Good morning and welcome to the Flotek Industries Inc., Fourth Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of the company's prepared remarks. An operator will provide instructions on how to ask your question at that time. [Operator Instructions]. This conference is being recorded. At this time, I would like to turn the conference over to Matt Marietta, Flotek's Senior Vice President of Corporate Development and Investor Relations. Mr. Marietta, you may begin.

Thank you and good morning on behalf of the Flotek team. Joining me this morning are John Chisholm, Flotek's Chairman, President and CEO; Rich Walton, our Chief Financial Officer and Josh Snively, Executive Vice President and our Head of Operations as well as other members of our leadership team. Our earnings press release was distributed yesterday afternoon and is available on the Flotek website. In addition, today's call is being webcast, and a replay will be available on our website. Before we begin our formal remarks, I would like to remind participants that during this call some of the comments made may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and other applicable statutes reflecting Flotek's views, comments or expectations about future events and their potential on performance. Words such as expects, anticipates, plans, believes, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not exclusive means of identifying those forward-looking statements. These matters involve risks and uncertainties that could cause our actual results to differ from such forward-looking statements. These risks are discussed in Flotek's filings, including our Form 10-K with the U.S. Securities and Exchange Commission. Also, please refer to our reconciliations provided in our earnings press release and filed in an 8-K this morning as management may discuss non-GAAP metrics. With that, I’ll turn the call over to John Chisholm.

Hey, thank you Matt and thank you all for joining today’s call, posted from our Global Research and Innovation Center Headquarters here in Houston. I'll begin with some introductory remarks followed by Rich who will review our financial highlights, followed by Josh who will provide an operational overview. Finally, I will end with closing remarks and outlook before taking your questions. Before we begin, I would like to thank our hardworking employees at Flotek for their efforts in the transformation of Flotek that occurred in 2017. The accomplishments they have made in the short amount of time is inspiring. I’m honored to lead the organization as we head into our first full year as a pure play custom Chemistry Technology Company. To outline the accomplishments in 2017, first our leadership team was transformed during the year and now reflects our go-forward vision for the company. We thank prior leadership for their service, but I believe the team we have put together is built to last and further more thrive for our shareholders. Second, and while it may seem like a long time ago to some, it was only back in May that we successfully divested our Drilling Technologies and Production Technologies segments. These segments were cornerstones of the Flotek legacy and while it’s difficult to move away from the businesses, it was the right decision for our shareholders. Third, we paid off our term loan and reduced the balance on a credit facility. The financial stability of Flotek has never been as strong as it is today. Fourth, we put into place an aggressive SG&A reduction initiative, which has allowed us to manage the organization to positive operating income and improve profitability in the fourth quarter despite sequentially lower revenues. While the bulk of the heavy lifting has been done,…

Thank you, John. I will address key financial information as of and for the fourth quarter and the year ended December 31, 2017. Flotek expects to file its Form 10-K for 2017 with the U.S. Securities and Exchange Commission before the end of the first week of March. We have continued to strengthen our balance sheet during the fourth quarter. In addition, we return to generating operating income during the fourth quarter as we successfully addressed and reduced our Corporate General & Administrative costs and segment Selling & Administrative costs. For the fourth quarter we reported total revenue of $72.5 million, compared with $70.6 million in the prior year period, an increase of $1.9 million or 2.7%. On a sequential basis, quarterly revenue was down $6.9 million or 8.7%. For the full year 2017 revenue was $317.1 million compared with $262.8 million in 2016, an increase of 20.6%. Energy chemistry quarterly revenue increased compared to the prior year period, but declined 9.6% on a sequential basis to $55.3 million. Our consumer and industrial chemistry segment quarterly revenue increased 11.3% compared to the prior year period, but declined 5.9% on a sequential basis to $17.2 million, primarily resulting from the seasonal impact of sales to the beverage industry. For the fourth quarter we had income from operations of $2.1 million. This follows three quarters of losses from operations. For the full year 2017 the consolidated loss from operations totaled $2.9 million. For the fourth quarter the consolidated operating margin was a positive 2.9%. For the full year 2017, the consolidated operating margin was a negative 0.9%. Segment operating margins were 13.8% in the energy chemistry segment and 10.1% in the consumer and industrial chemistry segment. Corporate, general and administrative expense for the fourth quarter was $7.7 million, a decrease of $2.6…

Thank you, Rich. First in our ECT segment, the business model is evolving, shifting from purely FOB manufacturing to downhole delivery, which means delivering inventory and the chemistry experience to the client, whether that client is an operator or service company. The industry is hungry for proven technology and reliable service which Flotek can and will continue to deliver. This shift creates an increasing need for partnerships with our operator clients, as well as alignment with our service company clients. Working together we can deliver the highest value chemistries through the operators while reducing redundant logistics and distribution costs, all with the ultimate goal of improving the reservoir and well performance. Interest in our prescriptive chemistry management or PCM platform remains very high and is likely to become more of a growth engine for Flotek. While this trend is not a quarter-to-quarter story, momentum will continue to build throughout 2018 and into future years. We are in the process of building out our facilities to fill our clients’ needs, covering logistics requirements and identifying the right partnerships. Our footprint needs to be enhanced and we are spending capital dollars to insure that we are optimized for delivery on that need. We are looking into opportunities to decentralize certain aspects of our manufacturing activities to lower our costs. Additionally we are perusing inventory strategies that will allow us to improve our delivery capabilities and respond faster to our clients. We will use these benefits to help accelerate the energy market penetration for our chemistry offerings during 2018. Overall, energy companies remain cost conscious, but understand the need for value added technology. We believe there will continue to be optimization efforts by our clients and while sometimes costs can overshadow performance or returns, we believe this is a temporary position. We remain…

Thanks Josh and really well down. Before we take questions I’d like to offer an outlook and add some concluding thoughts. We put in substantial effort to rapidly transform Flotek during 2017 and entering 2018 we continue to push to make a difference. In the second half of 2017 we managed our performance to enhance profitability and executed on our strategy to reduce SG&A. In doing so we exceeded expectation of what we could accomplish in such a short amount of time. We continue to asset our product and business portfolio and have exited certain offerings we determine to be unacceptable to our goal of maximizing our returns. Moving forward our focus is on three key buckets; cost discipline, managing the expansion of our PCM platform and new product development. On this last point, Flotek remains committed to custom chemistry solutions that meet the performance and the price point of our clients in both of our segments. Further more in energy markets, even as the decoupling trend expands throughout the industry, service companies remain critical partners of ours in delivering maximum value ad to the reservoir and the operator. Our unwavering commitment to research and innovation sets us apart from just chemical providers, as we chose to invest more during the energy downturn, to create the complete chemistry experience as Josh referenced earlier. Evidence to this success, in 2017 approximately 40% of our ECT revenue came from formulations that we created in 2015 or later. This accomplishment is why we believe our R&I investment will be a key milestone in the journey ahead for our company. We recently expanded an initiative to improve our case study and marketing publications. It is important for the industry to better understand our chemistry and the technologies we offer. Service companies and operators of…

Thank you. [Operator Instructions]. And we do have a question from the phone line that is from the line of Georg Venturatos with Johnson Rice. Please go ahead your line is now open.

[Operator Instructions]. One moment please. And I’m showing no further questions at this time. [Operator Instructions]. And we do have a follow-up question from the like of Georg Venturatos with Johnson Rice. Please go ahead.

And I’m showing no further questions at this time.

Okay. Thank you operator and thanks for everyone’s interest. As we mentioned, we’ll be transparent as the quarter moves on and look forward to chatting with you again further on in the year. Thanks for everyone’s interest. Bye for now.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.