of these have an ethane capacity problem, and we're trying to figure out do they cryo drop it or do they let it burn through and how much are we going to take on a derated capacity at those facilities. So that contributes just under 2 gigawatts. And then you've got this recent PREPA 400-megawatt award, which puts us right at 5 gigawatts. And then we talked about our robust pipeline, but that's how it kind of builds up. Each one of them have a little bit different revenue build because I don't want to say they're complicatedly customized, but depending on what level of conditioning and/or distribution or primary power is pulled in there with it that you see kind of a variance in how the revenue evolves there. But as you can imagine, there's significant upside because as we transition from measurement to measurement plus control and control plus distribution, the revenue per location increases dramatically.

Got it. That's awesome details and hopefully [indiscernible] made it through that explanation.

And your next question comes from the line of Gerry Sweeney of ROTH Capital.

I had a question. Obviously, on the data analytics side, you have power, you have digital valuation, you have the e-frac fleet opportunity. These markets are expanding. I think you're getting a better understanding of the opportunity. Is there anything you need to do invest in to maybe attack this market faster, solidify your position, grow a bigger pipeline to drive more consistent -- potential consistency with unlocking opportunities?

Yes, Gerry, that's a very interesting question. I'll try to dissect this is number one. When we look at from a rapid organic growth penetration and scalability, we have now invested going on $13-plus million in CapEx expenditures into monitoring equipment, conditioning equipment, distribution equipment. If you were to take every year that I've been at Flotek and add them together and multiply it times 2, we haven't spent that much CapEx. And this has been solely in growing the power services and digital valuation businesses. I look for that number to continue to expand even further in the back half of the year as we continue to put -- put CapEx on these is the right thing for us to do and reinvest in cash flow just from the fact of the ROI is very, very solid for the company. Also, there's other opportunities, I think, for us as we look at -- we mentioned some of these contracts that we're picking up in utilities. We don't want to be a pure play power provider, but I think there's opportunities for us to supplement the partners that we work with on some of the mobilization power. So there's an opportunity there for us to potentially grow some of our, I would say, organic power services, say, 50 to 100 megawatts, just to have to help stabilize the work that we do with the bigger behind-the-meter power generation people. And then I also think there's some opportunities for M&A and/or consolidation for some people that are trying to do some level of gas monitoring or conditioning, albeit not in real time or more mechanical in nature. There's opportunities there that we could take some of their existing equipment and utilize our proprietary blending technology and measurement to upgrade the equipment into a more advanced form of monitoring depending on the pipe, the vertical application there. So I think those are, I would say, 3 primary pathways we're looking at accelerating the growth. We were speaking to the Board that this growth is kind of choppy. I mean when you start picking up 400, 500-megawatt awards, you've got -- we got to start -- we're pre-investing and having some of those assets. Luckily for us, most of our measurement and/or conditioning assets, we can build in 4 weeks, 5 weeks. So we get a pretty quick turnaround. But I hope that gives you a little bit of color on what we're doing to expand the business and grow the opportunities that we're getting.

Yes, that's helpful. I mean, obviously, you have sometimes these big chunky opportunities, but even on the digital valuation, keeping -- growing those consistently, I think, builds in some of the opportunity as well. Technology, how does this separate you or create advantages in the power market? Are more and more potential customers or clients or partners recognizing this? And how do you actually expand this or sort of highlight it per se?

So I would say that we started our pursuits with heavily in a lot of the behind-the-meter guys that we knew that started in the frac space has now moved into the major top 10 behind-the-meter power suppliers, and we started doing measurements. A good example in the slide deck, we have a representation of the real-time gas condition and gas blending. And if you look in there, that's specific patented technology for us. And there's a graph on there that shows field gas being conditioned by one of these mobile gas power plants or I should say gas conditioning plant. So even when it comes out of that, it's still variable in quality. And what you can see us tracking is the variance in the methane number of that gas with how we open and close automatically by the measurement device, the blending valve to put the CNG in. And then after doing that, we level out the MN number directly to what's prescribed for the turbine or the recip. In this particular case, it was a turbine. And up until us coming out there, that turbine was shutting down. They had multiple hours of MPT. It was shutting down once or twice a week. We went out on location, and we were out there for 6 weeks and did not have one single shutdown. And then you start to see the value creation component around improved fuel efficiency by doing this. What's really important is the maintenance cycle improvements, which saves a lot of money. Some of these turbines and resets are wearing out faster than what they thought because of the wear and tear on variability and gas quality. And then also the derating capacity, where you have less equipment on location. And then finally, the value creation in carbon credits from less emissions. And so when you look at the velocity of measurement and this level of control speaking directly to the control modules on the engines, we have a very, very, very differentiated set of technologies. And as we're building these kids, every single one of them are going out contracting on location. So we're really excited about it. And this was the first of its kind being able to do that. So it's an exciting piece. And I would say that these type of case studies, we're going to continue to put them out and put impact and number on the ROI and the value creation from them as we begin to accelerate our adoption within the market space.

Your next question comes from the line of Josh Sullivan of JonesTrading.

Congratulations on the quarter here. I wanted to follow up on that comment, potential to acquire some of the mechanical commissioning operators. How large is the mechanical market, just so we can think of frame of reference?

In terms of -- I would say, in terms of dollars, it's kind of hard to say on what some of them call theirselves doing because it depends on -- some of them are just doing what I would call traditional filtration and knocking sands and/or debris, et cetera, that some people move into more of a JT skid type applications in different parts. But most of the time, when you see fuel gas utilization being run directly to frac fleets, there's traditionally some type of filtration used ahead of it. Now the problem is that they never can really detect what quality of the gas is in real time nor can they effectively blend it. If they were trying to blend it with real-time measurement, they'd be a violation of our technology patents. So -- but I would say there's I think that when you look at the amount of capital investment that's in the area that -- every e-frac fleet that's running field gas and probably run in some form of CNG should have at least a smart skid type on there, which is a low rental cost considering the ROI that you get on fuel improvements and protection of the equipment. And so right now, there's probably 110 to 120 locations that's possible for it for full conditioning and distribution. And we've got some measurement device on about 75 of those. And I think that puts us in a good place to continue to grow. The most exciting part is these are the same companies in the majority space that are moving into behind-the-meter power generation that created their own interior or some spin-off of their company, and this type of technology is moving directly with them. And what's even more exciting about it is people have traditionally thought you didn't need some type of monitoring and conditioning even if you have pipeline gas going to data centers. But we've shown that to not be the case because we see that variance in quality in our natural gas-fired power facilities, plus the premature damage on the turbines over a long time, the derating problems and all the other issues that we can really help to solve.

And I guess just a follow-up on that point and all the advantages you guys are bringing to the behind-the-meter conversation, how much inbound are you guys getting versus outbound work are you doing? Is the word out to your point on some of those dynamics you're really helping out on? Or just curious on the inbound at this point.

It's traditionally, what we're starting to see now is we're seeing a growing amount of inbound when companies sort of point of these turbines are shutting down to reset and it takes multiple hours to get them back up and running. And a lot of the inbound we see is where we've already got measurement devices out there, they want to go to the next level of customization. And now we're also -- what I would say, even more excited is we're starting to see more on the, I would say, infrastructure side piece around utilities contractors on inbound pieces coming there. They've seen what our technologies can do for protecting assets. And then we're seeing some more of the data center inbounds. We are continuing to expand our, I would say, sales and pursuit teams in the field. Right now, we will double those by the end of the year, and we'll continue to add as we see the market piece come. The other side that's been interesting, we've seen strong inbounds on is the OEM engine builders. As we mentioned prior, we didn't talk about in our prepared comments here, but we built the specific XSpec FG units amount directly to reciprocating engines to control fuel quality and adjust timing and firing on those engines. Those tests are going really well in the field, and we're getting constant inbounds from OEMs to test that type of equipment on their various engine types. So it's an exciting time for us. I think we're kind of at that precipice to where the pursuits outward are now being overcome by what we're seeing on inbounds.

Your next question comes from the line of Blake McLean of Daniel Partners.