INVESTOR PRESENTATION NOVEMBER 2018
FORWARD-LOOKING STATEMENTS Cautionary Statement Regarding Forward-Looking Statements The statements contained in this presentation and any oral statements made in connection with this presentation that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as may, will, could, should, expect, plan, project, intend, anticipate, believe, estimate, predict, potential, pursuant, target, continue, and similar expressions are intended to identify such forward-looking statements. The statements in this presentation that are not historical statements, including statements regarding the Company s plans, objectives, future opportunities for the Company s services, future financial performance and operating results, the number of active fleets in the fourth quarter of 2018, the number of reactivations in the first quarter of 2019, targeted debt and free cash flow levels, further deleveraging, returns to stockholders and any other statements regarding FTSI s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts, are forwardlooking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond FTSI s control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to the operations of FTSI; results of litigation, settlements and investigations; actions by third parties, including governmental agencies; volatility in customer spending and in oil and natural gas prices, which could adversely affect demand for FTSI's services and their associated effect on rates, utilization, margins and planned capital expenditures; global economic conditions; excess availability of pressure pumping equipment, including as a result of low commodity prices, reactivation or construction; liabilities from operations; weather; decline in, and ability to realize, backlog; equipment specialization and new technologies; shortages, delays in delivery and interruptions of supply of equipment and materials; ability to hire and retain personnel; loss of, or reduction in business with, key customers; difficulty with growth and in integrating acquisitions; product liability; political, economic and social instability risk; ability to effectively identify and enter new markets; cybersecurity risk; dependence on our subsidiaries to meet our long-term debt obligations; variable rate indebtedness risk; and anti-takeover measures in our charter documents. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in FTSI's Securities and Exchange Commission ( SEC ) filings, including the most recently filed Forms 10-Q and 10-K. FTSI's filings may be obtained by contacting FTSI or the SEC or through FTSI's website at http://www.ftsi.com or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at http://www.sec.gov. FTSI undertakes no obligation to publicly update or revise any forward-looking statement except as required by law. Statements made in this presentation include non-gaap financial measures. The required reconciliation to GAAP financial measures are included at the end of this presentation. Nothing in this presentation shall constitute a solicitation to buy or an offer to sell shares of FTSI's common stock. 2
Company Overview
Michael Doss Chief Executive Officer 4
IMAGINE MORE Too often, we settle. We settle for the average. The ordinary. The run of the mill. We tell ourselvesthisisjustthewayit is.thisisasgoodasitgets.and that we should simply accept what is presented, and make do. But, wouldn t it be nice to give ourselves permission to imagine more? FTSI is a company where imagining more isn t just encouraged, it s expected. It s a place where limits simply don t exist. And the opportunity to succeed is within everyone s grasp, every single day.
More Focus More Innovation More Grit 6
LEADER IN HYDRAULIC FRACTURING FTS International, Inc. Large, pure play provider of hydraulic fracturing services NYSE: FTSI IPO February 2018 1.7 million total HHP capacity (1) Headquarters Shares Outstanding Fort Worth, TX 109.3 Million Operational footprint covers majority of new wells expected through 2020 Market Capitalization Equipment (1) $1.2 Billion 34 Fleets / 1.7mm HHP (1) Includes 50,000 HHP of newbuild capacity. 7
LEADER IN PROFITABILITY & EFFICIENCY Consistently among industry leaders in margins, annualized EBITDA per fleet and capex per fleet Significant economies of scale, yet nimble Strong operational performance combined with adaptive commercial strategy $ in millions $200 $150 $100 $50 $ Strong EBITDA Performance (1) $21 $21 $20 $19 $17 $16 $127 $139 $129 $141 $4 $87 $95 $20 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Adjusted EBITDA Annualized Adj. EBITDA per Fleet (2) $25 $20 $15 $10 $5 $ (1) See Appendix for a reconciliation of Adjusted EBITDA and Adjusted EBITDA, excluding supply commitment charge, to net income. (2) 3Q18 Adjusted EBITDA and Annualized Adjusted EBITDA per fleet exclude a $10 million supply commitment charge. Please see FTSI s latest 10Q filing for more information on this charge. 8
COMPELLING INVESTMENT THESIS Large, pure play provider of hydraulic fracturing services Market leading positions in the most active basins 1.7 million total HHP across 34 fleets with idle fleets ready to be reactivated quickly and cost effectively Vertically integrated with in house manufacturing that drives what we believe are the lowest opex and capex requirements in the industry Culture built on safety and innovation Low cost structure allows us to maximize returns in any market Highest free cash flow yield in the industry 3Q annualized yield was 18% (1) (1) Annualized yield calculated by taking third quarter 2018 free cash flow, excluding changes in operating assets and liabilities and multiplying it by four; then dividing by common shares outstanding; then dividing the result by the third quarter 2018 VWAP. Please see appendix for reconciliation of free cash flow and free cash flow, excluding changes in operating assets and liabilities, to net income. 9
OPERATIONAL FOOTPRINT IN ACTIVE BASINS Currently have 19 fleets active and expect to average 18 active in 4Q Expect to reactivate fleets in 1Q with dedicated customers Midcontinent Active Fleets 0 District Fleets 5 District Location Elk City, OK Marcellus/Utica Shale Active Fleets 4 District Fleets 4 District Location Washington, PA Permian Basin Active Fleets 12 District Fleets 5 District Location Odessa, TX Eagle Ford Shale Active Fleets 2 District Fleets 4 District Location Pleasanton, TX Haynesville Shale Active Fleets 1 District Fleets 1 (Mobile) District Location (1) Longview, TX (1) Overhead functions have been consolidated with other locations Legend Corporate Headquarters (Fort Worth, TX) Manufacturing Facility (Fort Worth, TX) Maintenance & Refurb Facility (Aledo, TX) District Locations 10
VERTICAL INTEGRATION DELIVERS SIGNIFICANT COST ADVANTAGES Operating Expenses Maintenance Capex Growth Capex We manufacture our own fluid ends and perform substantially all non capex, recurring maintenance in house We perform all engine, transmission and blender refurbs in house We manufacture and rebuild all of our own power ends We build all new fleets and implement design enhancements Ancillary equipment like blenders also built in house ~50% cost advantage versus buying fluid ends from third parties ~$2.5 million per fleet per year; one of the lowest maintenance capex requirements in the industry Newbuild cost of ~$25 million per 50k HHP fleet including all ancillary equipment Outstanding Returns on Investment 11
COST EFFECTIVE REFURBS SHIELD EQUIPMENT FROM ATTRITION Frac Pump Cost in 000s unless noted Engine Transmission Power End Other 20 Pumps per Fleet Total per Fleet Refurb Cost $90 $45 $45 $140 x20 $6.4M Average Years Between Refurbs Refurb Cost per Year 4.0 3.5 2.5 2.0 2.6 $23 $13 $18 $70 x20 $2.5M 12
CENTRALIZED FLEET MONITORING ENABLES CONSISTENT, RELIABLE OPERATIONS National Operations Center operates 24/7, monitoring real time job and equipment data Centralized location of engineering functions enables sharing of knowledge and best practices across organization Dedicated workstation for each fleet Assists in development of equipment automation algorithms Enhances customers data analytics capabilities 13
SENSOR TECHNOLOGY GIVES OUR EQUIPMENT A VOICE Only top 1% of the market fully leverages 21 st century technology to optimize equipment performance and design 2016 Stage 1 Catch Failures 2017 Stage 2 Reduce Damage 2018+ Stage 3 Change Behavior Smoke detector model Immediate identification of anomalies We began monitoring vibrations on all of our fleets allowing us to create a baseline of normal operating conditions Cloud based machine health monitoring Early warnings based on predicative models that leverage historical data Utilized vibration signatures to augment operations and reduce damage accumulation Identify and mitigate root causes of failure Led to re designs of our fluid ends to allow for longer life and materials cost optimization Supported re design of other components to reduce wear and tear upstream from our pumps 14
DUAL FUEL FRAC FLEETS What is Dual Fuel? A fleet that has been retrofitted to burn lowercost natural gas and diesel fuel simultaneously Benefits of Dual Fuel Dual fuel provides value to customers through cost savings and efficiency gains We have 88 dual fuel pumps Can quickly retrofit an existing fleet for ~$2 million Natural gas supplied through customer sourced gas or through third parties If source becomes unavailable, engines can utilize 100% diesel fuel with no interruption to operations Cost Savings Efficient Operations ~70% substitution, resulting in fuel savings of over $20,000 per day (1) Streamlined supply chain and increased efficiency due to fewer trucks on site Reduced Emissions Significant reduction in emissions with cleaner burning natural gas (1) At latest available monthly average diesel and LNG prices per EIA; cost savings net of incremental gas cost; per fleet 15
RETURNS-FOCUSED APPROACH $17mm EBITDA per fleet (1) $2.5mm Maintenance capex per fleet (2) Zero Effective federal tax rate (3) Best in class free cash flow Solid operational execution with a focus on efficiency Low operating expenses, low SG&A, and low maintenance capex Tax amortization of goodwill and NOLs eliminate cash taxes (1) Annualized Adjusted EBITDA per active fleet was $17.4 million in Q3 2018 and excludes a supply commitment charge of $10 million. (2) Due to tax amortization of intangible assets and utilization of net operating loss carryforwards. 16
STRENGTHENING BALANCE SHEET $ in millions $1,200 $683mm reduction in net debt $800 $565 $380mm more than IPO proceeds $400 $1,081 $1,069 $1,014 $922 $580 $509 $398 $ 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Net Debt (1) Gross Debt Since the beginning of 2017 we have significantly reduced our net debt while also building working capital by over $100 million Line of sight to reach debt target with excess cash flow available for additional growth, further deleveraging and/or returns to shareholders (1) Net debt calculated as total principal amount of debt less cash and cash equivalents. Please see Appendix for reconciliation of net debt to long term debt. 17
STRONG FINANCIAL & OPERATIONAL PERFORMANCE $ in millions $500 $400 $300 $200 $100 $ Net Income $213.5 $344.9 $449.0 $458.7 $467.5 $493.3 $334.4 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 ($20.1) Revenue & Net Income $44.3 $83.6 $92.9 $78.7 $103.6 $ in millions $150 $125 $100 $75 $50 $25 $ $20.0 Adjusted EBITDA & Capex (1) $86.8 $127.4 $138.5 $129.1 $141.3 $95.0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 $49.6 Capex $6.7 $13.1 $13.6 $30.6 $37.8 $28.5 $18.6 Annualized Adjusted EBITDA per Active Fleet (1) Stages per Active Fleet $ in millions $25 $20 $15 $15.6 $20.5 $21.1 $18.8 $20.2 $17.4 400 300 200 326.2 356.6 330.5 314.8 296.4 334.1 320.7 $10 $5 $4.0 100 $ 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Active Fleets 20.0 22.3 24.8 26.2 27.5 28.0 21.8 (1) See Appendix for a reconciliation of Adjusted EBITDA and Adjusted EBITDA, excluding supply commitment charge, to net income. 3Q18 Adjusted EBITDA and Annualized Adjusted EBITDA per fleet exclude a $10 million supply commitment charge. 18
APPENDIX
ADJUSTED EBITDA RECONCILIATION ($ in millions except average active fleets) Three Months Ended Year Ended Three Months Ended Mar 31, 2017 Jun 30, 2017 Sep 30, 2017 Dec 31, 2017 Dec 31, 2017 Mar 31, 2018 Jun 30, 2018 Sep 30, 2018 Net income (loss) $ (20.1) $ 44.3 $ 83.6 $ 92.9 $ 200.7 $ 78.7 $ 103.6 $ 49.6 Interest expense, net 21.2 21.5 22.1 21.9 86.7 17.4 12.1 10.4 Income tax expense 0.1 0.4 0.4 0.7 1.6 1.0 0.9 0.2 Depreciation and amortization 21.8 21.3 22.1 21.4 86.6 20.6 20.7 21.1 (Gain) loss on disposal of assets, net (0.4) (0.4) (0.8) 0.2 (1.4) 0.5 (0.2) (0.1) Gain on insurance recovery (2.6) (0.3) - - (2.9) - - - Loss on extinguishment of debt, net - - - 1.4 1.4 9.3 0.8 0.6 Stock-based compensation - - - - - 1.6 3.4 3.2 Adjusted EBITDA 20.0 86.8 127.4 138.5 372.7 129.1 141.3 85.0 Average active fleets 20.0 22.3 24.8 26.2 23.3 27.5 28.0 Annualized Adjusted EBITDA per fleet $ 4.0 $ 15.6 $ 20.5 $ 21.1 $ 16.0 $ 18.8 $ 20.2 Adjusted EBITDA $ 85.0 Add: supply commitment charge 10.0 Adjusted EBITDA, excluding supply 95.0 commitment charge Average active fleets 21.8 Annualized Adjusted EBITDA, excluding supply commitment charge, per fleet $ 17.4 Adjusted EBITDA is a non GAAP financial measure that FTSI defines as earnings before interest; income taxes; and depreciation and amortization, as well as, the following items, if applicable: gain or loss on disposal of assets; debt extinguishment gains or losses; inventory write downs, asset and goodwill impairments; gain on insurance recoveries; acquisition earn out adjustments; stock based compensation; and acquisition or disposition transaction costs. Adjusted EBITDA, excluding a supply commitment charge, is a non GAAP measure that further adjusts Adjusted EBITDA to exclude a supply commitment charge. The most comparable financial measure to Adjusted EBITDA and Adjusted EBITDA, excluding a supply commitment charge, under GAAP is net income or loss. Adjusted EBITDA and Adjusted EBITDA, excluding a supply commitment charge, are used by management to evaluate the operating performance of the business for comparable periods and Adjusted EBITDA is a metric used for management incentive compensation. Adjusted EBITDA and Adjusted EBITDA, excluding a supply commitment charge, should not be used by investors or others as the sole basis for formulating investment decisions, as it excludes a number of important items. The Company believes Adjusted EBITDA and Adjusted EBITDA, excluding a supply commitment charge, are important indicators of operating performance because they exclude the effects of its capital structure and certain non cash items from its operating results. Adjusted EBITDA is also commonly used by investors in the oilfield services industry to measure a company's operating performance, although FTSI s definition of Adjusted EBITDA may differ from other industry peer companies. Please see FTSI s latest 10Q filing for more information about the supply commitment charges for why management believes this charge should be excluded from 3Q18 results for comparability purposes with prior periods. 20
NET DEBT RECONCILIATION ($ in millions) Mar 31, 2017 Jun 30, 2017 Sep 30, 2017 Dec 31, 2017 Mar 31, 2018 Jun 30, 2018 Sep 30, 2018 Senior floating rate notes due June 2020 $ 350.0 $ 350.0 $ 350.0 $ 290.0 $ - $ - $ - Term loan due April 2021 431.0 431.0 431.0 431.0 331.0 231.0 161.0 Senior notes due May 2022 426.3 426.3 426.3 409.0 404.0 404.0 404.0 Total principal amount of debt 1,207.3 1,207.3 1,207.3 1,130.0 735.0 635.0 565.0 Less: cash and cash equivalents 126.7 138.5 193.8 208.1 155.5 126.3 167.2 Net debt, excluding unamortized discount and debt issuance costs $ 1,080.6 $ 1,068.8 $ 1,013.5 $ 921.9 $ 579.5 $ 508.7 $ 397.8 Net debt, excluding unamortized discount and debt issuance costs, is a non GAAP financial measure that FTSI defines as total principal amount of debt (also referred to as gross debt) less cash and cash equivalents. The most comparable financial measure to net debt, excluding unamortized discount and issuance costs, under GAAP is long term debt. Net debt, excluding unamortized discount and issuance costs, is used by management as a measure of our financial leverage. Net debt, excluding unamortized discount and issuance costs, should not be used by investors or others as the sole basis in formulating investment decisions as it does not represent the Company s actual indebtedness. 21
FREE CASH FLOW RECONCILIATION ($ in millions) Three Months Ended Sep 30, 2018 Net income (loss) $ 49.6 Add: non cash items Depreciation, depletion and amortization 21.1 Stock based compensation 3.2 Amortization of debt discounts and issuance costs 0.5 Impairment of assets and goodwill Loss on disposal of assets (0.1) Gain on insurance recovery Loss on extinguishment of debt 0.6 Inventory write down Acquisition earn out adjustment Other non cash items 0.7 Net income adjusted for non cash items 75.6 Changes in operating assets and liabilities 53.5 Net cash provided by (used in) operating activities 129.1 Less: capital expenditures (18.6) Free cash flow $ 110.5 Free cash flow $ 110.5 Less: Changes in operating assets and liabilities (53.5) Free cash flow, excluding changes in operating assets and liabilities $ 57.0 Free cash flow is a non GAAP financial measure that FTSI defines as net cash provided by (used in) operating activities less capital expenditures. Free cash flow, excluding changes in operating assets and liabilities, is a non GAAP financial measure that further adjusts free cash flow to exclude changes in operating assets and liabilities. The most comparable financial measure to free cash flow and free cash flow, excluding changes in operating assets and liabilities, under GAAP is net cash provided by (used in) operating activities. Free cash flow and free cash flow, excluding changes in operating assets and liabilities, are used by management to evaluate our ongoing business operations. Free cash flow and free cash flow, excluding changes in operating assets and liabilities, should not be used by investors or others as the sole basis for formulating investment decisions, as they exclude important items. These calculations are commonly used as a basis for investors to evaluate and compare the operating performance and value of companies within our industry, although FTSI s definition of free cash flow and free cash flow, excluding changes in operating assets and liabilities, may differ from other industry peer companies. 22