Ryan Ezell: That’s a great question. I think when we look at it, it depends on if you’re in upstream, midstream or downstream application. What I would consider to be more of the golden applications in the midstream part. A lot of the customers that we continue to expand business with prefer the capital purchase just because of how the unit is utilized. What we’re seeing is the predominance in the upstream business to be 90-plus percent in terms of either one, a Data as a Service model or a hybrid type service with a large subscription-based model with the minimal capital investment upfront for the installation. So I think it kind of depends on the application, but pretty much the bifurcation is heavy on subscription based and upstream, there’s still a little preference to the capital purchase in the midstream part.
Bond Clement: Yes. Don, Ryan gave some stats on the percentage of revenue from DaaS versus capital sales, 1Q versus 1Q. Included in those percentages when you look at just pure DaaS revenue quarter-over-quarter, it’s up 30% in first quarter, ’24 versus first quarter ’23. So people are migrating to the DaaS model, certainly.
Donald Crist: That’s good to hear. It’s much more sustainable and gets a higher multiple. I appreciate the color, guys. I’ll turn it back.
Bond Clement: All right. Thanks.
Operator: Your next question comes from the line of Eric Swergold from Firestorm Capital. Your line is now open. Please ask your question.
Eric Swergold: Good morning and congratulations on your hard thought progress. There’s been a number of industry pieces talking about the use of AI in the E&P space. Can you speak to how your data analytics and chemistry segments fit into this new AI framework for E&Ps? Thanks.
Ryan Ezell: Yes. This is actually a real, I would say, exciting frontier for us, Eric, is that initially, most of the AI-oriented activities that we’re doing were around our chemometric modelings and things that we’re doing on the JP3 side, leveraging that large database of crude samples that we’ve had over the last five to seven years. And so there’s a lot of advancements that we’re making to accelerate the accuracy, the models, accelerate the group fits particularly when you look at I would say, the chain of custody and rebate for pressure measurement, and stuff that we’re doing there. And AI continues to be a large part of that. What’s been really exciting is we took a step back and said, hey, if you’ve been an innovative chemistry company with 200 patents in the advanced reservoir technologies component when you look at some of these influences at the nanopore level and what goes on with surface interaction — surface interactions and things.
We’ve completed over 20,000 wells, and we have production data and chemistry modeling for these things. So we’ve gone in and now using AI to actually take these data sets, crunch them create cubes of different data with that. In advancing how we look at the performance of our chemistry to make small formulation changes and actually advance where we’re going to be in the future and what I consider to be improved oil recovery for the total life of the asset. So I think it’s playing an essential part for us to accelerate our technology and the thinking that we do on both the chemistry and the data side. And what it’s starting to do is really create an amount of synergy and a unique platform, I think, to Flotek that we’re going to be talking quite a bit about some of the upcoming events we have at the Louisiana Energy Conference, and what we’re going to talk about Intercom and Denver later in August, we’re going to be presenting some of this work.
Eric Swergold: It sounds good. Thanks very much guys. Keep it up.
Operator: Your next question comes from the line of BJ Cook, an individual investor. Your line is now open. Please ask your question.
BJ Cook: Hi guys, thanks for taking my call. BJ Cook with Singular Research. You guys talked about external chemistry this year. I expect it to increase here, but I know it’s determined on volume quite a bit. I’m just curious, you guys anticipate or are adding new external operators to your platform.
Ryan Ezell: Yes, 100%. I mean the biggest part we look at on external chemistry is we have — we’ve seen the tenure being here, our seasonality shift a little bit. What used to be Q3 to Q4 now with a little bit [indiscernible] be the capital discipline the way you look at plans and the ability to turn to Spigit on and off here in the U.S. We’ve seen some of that seasonality shift in the Q1, and has traditionally been probably our least active quarter on the external chemistry sales component of that. But compared to be speaking over the tenure that we’ve done this turnaround, you’ve seen average frac fleet in those quarters go down, and our revenues continue to go up substantially. As you look at, say, for Q2 to Q4 through the rest of this year, we’ve got a substantial.
We’ve got a really healthy and robust pipeline at continued activity with a strong group of what we call our stickier customer base and quite a few new opportunities on the backside here is the adoption of our prescriptive chemistry management and our understanding of the reservoir technologies are coming into prominence. As you’re starting to see a lot of these operators moving infield, well design and downspacing on how they do their completions.
BJ Cook: Great, thanks. I appreciate that.
Ryan Ezell: Yes.
Operator: We don’t have further questions at this time. Presenters, please continue.
Michael Critelli: Thank you again for joining us today. Flotek’s CEO, Ryan Ezell, will be participating on a service industry panel at the Louisiana Energy Conference on May 29, 2024 at 4:00 p.m. He will be joined by CFO, Bond Clement, in hosting meetings with investors and a copy of the presentation will be used in the discussions with the investors will be available on the corporate website prior to the event. We look forward to meeting with you. Thanks again for joining us today. Please feel free to contact us if you have any additional questions. Have a great day.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
