Greetings and welcome to Flotek Industries' Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's prepared remarks. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Danielle Allen, Senior Vice President, Global Communications and Technology Commercialization for Flotek. Thank you, ma'am. You may begin.

Thank you, and good morning, everyone. We appreciate your participation. Joining me on today's call is John Chisholm, Flotek's President Chief Executive Officer; and Elizabeth Wilkinson, Flotek's Chief Financial Officer. On today's call John and Elizabeth will provide prepared remarks concerning our business and remarks for the quarter including our results. In addition, David Nierenberg, Flotek's Chairman of the Board will provide some closing comments before we open it up for questions. Yesterday we released our earnings announcement for the third quarter of 2019 which is available on our website. Today's call is being webcast and a replay will also be available on our website along with our updated corporate presentation. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual events to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our Form 10-Q which will be filed later today with the SEC. Also, please refer to our reconciliations provided in our earnings press release as management may discuss non-GAAP metrics on this call. Finally, after our prepared remarks, we will answer any questions you may have. With that, I'll turn it over to John.

Thanks Danielle. We appreciate everyone joining us for today's call. I'm actually in Abu Dhabi at ADIPEC, the largest energy conference in the world. So, Elizabeth will be doing a lot of the coordinating of the call back in Houston. The third quarter saw another period of decreased drilling and completion activity for U.S. onshore like other oilfield service providers with significant exposure to U.S. land operations. Our topline results and margins were negatively impacted. Also impacting topline results was the recent reorganization of our salesforce to further align ourselves with and provide the opportunity for expanded relationships with our clients. This transition was clearly the right thing to do for the business. However, we expect it will be in the next year before we begin to see the full benefit of our efforts given the longer sales cycle-time we predominantly see in our business. For the fourth quarter, we expect sales to continue to be depressed primarily due to E&P budget exhaustion and the typical holiday seasonality. Supporting this view was the estimated 5% decrease in U.S. active frac spread hydraulic horsepower count seen during the month of October. Shorter cycles have continued and sometimes extreme volatility are part of the new normal we operate in today and something we continue to expect to see in the foreseeable future. As the recent RS Energy Report noted, this is an environment in which the winners will pull away from the pack by demonstrating discipline, focus on cash flow, and adoption of technology versus those who stick to the tried and true methods. As part of this enhanced approach, optimization of completion designs is critical to both capital efficiency and profitability. In a recent report, titled Deciphering the Performance Puzzle in Shales, Deloitte analyzed more than 80,000 wells in the Permian and Eagle Ford. They found that the previously assumed linear relationship between completion intensity and well productivity has peaked over the past several years noting the right well design not the biggest should be the focus for operators. Further, the industry is seeing a prevalence of spacing challenges which have significantly and negatively impacted production. In Tudor, Pickering, Holt's recent analysis of over 14,000 wells in the Permian Basin, wells spaced too closely together resulted in a loss of 15% to 20% of the production that can ultimately be recovered. Flotek offers a unique value proposition in this environment. Our core competencies center around being a best-in-class reservoir-centric chemistry services company that partners with our clients to increase the productivity of their asset bases. Key to Flotek's long-term success is ensuring we remain laser-focused on what we can control. In essence, we have adopted the guiding principle of controlling the controllables. At the top of the list, are our wide range efforts to take costs out of the business. Through previously announced cost-cutting measures, we were able to improve our results for the third quarter, notwithstanding the impact of reduced sales volumes. This included lowering operating and corporate general and administrative expenses versus the second quarter. In addition, we implemented another round of cost-cutting initiatives last week. Furthermore, by the end of the fourth quarter, we will have fully implemented a new framework focused on improving our operational efficiency and effectiveness, which is expected to meaningfully reduce operating expenses next year. Under Elizabeth's leadership, this transformational progress has been accomplished with the support of employees across the organization, and I want to thank everyone for their continued hard work and dedication to that effort. Another key facet of controlling the controllables is aligning our products and services to specifically address some of the industry's most significant reservoir challenges. We have extensive data showing that our chemistry, which is tailored to the reservoir, has a positive impact on well production in all completion designs and spacing models. Specifically, we show that our chemistry had improved production through the mitigation of suboptimal well spacing and frac hits, as well as provide incremental production benefits at lateral-length and proppant-intensity rollover points. Our extensive portfolio of case studies, show both increased initial and sustained production. Further, we are diversifying the applications of our chemistries beyond stimulation and have increased the intensity of our pursuit of opportunities in the areas of enhanced oil recovery, water-flooding, remediation and other applications. Finally, while it is clear that our current revenues have been negatively impacted by the recent transition in our sales team, we are actively engaging with leading operators and service providers that recognize the significant benefits that our chemistry technologies can have on their bottom line results. Our new highly-skilled technical sales team has made great progress in pursuing a number of identified near and long-term opportunities. However, as I said previously, we expect it will be into next year before we begin to see the full benefits of our efforts, given the longer sales cycle time we predominantly see in our business. With that, I will turn it over to Elizabeth to discuss our financial results in more detail. Elizabeth?

Thanks, John. Similar to the past few quarters, the financial tables in our press release present the operations of our CICT segment as a discontinued operation for all periods. As such, I will focus my discussion today on quarterly results for our continuing operations, which includes our energy business as well as our supporting research and innovation and corporate functions. As John discussed, we continue to operate in a volatile environment for U.S. onshore drilling and completions activity. This clearly impacted our top line and margin results for the third quarter on top of the impact we have had related to our recent sales force turnover. And, while we have taken additional aggressive steps to reduce costs and enhance cash flow, we expect the fourth quarter will be similarly challenging based on the current industry outlook for U.S. onshore. Looking at our financial results, revenue for the third quarter was $21.9 million compared to $34.7 million for the second quarter. ECT operating expenses were $23.7 million for the third quarter versus $38.3 million for the second quarter. While the absorption of fixed and semi-variable costs on almost $13 million of lower revenue impacted our margins, we are pleased to show a more than 200 basis point margin improvement in operating expense as a percentage of revenue. Driving this improvement were increased efficiencies in our logistics including lower cost per load per mile and the impact of other operational cost reduction initiatives. Corporate G&A decreased to $5.7 million from $6.1 million for the second quarter of 2019, in spite of a nonrecurring severance charge in the third quarter totaling $0.5 million. Research and innovation costs increased slightly to $2.3 million from $2.1 million in the preceding quarter. Looking forward, we continue to anticipate G&A -- corporate G&A costs to average approximately $5 million per quarter and R&I costs to average approximately $2 million or slightly less than that per quarter. Despite a more challenging industry operating environment, we reported an improved loss from continuing operations of $11.2 million or a $0.19 loss per diluted share for the third quarter compared to a loss of $13 million or a $0.22 loss per diluted share for the second quarter. While clearly, we are not satisfied with reporting a loss for the business, we are pleased to see the financial impact of significant efforts we have undertaken in 2019 to drive down costs and advance process improvement and we look forward to seeing the full benefits of our continued wide-ranging initiatives as we move through 2020. On an adjusted earnings basis, we reported a third quarter loss from continuing operations of $10.7 million or an $0.18 loss per diluted share versus the second quarter loss of $12.3 million or a $0.21 loss per diluted share. Please refer to our table in the release for more details. Our adjusted EBITDA for the third quarter was a loss of $8.1 million compared to a loss of $9.6 million for the second quarter. Contributing to the smaller loss were improved operating margins and lower corporate general and administrative expenses. Again, please refer to our table in the release for more details. Turning to the balance sheet, we were especially pleased to grow our cash balance from the second quarter given the almost $13 million decrease in revenue that we saw in the third quarter. As of September 30, we had cash and equivalents of $107 million as compared to $97.5 million at the end of the second quarter. Contributing to the sequential increase in cash was a decrease in net accounts receivable including the successful collection in full of certain long-dated receivables. As a result, we ended the third quarter with a days sales outstanding of 70 days compared to 85 days reported as of June 30. As scheduled, we also collected $3.3 million of the indemnity escrow that was established at the time of the closing of the sale of Florida Chemical in the first quarter of this year. Finally, we managed our inventory balances to a slightly lower level. At the end of the third quarter, we had no debt outstanding and $12.5 million of escrowed funds included in the other current assets account on our balance sheet reflecting both the company's estimate of its claim to the post-closing working capital adjustment escrow and the remaining balance of the indemnity escrow related to the sale of Florida Chemical. As John discussed, we have continued to execute on our cost-cutting initiatives during 2019, benefiting our third quarter with the mid-July implementation of more than $5 million of additional annualized spending cut. This past week, we also executed on an additional $3.5 million of annualized cut focus on further reducing personnel and other miscellaneous costs. Overall, since the beginning of 2019, we have reduced our annualized fixed cash cost by approximately $30 million across the business. Looking beyond that $30 million on our second quarter call, I discussed our development of an action plan to execute on priority initiatives that have been identified through our engagement of a global consulting firm recognized for their extensive manufacturing and supply chain expertise. Through this process we prioritized various opportunities to reduce costs and drive greater profitability through order-to-cash efficiencies including process enhancements to sales, manufacturing, supply chain and logistics. As a result of this project, our expectation is that we will see a further reduction in operating expenses of more than $5 million on an annualized basis beginning in 2020. The impact of this will be to lower our estimated quarterly adjusted EBITDA breakeven revenue level by more than 10%. Turning attention to the Strategic Capital Committee. As Co-Chair of the committee with the Chairman of our Board of Directors David Nierenberg, I wanted to provide some additional perspective on our ongoing process. The committee continues to evaluate opportunities for reinvestment in the business and we continue to consider the best use of our cash is to remain focused on opportunities that will provide us with immediate positive operating cash flow, greater scale and the opportunity to build on and enhance our core competencies. However, at this point, we have slowed down our evaluation process, as it relates to inorganic opportunities, given the current industry environment, while we focus squarely on our overarching strategy of controlling the controllables that John discussed in his opening comments, namely rightsizing our cost structure and improving the efficiency and effectiveness of our operations. Having said that, we are continuing to pursue a number of identified high-value organic growth opportunities that we believe will over time result in greater scale and profitability while being capital light in nature. As discussed on our call -- on our last call, these growth opportunities include targeting clients of scale, commercializing differentiated next-generation technologies and leveraging our unique innovation capabilities to develop creative solutions to expand our presence across the life cycle of the well. One example is our ongoing long-term effort to drive further awareness and adoption of our chemistries in the area of enhanced oil recovery as John mentioned. I will now turn it over to our Chairman, David Nierenberg for some closing comments before we open the call for questions. David?

Thank you very much, Elizabeth. Good morning everyone. Echoing Elizabeth's comments, while our third quarter revenues were disappointing and frustrating, the company continued to make significant progress in its efforts to further rightsize the business. In addition, the team thoroughly evaluated and identified important process and related enhancements which will be seen starting early next year and which will improve the company's efficiency and effectiveness. As Elizabeth said, we're making solid progress on the other aspects of our guiding principle of controlling the controllables, adding even more than the $30 million of 2019 cash savings to the savings realized late in 2017 and in 2018 as well. Turning to the Strategic Capital Committee. In my role there as its Co-Chair with Elizabeth, we remain focused on protecting the substantial financial flexibility we enjoy as a result of the sale of Florida Chemical. This has placed Flotek in a strong financial position compared with many other similarly sized oilfield services companies, which is extremely important given the current industry backdrop. Since the closing of the Florida Chemical transaction, we continue to have no debt have over $100 million of cash and we're doing all we can to preserve that liquidity as we navigate our way through challenging times and work intensively to grow the business. Coming off of our conversations from last quarter, we clearly heard from our investors as they counseled us to stay away from inorganic deals until we had rightsized the cost structure of the company and hired a successor to John Chisholm. As a result, we have pressed the pause button on potential investments in inorganic opportunities as we continue to improve the underlying health of the company. Finally, I've spoken in the past about the company's search for John's successor. And I'm pleased to report that working with an excellent recruiting firm, we've made positive progress in identifying multiple candidates who are highly qualified to lead Flotek into the future and who are eminently capable of delivering value to Flotek's stakeholders. We are actively engaged in these conversations and we look forward to sharing an update with you when we have more details to disclose. We are encouraged by the quality of the candidate pool and by the candidates' appreciation of Flotek's strengths, particularly its balance sheet, its technology and its field service expertise. So with that I believe we will now open it up to questions. Operator?

[Operator Instructions] Our first question comes from Georg Venturatos with Johnson Rice. Please go ahead.

Hey good morning. John, Elizabeth maybe on the core business just given the magnitude of the sequential decline we saw on the top line down 37% quarter-over-quarter. And certainly the peers and completions activity would suggest more towards the 10% to 15% range on average. So I know you mentioned some of the sales reorgs were an impact, but just wanted to get a better understanding of that type of top line decline quarter-over-quarter what drove it. And also maybe a little bit of detail on the product mix and how that impacted operational margin as well?

John I assume you'll be taking that one.

Yes I'll take it from Abu Dhabi. So the driving part of that, that you mentioned Georg was still the time it's taken this new sales team to get up to speed and quite frankly has affected us more than we thought it might three months ago. But we see very good progress being made as I mentioned in the earlier comments. This is a long sales cycle. We've talked about it on numerous earnings calls. These sales don't happen overnight or over a week and sometimes not over the month. And so we're disappointed with that amount. The sales mix, we don't talk in great specificity about, but the CnF activity has held up very well during that period of time that we're encouraged about. Elizabeth anything you want to add to that?

I think that's exactly what I was - had to say as well.

Okay. Thanks John. And the second question, Elizabeth you mentioned net breakeven top line number moving down 10% relative to former expectations. I know last quarter you all kind of broadly talked about that range. Could you potentially quantify what that top line breakeven number is as we enter 2020 to get a better sense of how -- at least what number we would need to get up a top line perspective to get to breakeven for the business?

Sure. So basically in our last call what I had referred to is something in the neighborhood of our first quarter revenue level which was neighborhood mid-40s and I now think we're pushing that number below 40. That's what is going to be significant results of these operational efficiency and effectiveness changes we've been talking about.

Okay. Got it. Last one, and one more. But just a bigger picture. As you think about the landscape and what's appearing to change here particularly in the Permian, you're seeing the larger players dominate. They've got the ability to continue to produce through cycles and through more difficult WTI benchmarks, Exxon, Chevron. Historically, those have been very difficult for you all to tap into those types of players. And you've been largely in the small mid-cap range. What are you doing strategically maybe and maybe Mark is doing it on the sales side to counteract that and to move then to some of the guys who are likely going to concentrate the activity going forward in key base?

Sure. Great question, Georg. The main thing that's different now than six months ago or a year ago is the amount of statistics that's being published by many different companies in the industry whether it's RS Energy, whether it's Deloitte, whether it's Tudor Pickering Holt. And no longer is it just us talking about what we were seeing in the trends. And undoubtedly, these larger companies that you mentioned are reading the same thing everybody else is reading where the physical limitations of these wells are being reached whether it's in the size of the completion of the lateral length. And we've been engaging these folks for several months now, the larger players as we've talked about the companies of scale because we agree with you they're the ones that are going to be around. And we think that it's just the evolution of the industry of the awareness of what people had thought would be the way to continue to grow production, reach the plateau and that's now not the case. We believe, others believe that one of the things that will lead to is a much deeper closer look to customized chemistry. And actually in the most recent write-ups that we're seeing and you're seeing them as well I'm sure that there's even predictions that the AFEs will decrease by 15% to 20% next year again due to the efficiency of the pumping companies on per stage revenue or cost and with in-basin proppant. That opens up a window of understanding and realizing are there other alternatives that could benefit from that cost savings. And again, we think that speaks to chemistry. So I think that's the biggest takeaway that we see. We're covering these accounts from the C-suite down to the field level. We've got the type of expertise now with the sales group to do that. And that's why we have the feeling that we do. Hopefully that helps.

Yeah, that's helpful John. And last one just given the successor talk, John I wanted to get a sense of your plans through this process and future plans. And I enjoyed working with you while you were there.

Well, thanks for the question. I haven't thought about it a whole lot except, I guess, I'd like to figure out a way to have some time to learn how to play the piano again. But seriously, I've been involved and I'm highly supportive of my replacement initiative, the timing of it and the quality of the people that David mentioned. And obviously, if I can help in any way with my relationship network when that time comes going forward, I obviously and certainly will. But it's safe to say, I intend to stay active in the industry. I'm on a couple of boards, but I'm not going to be at the pace that I'd been at for the last 10 years. But thanks a lot Georg for the question.

Appreciate it, as always. Thanks.

Our next question comes from Alan Mitrani with Sylvan Lake Asset Management. Please go ahead.

Hi. Thank you. A couple of questions. Elizabeth, just on the breakeven. So it sounds like somewhere closer to maybe $155 million $160 million breakeven, but this year you're going to run about $120 million. So even if you go up meaningfully in revenues this year versus next year you're still going to be kind of losing money next year. Is that the anticipation that we're going to lose money for the whole next year?

Well, I'm not going to give you too much guidance about what our expectations are for next year, but we certainly would like to think that we'll be recovering revenue levels that are in excess of where we are right now and that it's entirely possible it will get to positive EBITDA quarters during the year -- next year.

Okay. And then how many employees do you currently have?

About 179, I want to say.

And that's before the latest restructuring that started last week or that's coming up?

Yes. No, actually -- I'm sorry. We're actually at 189 at the moment -- at the end of quarter of Q3.

189. And where do you -- I mean and you anticipate this restructuring is going to be mostly people related or it's closing facilities? What's the -- can you just give us some insight?

It's mostly people and a variety of other miscellaneous costs.

Okay. And then in terms of strategic opportunities looking at, have you guys looked outside of just the oil and gas business as well? Have you been approached or looking outside? I mean, are you willing to do anything to focus on shareholder value because the stock is now at the lowest point since the day you announced that deal with Archer Daniels? It's really been a disappointing year to be honest. And I'm just wondering, where the Strategic Committee sees their role in the next year. I understand cutting costs internally and trying to chase the cost down or the revenue down, which clearly makes sense you have to have a stable business. But given how much cash you have and the NOLs you have I'm just thinking about maybe looking outside and opening your eyes for a field.

Well, as we've mentioned before and revealed in our investor deck, we're very much focused on cash flow, achieving greater scale, and aligning ourselves with businesses that will continue to enhance our core competencies. So, we're really not looking at things that would be outside the energy space. That said, I mean, never say never if things come our way we're going to look and consider whether they make sense or not. But predominantly, the things that we've been looking at are in that realm of energy.

Okay. And then….

May I add some complementary points to the question? I would remind you that, we are well along in a CEO search and the candidates that we've seen have all noticed the strength of the balance sheet and they view that as a positive attribute that attracts their interest. The other thing that I would say is that, we recognize the extreme volatility of the drilling and completion end of the energy business. And we also are well aware of the strong market power of the service companies. And so while we were in the mode of thinking about inorganic acquisitions, most of our activity is focused more on production side of the business, and other sides of the business that would we hope give us less volatile more regularly recurring revenue business model. But again, as we've said, we've touched the pause button on this until we complete the cost reduction work and until we have John's successor in place.

Thank you.

[Operator Instructions] Our next question will come from Joe Bannister [ph] with MHF. Please go ahead.

Hi. The quick question what's happening in the Middle East. I guess, John is over there now. So, maybe you could fill us in on what kind of interest and prospects CnF has over there?

Sure. Thanks for the question. The interest continues to grow not just in Saudi area, but also in the UAE and in other areas. We're encouraged. Again, it's a process. It took us a while to get here and we've talked about in previous calls looking at forming an entity in the UAE, which is almost a requirement to have a stable business here, but safe to say in our efforts again to look at costs. I wouldn't be over here or a couple of other folks with me if we didn't feel there was an opportunity here. Thanks for the question.

And as a quick follow-up your stock is currently trading at a valuation that doesn't provide – well you get the business for free I guess working capital less debts were around $2.50 a share. Why not buy back stock here? It seems like the best bargain out there.

Would you like me to speak to that Elizabeth?

Sure, yes please to, go ahead.

It has been extensively considered, and I'm sure that we will continue to think about it with disciplined opportunism. Having said that, though and hoping that, we maybe close to identifying and bringing on board John's successor. As I said before, the people that we have been interviewing attribute, a considerable value and attractiveness to the balance sheet, as it is today. And bringing on someone capable, the Board and the management would want to work with that person, to determine the forward strategy, for the company. So while I hear you loud and clear, about pricing and valuation. I think I can speak for the Board in saying that, it's a bit premature right now, until we have our person in place and until that person puts their strategic imprint onto the company.

Our next question comes from Scott Scher with LMJ Capital. Please go ahead.

Two questions, the first question is, on last quarter's transcript. John, I believe, it was either you or Elizabeth, you mentioned that one of the reasons for sales coming in late Q2 was the two orders were deferred into Q3. Did those orders come through? And Part B, to that question is, how far off from plan was your revenues in Q3?

So, yeah, go ahead Elizabeth.

Well. Yeah. I mean, you're fine to go ahead -- go ahead, John.

Yeah. So, some of the revenue that you talked about that was delayed just by the logistics and all that happened. And some of it that we forecast in the third quarter will be pushed into the fourth quarter. And it's kind of this accordion that we try to get better with. And we actually are getting better. May not seem like it to the outside world but we are internally. And I don't know that, we specifically talk about what the forecast looks like versus reality. But Elizabeth, you might want to chime in as to your thoughts on that. But, yeah, some of the work that was pushed did happen. We're not aware of losing any material amount to any other type of chemical company, but Elizabeth, go ahead.

I guess the thing that I would add is just simply that, I think, that as the market has gone the way, it has during the course of this year that, companies have run into what they describe, as budget exhaustion. And we also see a certain amount of disruption with some very significant layoff exercises, being conducted with some of these players out there, announcing 1,000 employee layoffs is a little bit of a distraction, relative to contemplating technology adoption. And so, I think those, two factors together really have pushed some things down the calendar of that.

Okay. Second question, I guess, this is really for, David. David, can you talk about -- with regards to the Strategic Capital committee. Obviously, there are some people who would like you to possibly buy back stock. You guys are looking at inorganic and organic acquisitions, is part three and have you contemplated putting the company up for sale? In reference to the two questions, I made this point about four quarters ago, that if you're spending $20 million a year on corporate costs, put some multiple on that you're worth materially more to somebody else albeit, you don't want to sell low. No one wants to sell low. Everyone thinks the industry is going to turn up, but we thought that for six quarters or eight quarters or 10 quarters. So can you comment on is that part of the strategic planning committee? Have you contemplated that, instead of hiring a CEO who is somehow going to come in and do something brilliant that we haven't been able to do for the last 12 quarters?

Thank you for the question and good morning, Scott. I fully agree with you that, if we were interested in considering sale of the company, we would want to be selling it from a position of actual and perceived strength. We have made, as you've heard today, a lot of progress on cost reduction. And we haven't finished that yet. You're also correct that, if we were part of someone else's consolidation play, they would take further cost out because of duplicated functions. But I think we owe it to everybody to complete our own cost reduction work. And take that as far as we can. I found in other industries over the years that there are relatively few strategic acquirers who have the ability to operationally staunch bleeding in acquisitions. So I'd like us to first make ourselves as healthy as we can. Second, and while I share your and other people's extreme frustration and disappointment with third quarter revenue, I think it's premature to decide to throw in the towel and put the company up for sale at this time. The average person on our reorganized sales force has been with us probably only four or five months right now, and customers process of evaluating and qualifying our products takes even longer than that. So we haven't yet seen what the sales force is capable of doing. We haven't yet seen what we can do for ourselves with enhanced oil recovery and new generations of friction reducers. And I'd like to see what could happen. And I think I speak for the Board in saying that, I'd like to see all the things that we can do to make ourselves better regardless of which way we go whether we remain independent or whether we consider other opportunities and maintain a tight focus on that. In the same vein, I think if we make a judicious selection of John's successor and bring on Board a person who adds value to the company, that person would add value to the company whether it was a standalone company in the future or whether the company was sold. So that's the theme. Continue adding value to it as rapidly as we can across the board, because it makes the company itself better and potentially makes the company more attractive.

If you wouldn't mind I'll just make one follow-up comment that I already disagree. At the time of the sale of the Florida Chemical business on that call, I suggested even if you grew the core business, we still have massive overhead to cover. So instead of taking that cash and then putting the company up for sale and selling it to a world-class organization, who has an existing world-class sales force, who could plug and play a phenomenal product into their world-class sales force across 10, 20, 50 offices around the world you've decided for option B to restructure your entire sales force, which put you behind a year to 18 months of sales. You've decided to now go for a CEO search for someone we don't know how capable they are or not. It seems like you've taken a much riskier strategy when all this company's key value is embedded in product technology that would be plug and play for somebody else. So just if you wouldn't mind responding to that, I mean it seems like the lowest risk strategy would have been after Florida Chemical admit that you have a great product, put that company up for sale and sell to a larger company that has worldwide sales force that's already established that's already world-class. Instead we're going out -- how greater the salespeople going to be when we're hiring at a $100 million market cap company where sales going down by 30%, it seems to me you've taken a far riskier strategy. Please respond.

As I said before Scott, my experience across multiple industries has been that the universe of strategic acquirers who have the ability to fix what they buy is relatively limited. And I think I speak for the Board and the management in terms of saying that we are approaching, taking out something like $10 million per quarter of cost from the cost run rate at the time that the Florida Chemical deal was negotiated. That's a lot of money. We think it buys us some time and some flexibility and reasonable minds can differ about whether or not that's the best thing to do, or whether or not something else should -- a different avenue should have been pursued, but we think that a lean cost structure and a more tightly focused and higher service-oriented sales organization combined with possible growth in EOR and friction reducers is a good strategy. We watch it closely. We are not unwilling to change our minds, but we think it's premature to decide -- to determine that the new sales force is not working. Operator, next question please.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to John Chisholm for any closing remarks.

Thank you, operator. I just wanted to say thanks again to everyone joining us today. We appreciate everyone's interest in Flotek and the support of our shareholders. In addition, given that Veterans Day was yesterday, I wanted to offer my deep appreciation of the many veterans that work at Flotek as well as the other countless veterans that have served our country so faithfully, the selfless sacrifices they and their families have and continue to make is extremely humbling and we wish them all the best. Again, everyone please have a great day and enjoy the upcoming holidays. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.