TETRA TECHNOLOGIES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in this Quarterly Report. In addition, the following discussion and analysis should also be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2026 (“2025 Annual Report”). This discussion includes forward-looking statements that involve certain risks and uncertainties. Business Overview We are an energy services and solutions company with operations on six continents focused on developing environmentally conscious services and solutions. Calcium chloride is used in the oil and gas industry, and also has broad industrial applications to the agricultural, road, food and beverage, and lithium production markets. In addition to providing products and services to the oil and gas industry and calcium chloride for diverse applications, TETRA is expanding into the low-carbon energy market with chemistry expertise, key mineral acreage, and global infrastructure, helping to meet the demand for sustainable energy in the twenty-first century. We are also developing and pilot testing technologies to treat and desalinate produced water from oil wells for beneficial reuse, including surface discharge. We are currently composed of two segments – Completion Fluids & Products and Water & Flowback Services. Consolidated revenue for the first six months of 2026 of $341.9 million increased 3.3% compared to the prior year, led by strong results from our Completion Fluids & Products Segment, and increased 18.8% sequentially quarter over quarter. Completion Fluids & Products Segment revenues for the second quarter of 2026 increased 23.3% compared to the first quarter of 2026 driven by strong specialty chemicals and deepwater Brazil projects. Completion Fluids & Products Segment revenues increased slightly compared to the first six months of 2025. Water & Flowback Services revenues increased slightly compared to the first quarter of 2026, driven by additional early production facilities operating during the second quarter of 2026 in Latin America and higher flowback activity as utilization of TETRA Sandstorm and Auto-Drillout technologies continued to improve across the United States. We continue to take proactive actions to reduce costs, optimize the size of our support structure, and close underperforming service lines within Water & Flowback Services. The Middle East conflict did not materially affect our first or second quarter 2026 results, as historically less than 5% of our revenue is exposed to this region. Our chemical manufacturing plants are located in the United States and Europe and our elemental bromine for our chemical manufacturing in the United States is sourced locally. Over the longer term, the impact of developments in the Persian Gulf and the broader Middle East may impact the global oil and gas markets and our business and financial results. Generally, we believe the conflict may provide tailwinds to an already robust offshore and deepwater outlook and boost unconventional investment activity in the United States and Latin America. 20 Results of Operations The following information should be read in conjunction with the Consolidated Financial Statements and the associated Notes contained elsewhere in this report. The analysis herein reflects the optional approach to discuss results of operations on a sequential-quarter basis, which we believe provides information that is most useful in assessing our quarterly results of operations. Three months ended June 30, 2026 compared with three months ended March 31, 2026. Consolidated Comparisons Three Months Ended Period to Period Change June 30, March 31, $ Change % Change 2026 2026 (in thousands, except percentages) Revenues $ 185,657 $ 156,253 $ 29,404 18.8 % Cost of product sales and services 130,343 108,852 21,491 19.7 % Depreciation, amortization and accretion 9,600 9,176 424 4.6 % Gross profit 45,714 38,225 7,489 19.6 % General and administrative expense 25,584 25,409 175 0.7 % Operating income 20,130 12,816 7,314 57.1 % Interest expense, net 3,267 3,237 30 0.9 % Other expense (income), net 1,009 (2,011) (3,020) (150.2) % Income before taxes 15,854 11,590 4,264 36.8 % Income tax expense 5,617 3,271 2,346 71.7 % Net income attributable to TETRA stockholders $ 10,237 $ 8,319 $ 1,918 23.1 % Consolidated revenues increased sequentially as a result of increased activity for both the Completion Fluids & Products Segment and Water & Flowback Segment. See Segment Comparisons section below for a more detailed discussion of the change in our revenues. Consolidated gross profit increased primarily due to higher activity levels from both the Completion Fluids & Products and Water & Flowback Services Segments. See Segment Comparisons section below for additional discussion. Consolidated other (income) expense, net, decreased compared to the prior quarter primarily due to a $1.1 million decrease in unrealized gains from the change in fair value of our investments issued by a privately-held company and by a $2.2 million decrease in foreign exchange gains, primarily in Brazil and Argentina. Consolidated income tax expense increased $2.3 million. The increase in our tax expense was related to an increase in earnings as well as an increase in the company’s effective tax rate. The Company's effective tax rate increased to 35.4% for the three months ending June 30, 2026, from 28.2% in the prior quarter. The increase in the effective tax rate resulted primarily from a shift in the mix of earnings toward higher-tax foreign jurisdictions. Segment Comparisons Completion Fluids & Products Segment Three Months Ended Period to Period Change June 30, March 31, $ Change % Change 2026 2026 (in thousands, except percentages) Revenues $ 113,110 $ 91,721 $ 21,389 23.3 % Gross profit $ 35,267 $ 30,600 $ 4,667 15.3 % Operating income $ 27,553 $ 22,390 $ 5,163 23.1 % Revenues for our Completion Fluids & Products Segment increased sequentially primarily due to higher sales volumes in our Northern Europe specialty chemicals business as well as ongoing deepwater Brazil projects. 21 Gross profit and operating income for our Completion Fluids & Products Segment increased compared to the prior quarter driven by the increase in revenues mentioned above. Our profitability in future periods will continue to be affected by the mix of our products and services, market demand for our products and services, and drilling and completions activity. Water & Flowback Services Segment Three Months Ended Period to Period Change June 30, March 31, $ Change % Change 2026 2026 (in thousands, except percentages) Revenues $ 72,547 $ 64,532 $ 8,015 12.4 % Gross profit $ 10,523 $ 7,704 $ 2,819 36.6 % Operating income $ 4,018 $ 1,558 $ 2,460 157.9 % Revenues for our Water & Flowback Services Segment increased compared to the prior quarter driven by new early production facilities in Latin America and increased flowback activity from improved utilization of our patented TETRA SandStorm and Auto-Drillout technologies in key markets in the United States and Latin America. Gross profit and operating income for our Water & Flowback Services Segment increased compared to the prior quarter primarily due to the increased activity levels described above, as well as by cost-reduction initiatives and market penetration of higher-margin automation technologies. Corporate Overhead Three Months Ended Period to Period Change June 30, March 31, $ Change % Change 2026 2026 (in thousands, except percentages) Depreciation and amortization $ 76 $ 79 $ (3) (3.8) % General and administrative expense 11,365 11,053 312 2.8 % Interest expense, net 3,123 3,305 (182) (5.5) % Other (income) expense, net (27) 332 359 108.1 % Loss before taxes $ (14,537) $ (14,769) $ 232 1.6 % Corporate overhead loss before taxes decreased slightly compared to the prior quarter primarily due to a $0.4 million increase in other income, partially offset by a $0.3 million increase in general and administrative expenses primarily from higher legal fees. 22 Six months ended June 30, 2026 compared with six months ended June 30, 2025. Consolidated Comparisons Six Months Ended June 30, Period to Period Change 2026 2025 $ Change % Change (in thousands, except percentages) Revenues $ 341,910 $ 331,012 $ 10,898 3.3 % Cost of product sales and services 239,195 220,911 18,284 8.3 % Depreciation, amortization and accretion 18,776 18,340 436 2.4 % Impairments and other charges — 611 (611) NM (1) Gross profit 83,939 91,150 (7,211) (7.9) % General and administrative expense 50,993 49,393 1,600 3.2 % Operating income 32,946 41,757 (8,811) (21.1) % Interest expense, net 6,504 8,918 (2,414) (27.1) % Other (income) expense, net (1,002) 8,317 9,319 112.0 % Income before taxes 27,444 24,522 2,922 11.9 % Income tax expense 8,888 9,168 (280) (3.1) % Net income attributable to TETRA stockholders $ 18,556 $ 15,354 $ 3,202 20.9 % (1) Percent change is not meaningful Consolidated revenues increased slightly compared to the prior year due to a slight increase in revenues from both our Completion Fluids & Products and Water & Flowback Services Segments. See Segment Comparisons section below for a more detailed discussion of the change in our revenues. Consolidated gross profit decreased compared to the prior year primarily due to the increase in Cost of product sales from our Completion Fluids & Products Segment. See Segment Comparisons section below for a more detailed discussion of the change in our revenues. Consolidated general and administrative expenses increased $1.6 million compared to the prior year due to higher compensation expenses, including incentive compensation and legal fees. Interest expense, net decreased $2.4 million primarily due to an increase in the interest expense capitalized for our Arkansas development as well as lower interest rates on our Term Credit Agreement. Consolidated other (income) expense, net, changed compared to the prior year in part due to an $8.7 million decrease in foreign exchange loss, primarily from recognition of the $9.5 million cumulative currency translation adjustment loss associated with the dissolution of a former subsidiary in Canada in the first quarter of 2025, and a $0.5 million net increase in unrealized gains from our investments. Consolidated income tax expense decreased $0.3 million for the six months ended June 30, 2026, as a lower effective tax rate of 32.4%, compared with 37.4% in 2025, more than offset the impact of higher earnings. The lower rate was driven primarily by our Brazilian entity U.S. classification election and the absence of a prior-year item related to the dissolution of our Canadian subsidiary, partially offset by a $1.2 million tax benefit recorded in 2025 from a correction to the 2024 tax provision. Segment Comparisons Completion Fluids & Products Segment Six Months Ended June 30, Period to Period Change 2026 2025 $ Change % Change (in thousands, except percentages) Revenues $ 204,831 $ 202,462 $ 2,369 1.2 % Gross profit $ 65,867 $ 81,162 $ (15,295) (18.8) % Operating income $ 49,943 $ 67,579 $ (17,636) (26.1) % 23 Revenues for our Completion Fluids & Products Segment increased slightly as continued high volumes on our industrial chemical sales, including higher sales volume from traditional seasonal uplift in Northern Europe during the second quarter. Gross profit and operating income for our Completion Fluids & Products Segment decreased compared to the prior year due to decreased operating margins from the effect of changes in product mix, including the TETRA Neptune fluid sales in the prior year. Our profitability in future periods will continue to be affected by the timing of and the mix of our products and services, market demand for our products and services, and overall drilling and completions activity. Operating income for our Completion Fluids & Products Segment was impacted by lower gross profit and a $2.3 million increase in general and administrative expense driven by higher compensation expense. Water & Flowback Services Segment Six Months Ended June 30, Period to Period Change 2026 2025 $ Change % Change (in thousands, except percentages) Revenues $ 137,079 $ 128,550 $ 8,529 6.6 % Gross profit $ 18,227 $ 10,176 $ 8,051 79.1 % Operating income $ 5,576 $ (374) $ 5,950 NM (1) (1) Percent change is not meaningful Revenues for our Water & Flowback Services Segment increased compared to the prior year primarily from new early production facilities in Latin America. Gross profit and operating income for our Water & Flowback Services Segment increased driven by the new early production facilities in Latin America as well as our continued focus on automation and cost-control initiatives, which mitigated the impact of a tepid North America environment. Corporate Overhead Six Months Ended June 30, Period to Period Change 2026 2025 $ Change % Change (in thousands, except percentages) Depreciation and amortization $ 155 $ 188 $ (33) (17.6) % General and administrative expense 22,418 25,260 (2,842) (11.3) % Interest expense, net 6,428 9,329 (2,901) (31.1) % Other expense (income), net 305 (648) (953) (147.1) % Loss before taxes $ (29,306) $ (34,129) $ 4,823 14.1 % Corporate overhead loss before taxes decreased primarily due to a $2.9 million decrease in interest expense, net due to lower interest rates on our Term Credit Agreement as well as an increase in the interest expense capitalized for our Arkansas development and a $2.8 million decrease in allocated corporate costs. Liquidity and Capital Resources We believe that our capital resources allow us to meet our financial obligations on both a short-term and long-term basis. Our liquidity at the end of the second quarter was $221.1 million. Liquidity is defined as unrestricted cash plus availability under our credit agreements. Information about the terms and covenants of our debt agreements can be found in Note 5 - Long Term Debt and Other Borrowings. 24 Our consolidated sources and uses of cash for the periods presented below are as follows: Six Months Ended June 30, 2026 2025 (in thousands) Operating activities $ 22,531 $ 52,268 Investing activities $ (42,175) $ (18,275) Financing activities $ 101,753 $ (4,584) Operating Activities Consolidated cash flows provided by operating activities decreased compared to the first six months of 2025 primarily due to an increase in operating expense, offset by working capital changes. Investing Activities Total cash capital expenditures during the first six months of 2026 were $42.3 million, which reflects increased expenditures for advancement of our Arkansas brine resource development and additions to accommodate strategic opportunities in certain regions. Our Completion Fluids & Products Segment spent $26.0 million on capital expenditures, including $17.5 million for our Arkansas brine resource development, net of reimbursement from our Evergreen Unit participating interest owner and including major infrastructure and equipment supporting the bromine processing plant, and $3.9 million of capitalized interest for the Arkansas project. We also made additional investments to support strategic opportunities primarily in the United States. Our Water & Flowback Services Segment spent $16.3 million on capital expenditures for additional early production facilities in Latin America and to maintain, automate and upgrade our water management and flowback equipment fleet. We have rights to the brine underlying our approximately 40,000 gross acres of brine leases in the Smackover Formation in Southwest Arkansas, including rights to the bromine, lithium and other minerals contained in the brine. Additional information on these resources is described in Part I, “Item 2. Properties” in our 2025 Annual Report . The extraction of bromine, lithium, magnesium and other minerals from these brine leases will likely require a significant amount of time and capital. In May 2026, our Board of Directors approved the final investment decision for the development of our Arkansas bromine production facility (the “Arkansas Bromine Project”). Phase 1 of the Arkansas Bromine Project, which included site preparation, power infrastructure, and installation of the bromine tower, was completed in December 2025. Phase 2, which encompasses the major infrastructure and equipment supporting the plant, is currently underway with mechanical completion targeted by the end of 2026. The entire facility is expected to be operational by the end of 2027, with first production anticipated in early 2028. Remaining capital expenditures will be funded over the next two years from a combination of cash from operations, credit facility borrowings, proceeds from our June 2026 Offering discussed below, and other financing sources. If the development of our brine resources is materially accelerated or delayed or if other participating interest owners do not fund their share of development costs, the amount of planned capital expenditures for the Arkansas Bromine Project, including the associated upstream, may be adjusted. Historically, a significant majority of our planned capital expenditures have been related to identified opportunities to grow and expand our existing businesses. We are also focused on enhancing shareholder value by capitalizing on our key mineral assets, brine mineral extraction expertise, and deep chemistry competency to expand our offerings into the low carbon energy markets. However, we continue to review all capital expenditure plans carefully in an effort to conserve cash. If the forecasted demand for our products and services increases or decreases, the amount of planned expenditures on growth and expansion may be adjusted. 25 Financing Activities On June 4, 2026, we received $108.2 million of proceeds, net of underwriting discounts and commissions, and offering fees, from the issuance of 12,432,432 shares of our common stock (including 1,621,621 shares sold pursuant to the underwriters’ exercise in full of their over-allotment option). We intend to use the net proceeds from the offering for general corporate purposes, including funding a portion of the construction costs of our Arkansas Bromine Project. Our financing activities for the first six months of 2026 also include $6.4 million of taxes paid upon vesting of restricted stock units, and $2.4 million of capital lease payments associated with equipment leased primarily for the early production facilities in Argentina and equipment leases in the United States. We may supplement our existing cash balances and cash flow from operating activities with short-term borrowings, long-term borrowings, issuances of equity and debt securities, and other sources of capital. We are managing our working capital and capital expenditure needs in order to maximize our liquidity in the current environment and fund our key growth initiatives. For additional information on our credit agreements, see Note 5 - “Long-Term Debt and Other Borrowings” in the Notes to Consolidated Financial Statements. Other Sources and Uses of Cash In May 2025, we filed a universal shelf Registration Statement on Form S-3 with the SEC, which was declared effective by the SEC. Pursuant to this registration statement, we have the ability to sell debt or equity securities in one or more public offerings up to an aggregate public offering price of $400 million. In June 2026, we issued 12,432,432 shares of our common stock under this registration statement for an aggregate public offering price of $115.0 million. As a result, as of June 30, 2026, we had the ability to sell up to an additional $285.0 million of securities under this registration statement. This shelf registration statement currently provides us additional flexibility with regards to potential financing that we may undertake when market conditions permit or our financial condition may require. In addition to the aforementioned credit facilities and Term Credit Agreement, we fund our short-term liquidity requirements from cash generated by our operations and from short-term vendor financing. In addition, as of June 30, 2026, the market value of our equity holdings of Standard Lithium was $2.2 million with no holding restrictions on our ability to monetize our investments. Should additional capital be required, instability or volatility in the capital markets may increase our cost of capital or limit our ability to raise capital through the issuance of additional debt or equity securities for an indeterminate period. If it is necessary to issue additional equity to fund our capital needs, additional dilution of our common stockholders will occur. We periodically evaluate engaging in strategic transactions and may consider divesting non-core assets where our evaluation suggests such transaction is in the best interest of our business. In challenging economic environments, we may experience increased delays and failures by customers to pay our invoices. We could experience delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have an adverse effect on our liquidity. An increase of unpaid receivables would also negatively affect our borrowing availability under the ABL Credit Agreement and Swedish Credit Facility. As of June 30, 2026, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations. Critical Accounting Policies and Estimates There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our 2025 Annual Report . In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. These judgments and estimates may change as new events occur, as new information is acquired, and as changes in our operating environments are encountered. Actual results are likely to differ from our current estimates, and those differences may be material. 26 Commitments and Contingencies Litigation For discussion of our legal proceedings, please see our 2025 Annual Report and Note 6 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements. Long-Term Debt For information on our credit agreements, see Note 5 - “Long-Term Debt and Other Borrowings” in the Notes to Consolidated Financial Statements. Leases We have operating leases for some of our transportation equipment, office space, warehouse space, operating locations and machinery and equipment, as well as a sales-type lease and subleases for certain facilities. We have finance leases for certain facility storage tanks and equipment rentals. Information about the terms of our lease agreements can be found in our 2025 Annual Report . Product Purchase Obligations For information on product and asset purchase obligations, see Note 6 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements. Cautionary Statement for Purposes of Forward-Looking Statements This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements in this Quarterly Report are identifiable by the use of the following words, the negative of such words, and other similar words: “anticipates”, “assumes”, “believes”, “budgets”, “could”, “estimates”, “expects”, “forecasts”, “goal”, “intends”, “may”, “might”, “plans”, “predicts”, “projects”, “schedules”, “seeks”, “should”, “targets”, “will”, and “would”. These forward-looking statements reflect our current views with respect to future events and financial performance and are based on assumptions that we believe to be reasonable, but such forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to: economic and operating conditions that are outside of our control, including the trading price of our common stock, and the supply, demand, and prices of oil and natural gas; the availability of adequate sources of capital to us; the effect of inflation on the cost of goods and services; the activity levels of our customers; our operational performance; actions taken by our customers, suppliers, competitors and third-party operators; the availability of raw materials and labor at reasonable prices; risks related to acquisitions and our growth strategy, including our emerging growth initiatives; restrictions under our debt agreements and the consequences of any failure to comply with debt covenants; the effect and results of litigation, commercial disputes, regulatory matters, settlements, audits, assessments, and contingencies; potential regulatory initiatives to restrict hydraulic fracturing activities on federal lands as well as other actions to more stringently regulate certain aspects of oil and gas development such as air emissions and water discharges; risks related to our foreign operations; risks related to our non-controlling equity investments; information and operational technology risks, including the risk of cyberattack; our health, safety and environmental performance; the effects of consolidation on our customers and competitors; global or national health concerns, including the outbreak of pandemics or epidemics; acts of terrorism, war or political or civil unrest in the United States or elsewhere, including the current conflict between Russia and Ukraine, the conflict in the Israel-Gaza region, the conflict with Iran and uncertainty with respect to maritime traffic through of the Strait of Hormuz, and other continued hostilities in the Middle East, maritime piracy attacks; and statements regarding our beliefs, expectations, plans, goals, future events and performance and other statements that are not purely historical. These statements include statements concerning changes in general economic conditions, opportunity risks, such as the potential extraction of lithium, bromine, magnesium and other minerals, including potential extraction of those minerals designated as critical minerals, from our Evergreen Unit, demand therefor, or realizing industrial and other benefits expected from bromine processing; the timing and success of our bromine production wells and the construction of our bromine processing facility and related engineering activities and risks inherent in the construction of such facility, including delays, cost overruns and the ability to obtain local governmental and 27 regulatory approvals; the accuracy of our resources report or the timing of future updates to our resources report, feasibility study and economic assessment regarding our lithium, bromine and other mineral acreage; equipment supply, equipment defects and/or our ability to timely obtain equipment components; competition from existing or new competitors; and risks associated with changes in laws and regulations, or the imposition of economic or trade sanctions affecting international commercial transactions, including legislative, regulatory and policy changes, such as unexpected changes in tariffs, trade barriers, price and exchange control. With respect to our disclosures of measured, indicated and inferred mineral resources, including bromine, lithium carbonate equivalent concentrations, and other minerals, it is unclear whether they will ever be economically developed. Investors are cautioned that mineral resources do not have demonstrated economic value and further exploration may not result in the estimation of a mineral reserve. Further, there are a number of uncertainties related to processing lithium, which is an inherently difficult process, including, for example, the development of the technology to do so successfully and economically. Therefore, investors are cautioned not to assume that all or any part of our resources can be economically or legally commercialized. In particular, investors are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally commercialized, or that it will ever be upgraded to a higher category. With respect to the Company’s disclosures of the potential joint venture for the Evergreen Unit, the future relationship between the parties and the sharing of development costs is uncertain. Management believes that these forward-looking statements are reasonable as and when made. However, investors are cautioned not to place undue reliance on any such forward-looking statements. Such statements speak only as of the date on which they are made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations, forecasts or projections. Factors which may cause actual results to differ materially from current expectations include, but are not limited to: changes in general economic conditions; opportunity risks, such as mineral extraction, demand therefor, or realizing industrial and other benefits expected from bromine processing; our ability to develop a bromine processing facility and risks inherent in the construction of such facility; equipment supply, equipment defects and/or our ability to timely obtain equipment components; competition from existing or new competitors; risks associated with changes in laws and regulations, or the imposition of economic or trade sanctions affecting international commercial transactions, including legislative, regulatory and policy changes, such as unexpected changes in tariffs, trade barriers, price and exchange controls; and the other factors described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our 2025 Annual Report , and those described from time to time in our future reports filed with the SEC.