Flotek Chairman and CEO, John Gibson, is out after three years at the struggling specialty chemicals company. He is replaced, on an interim basis, by Harsha Agadi, a non-executive board director.
The company has its head office in NW Houston and has been losing money at an EBITDA level since 2016. Its share price is $1.52 and is has a market cap of $104 million. In February 2022, Flotek agreed to supply ProFrac Holdings high volume, low margin chemicals in return for convertible notes. Revenues in Q3 2022 were $46 million, over three times larger than Q3 2021. Profac now owns 51% of Flotek.
Mr. Gibson joined the company in January 2020. Four months later, the company paid $36 million (including $25 million in cash) for an oilfield data analytics company. The purchase price included $17.5 million of goodwill and $12.9 million of intangible assets. Four months after the acquisition, the company wrote down those assets by $24.2 million. The remaining goodwill was written off in 2021.
Mr. Gibson will receive a cash severance of $1.5 million. As part of the agreement, Mr. Gibson has agreed to forfeit all of his outstanding options and unvested restricted stock units.
Mr. Agardi has been on the Board since 2020. He has been the CEO at a publicly-traded insurance claims company, Friendly’s Ice Cream and Church’s Chicken. Whilst interim CEO, he will receive a salary of $50,000 a month.
Dispute with former CEO
The company is also in dispute with John Chisholm, the CEO prior to Mr. Gibson. In December 2021, the company conducted an internal investigation into his activities during the period 2014 to 2018. The company found evidence of related party transactions/self-dealing, inappropriate personal expenses, and general corporate waste.
Flotek’s board engaged a third party to review the findings of the investigation. After the third-party review, the company concluded that its current and historical financial statements can be relied upon, that proper action had been taken, and that no members of current management were implicated in any way.
Mr. Chisholm filed a countersuit against the company as he has not been paid his remaining severance of $0.4 million.
That severance hadn’t been paid because, in 2019, the IRS notified the company had it had not properly withheld certain employment taxes in 2014 (Mr. Chisholm provided his services through a management company). The amount involved is $1.8 million. Mr. Chisholm had indemnified the company, but it is Flotek who has to pay the IRS first and then recoup the money from Mr. Chisholm.
New CFO last month
Flotek appointed a new CFO, Bond Clement, just last month.
[Full Disclosure – I worked at Flotek between 2006-2009 and still own a small number of shares]