TETRA TECHNOLOGIES INC (TTI) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion is intended to analyze major elements of our consolidated financial statements and provide insight into important areas of management’s focus. This section should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes included elsewhere in this Annual Report. Statements in the following discussion may include forward-looking statements. These forward-looking statements involve risks and uncertainties. See “Item 1A. Risk Factors” for additional discussion of these factors and risks. For discussion of 2023 compared to 2022, see disclosures titled “Results of Operations” set forth in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024.

Business Overview

We are an energy services and solutions company with operations on six continents focused on developing environmentally conscious services and solutions that help make people’s lives better. 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. We operate through two reporting segments - Completion Fluids & Products Division and Water & Flowback Services Division.

Completion Fluids & Products Division activity for 2024 decreased slightly compared to 2023. We were awarded a three-well TETRA CS Neptune fluids project in the Gulf of America that is expected to begin in the first quarter of 2025. TETRA CS Neptune fluids projects are historically higher revenue and margin projects. We also recently secured a significant multi-well, multi-year deep water completion fluids contract in Brazil.

Our Water & Flowback Services Division activity also decreased compared to 2023 reflecting a slowdown in onshore activity in the Unites States and lower offshore completions fluids activity, as well as lower service revenues following the sale of early production facilities in Latin America. We initiated a series of cost reduction actions in the second half of 2024 to adjust to market levels.

We are committed to pursuing low-carbon energy initiatives that leverage our fluids and aqueous chemistry core competencies, our significant bromine and lithium assets and technologies, and our leading calcium chloride production capabilities. In August 2024, we published a definitive feasibility study and updated technical resources report with respect to bromine from our Evergreen Brine Unit. We have ongoing negotiations with various bromine providers for bridging supply agreements that, if and when finalized, will give us flexibility on the timing of a plant start-up, allowing us to accumulate additional cash from our base business. These initiatives are expected to provide us the volumes necessary for the growing deepwater market plus the growing long-duration battery requirements, while deferring investments in Arkansas or scaling up our bromine production at lower levels than previously anticipated. If and when the bridging supply agreement is finalized, we will announce our revised Arkansas investment and timing plans.

We are prioritizing our strategic investments on projects that can immediately impact our near-term results, with a focus on TETRA CS Neptune fluids in the Gulf of America, TETRA PureFlow+ electrolyte shipments to Eos Energy Enterprises, and further advancing our water desalination commercial pilot units that are expected to subsequently transition into long-term contracts for commercial desalination plants.

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Results of Operations

The following data should be read in conjunction with the Consolidated Financial Statements and the associated Notes contained elsewhere in this report.

Consolidated Comparisons

(1)         Percent change is not meaningful

Revenues

Consolidated revenues for 2024 decreased compared to the prior year due to lower activity in both our Completion Fluids & Products and Water & Flowback Services divisions, where revenue decreased by $1.7 million and $25.4 million, respectively. The decrease in our Completion Fluids & Products division is primarily due to lower completion fluid sales volumes from international markets. The decrease in our Water & Flowback Services division is primarily from an overall decline in the US market for our production testing and water management services. See Divisional Comparisons section below for a more detailed discussion of the change in our revenues.

Gross Profit

Consolidated gross profit as a percentage of revenue decreased slightly due to a decrease in revenue, an increase in operating costs and the effect of changes in product mix. See Divisional Comparisons section below for additional discussion.

Exploration and Pre-Development Costs

Exploration and pre-development costs decreased $12.1 million compared to the prior year due to the capitalization of costs beginning in January 2024 following project developments, including the completion of a technical resources report, compared to expensing of costs associated with the front-end engineering and design study and appraisal costs associated with the activity in the prior year.

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General and Administrative Expense

Consolidated general and administrative expenses decreased during 2024 compared to the prior year primarily due to a $7.4 million decrease in employee compensation from a reduction in equity-based compensation expense and incentive compensation as a result of lower operational margin performance.

Loss on Early Extinguishment of Debt

Consolidated loss on debt extinguishment increased $5.5 million from non-cash unamortized finance costs expensed in connection with the repayment of our prior Term Credit Agreement in January 2024.

Other Income, net

Consolidated other income, net decreased during 2024 compared to the prior year primarily due to a $9.3 million reimbursement from our partner associated with the collaborative arrangement related to our Arkansas resource development opportunity prior to capitalization of net pre-development costs beginning in January 2024, and a $1.0 million increase in unrealized losses on our convertible note embedded option. These decreases were partially offset by a $8.3 million increase in unrealized gains due to the change in the stock price of the Kodiak Gas Services, Inc. (NYSE: KGS) (“Kodiak”) shares we received in exchange for CSI Compressco LP (“CSI Compressco’) common units we owned in connection with Kodiak’s acquisition of CSI Compressco in April 2024.

Provision for Income Tax

Our consolidated effective tax rate for the year ended December 31, 2024 and December 31, 2023 was (295.3)% and 19.6%, respectively. The increase in our tax benefit compared to the prior year tax provision was primarily due to the reversal of the valuation allowance related to our United States deferred tax assets (federal and state). We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2024, in part because in the current year we achieved three years of cumulative pretax income in the United States tax jurisdiction, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $97.5 million are realizable. We therefore reduced the valuation allowance accordingly.

Divisional Comparisons

Completion Fluids & Products Division

The Completion Fluids & Products Division revenues decreased slightly primarily due to a decline of international brominated product sales, particularly in Europe and Latin America, offset by increased volumes and continued favorable pricing for industrial chemicals sales.

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The Completion Fluids & Products Division gross profit during 2024 increased compared to the prior year despite slightly lower revenues due to pricing improvements. Completion Fluids & Products Division profitability in future periods will continue to be affected by the mix of its products and services, market demand for our products and services, drilling and completions activity and commodity prices.

The Completion Fluids & Products Division pretax income increased during 2024 compared to the prior year primarily due to the increase in gross profit, along with a decrease in general and administrative expenses primarily due to a $1.9 million decrease in employee compensation and a $0.9 million decrease in professional services as well as a $0.6 million decrease in unrealized losses from our investment in Standard Lithium shares, which is included in other (income) loss, net. These changes were partially offset by a $12.1 million decrease in exploration and pre-development costs and a $9.3 million decrease in other income from reimbursements from our partner due to the capitalization of costs net of reimbursements beginning in January 2024. In addition, the unrealized losses on our convertible notes embedded derivative increased $1.0 million as the notes approach their maturity.

Water & Flowback Services Division

The Water & Flowback Services Division revenues decreased during 2024 compared to the prior year primarily due to an overall decline in the United States market from both our production testing and water management services. This was partially offset by improved international market conditions in Latin America including an early production facility expansion as well as a full year of operation of an additional early production facility.

The Water & Flowback Services Division gross profit decreased due to lower revenues resulting from the decreased activity levels described above and operating cost inflation.

The Water & Flowback Services Division income before taxes decreased during 2024 compared to the prior year primarily due the decrease in gross profit, partially offset by a $0.4 million increase in other income, a $0.3 million decrease in general and administrative expenses from headcount reductions, and a $0.2 million increase in unrealized gain on our investment.

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Corporate Overhead

Corporate Overhead loss before taxes decreased during 2024 compared to the prior year primarily due to an $8.3 million increase in unrealized gain on our investment in Kodiak, which acquired CSI Compressco in April 2024. General administrative expenses decreased primarily due to a $4.5 million decrease in salary related expenses. Impairments decreased $0.7 million primarily from an impairment of our corporate office lease in the prior year. These were partially offset by a $5.5 million loss on debt extinguishment from non-cash unamortized finance costs expensed in connection with the repayment of our prior Term Credit Agreement in January 2024 and a $1.0 million increase in professional services.

Non-GAAP Financial Measures

We use U.S. GAAP financial measures such as revenues, gross profit, income (loss) before taxes, and net cash provided by operating activities, as well as certain non-GAAP financial measures, including Adjusted EBITDA, as performance measures for our business.

Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) before taxes and discontinued operations, excluding impairments, exploration and pre-development costs, certain special, non-recurring or other charges (or credits), interest, depreciation and amortization, income from collaborative arrangement and certain non-cash items such as equity-based compensation expense. The most directly comparable GAAP financial measure is net income (loss) before taxes and discontinued operations. Exploration and pre-development costs represent expenditures incurred to evaluate potential future development of TETRA’s lithium and bromine properties in Arkansas. Such costs include exploratory drilling and associated engineering studies. Income from collaborative arrangement represents the portion of exploration and pre-development costs that are reimbursable by our strategic partner. Exploration and pre-development costs, net of the associated income from collaborative arrangement are excluded from Adjusted EBITDA because they do not relate to the Company’s current business operations. Adjustments to long-term incentives represent adjustments to valuation of long-term cash incentive compensation awards that are related to prior years. These costs are excluded from Adjusted EBITDA because they do not relate to the current year and are considered to be outside of normal operations. Long-term incentives are earned over a three-year period and the costs are recorded over the three-year period they are earned. The amounts accrued or incurred are based on a cumulative of the three-year period. Equity-based compensation expense represents compensation that has been or will be paid in equity and is excluded from Adjusted EBITDA because it is a non-cash item.

Adjusted EBITDA is used by management as a supplemental financial measure to assess financial performance, without regard to charges or credits that are considered by management to be outside of its normal operations and without regard to financing methods, capital structure or historical cost basis, and to assess the Company’s ability to incur and service debt and fund capital expenditures.

Adjusted EBITDA is a financial measure that is not in accordance with U.S. GAAP and should not be considered an alternative to net income, operating income, cash flows from operating activities, or any other measure of financial performance presented in accordance with U.S. GAAP. This measure may not be comparable to similarly titled financial metrics of other entities, as other entities may not calculate Adjusted EBITDA in the same manner as we do. Management compensates for the limitations of Adjusted EBITDA as analytical tools by reviewing

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the comparable U.S. GAAP measures, understanding the differences between the measures, and incorporating this knowledge into management’s decision-making processes.

The following table reconciles net income (loss) to Adjusted EBITDA for the periods indicated:

Liquidity and Capital Resources

We believe that our capital structure allows us to meet our financial obligations and fund future growth as needed, despite uncertain operating conditions and financial markets. Our liquidity at the end of the fourth quarter of 2024 was $182.2 million consisting of $37.0 million of unrestricted cash, $75.0 million of availability under our delayed draw term loan and $70.2 million of availability under our credit agreements. Liquidity is defined as unrestricted cash plus availability under the delayed draw from our Term Credit Agreement and availability under our revolving credit facilities.

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Our consolidated sources and uses of cash for the years ended December 31, 2024 and 2023 are as follows:

Operating Activities

Consolidated cash flows provided by operating activities totaled $36.5 million during 2024 compared to $70.2 million during the prior year, a decrease of $33.7 million. Operating cash flows decreased compared to the prior year primarily due to decreased activity levels from changes in market conditions and product mix, as well as the effect of working capital movements. We continue to monitor customer credit risk in the current environment and focus on serving larger capitalized oil and gas operators and national oil companies.

Investing Activities

Total cash capital expenditures during 2024 were $60.7 million. Our Water & Flowback Services Division spent $23.4 million on capital expenditures, primarily to deploy additional SandStorm units to meet increased demands and maintain, automate and upgrade its water management and flowback equipment fleet. Water and Flowback Services Division capital expenditures also included expenditures for expansion of an early production facility in Argentina. Our Completion Fluids & Products Division spent $37.0 million on capital expenditures during 2024, including $22.4 million on our strategic initiatives in Arkansas, net of reimbursement from our Evergreen Unit partner, to advance engineering and reservoir studies and began laying the groundwork for plant site preparation and power infrastructure for our bromine project. We also made additional investments to support higher activity levels in the United States and Europe.

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 and lithium contained in the brine. Additional information on these resources is described in Part I, “Item 2. Properties” in this Annual Report. The extraction of lithium and bromine from these brine leases will likely require a significant amount of time and capital, which are subject to further analysis and consideration. In August 2024, we published a definitive feasibility study and updated technical resources report with respect to bromine from our Evergreen Brine Unit. We have ongoing negotiations with various bromine providers for bridging supply agreements that, if and when finalized, will give us flexibility on the timing of a plant start-up, allowing us to accumulate additional cash from our base business. These initiatives are expected to provide us the volumes necessary for the growing deepwater market plus the growing long-duration battery requirements, while deferring investments in Arkansas or scaling up our bromine production at lower levels than previously anticipated. If and when the bridging supply agreement is finalized, we will announce our revised Arkansas investment and timing plans.

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, or we proceed with development of brine resources in Arkansas, the amount of planned expenditures on growth and expansion may be adjusted.

Financing Activities

During the year ended December 31, 2024, consolidated net cash used in financing activities was $8.9 million, consisting of $184.8 million borrowings under our new Term Credit Agreement and revolving credit facilities and $163.6 million repayments of our Term Credit Agreement and revolving credit facilities, $6.6 million debt issuance costs associated with our new term loan in January 2024 and the ABL Amendment in May 2024, as well as $1.4 million of payments of finance lease obligations. We may supplement our existing cash balances and

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cash flow from operating activities with short-term borrowings, long-term borrowings, issuances of equity and debt securities, and other sources of capital.

Term Credit Agreement. On January 12, 2024, the Company entered into a definitive agreement for a $265.0 million credit facility consisting of a $190.0 million funded term loan and a $75.0 million delayed-draw term loan (collectively the “Term Credit Agreement”) that refinanced the Company’s prior Term Credit Agreement and provided capital to advance the Company’s Arkansas bromine processing project. The maturity date of the New Term Credit Agreement is January 1, 2030.

Asset-Based Credit Agreement. On May 13, 2024, we entered into an amendment (the ABL Amendment”) to the Asset-Based Lending agreement dated September 10,2018 (as amended, the “ABL Credit Agreement). In connection with the ABL Amendment, Bank of America, N.A. became successor administrative agent to JPMorgan Chase Bank, N.A. approximately $0.9 million of fees were incurred in connection with the ABL Amendment, which were deferred and will be amortized over the term of the ABL Credit Agreement.

The amended ABL Credit Agreement provides, with certain restrictions, for a senior secured revolving credit facility of up to $100.0 million with a $25.0 million accordion. The credit facility is subject to a borrowing base determined monthly by reference to the value of inventory and accounts receivable, and includes a sublimit of $20.0 million for letters of credit, and a swingline loan sublimit of $11.5 million.

The ABL Credit Agreement may be used for working capital needs, capital expenditures and other general corporate purposes. The amounts we may borrow under the ABL Credit Agreement are derived from our accounts receivable, certain accrued receivables and certain inventory. Changes in demand for our products and services have an impact on our eligible accounts receivable, accrued receivables and the value of our inventory, which could result in significant changes to our borrowing base and therefore our availability under our ABL Credit Agreement. The ABL Credit Agreement is scheduled to mature on May 13, 2029. As of December 31, 2024, we had no balance outstanding under the ABL Credit Agreement and, subject to compliance with the covenants, borrowing base, and other provisions of the agreement that may limit borrowings, we had availability of $65.7 million under the ABL Credit Agreement. As of February 25, 2025, we have no outstanding borrowings under our ABL Credit Agreement and $0.2 million letters of credit, resulting in $79.8 million of availability.

Swedish Credit Facility. In January 2022, the Company entered into a revolving credit facility for seasonal working capital needs of subsidiaries in Sweden and Finland (“Swedish Credit Facility”). As of December 31, 2024, we had no balance outstanding and availability of approximately $4.5 million under the Swedish Credit Facility. During each year, all outstanding loans under the Swedish Credit Facility must be repaid for at least 30 consecutive days. Borrowings bear interest at a rate of 2.95% per annum. The Swedish Credit Facility expires on December 31, 2025 and the Company intends to renew it annually.

Finland Credit Agreement. In January 2022, the Company entered into an agreement guaranteed by certain accounts receivable and inventory in Finland (“Finland Credit Agreement”). As of December 31, 2024, we had $1.4 million of letters of credit outstanding against the Finland Credit Agreement. The Finland Credit Agreement has been renewed by the Company through January 31, 2026.

As of December 31, 2024, we are in compliance with all covenants of our debt agreements. See Note 10 - “Long-Term Debt and Other Borrowings” and Note 18 - “Subsequent Events” in the Notes to Consolidated Financial Statements for further information.

Other Sources and Uses of Cash

In addition to the aforementioned credit facilities and senior notes, we fund our short-term liquidity requirements from cash generated by our operations and from short-term vendor financing. In addition, as of December 31, 2024, the market value of our equity holdings of Kodiak and Standard Lithium were $18.4 million and $1.2 million, respectively, with no holding restrictions on our ability to monetize our investments. In January 2025, we sold our Kodiak shares for proceeds of $19.0 million, net of transaction and broker fees. Should additional capital be required, the ability to raise such capital through the issuance of additional debt or equity securities may currently be limited. Instability or volatility in the capital markets at the times we need to access capital may affect the cost of capital and the ability to raise capital for an indeterminable length of time. 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

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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.

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. See Note 2 - “Basis of Presentation and Significant Accounting Policies” and Note 8 - “Leases” in the Notes to Consolidated Financial Statements for further information on our lease obligations.

Asset Retirement Obligations

We operate facilities in various U.S. and foreign locations that are used in the manufacture, storage, and sale of our products, inventories, and equipment. We are required to take certain actions in connection with the retirement of these assets.

Product Purchase Obligations

In the normal course of our Completion Fluids & Products Division operations, we enter into supply agreements with certain manufacturers of various raw materials and finished products. For information on product purchase obligations, see - Note 11 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Off Balance Sheet Arrangements

As of December 31, 2024, we do not have any off balance sheet arrangements that may have a current or future material effect on our consolidated financial condition or results of operations.

Litigation

For information regarding litigation, including contingencies of discontinued operations, see Note 11 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. We prepared these financial statements in conformity with U.S. GAAP. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. We base these on historical experience, available information, and various other assumptions that we believe are reasonable. Our assumptions, estimates, and judgments 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.

An accounting policy is considered critical if it is both material to the presentation of the financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on the financial condition or results of operations. Accounting estimates and assumptions may become critical when they are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance.

Critical accounting estimates are estimates that require us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made and if different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely occur from period to period, have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. We believe that of our significant accounting policies described in Note 2 - Basis of

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Presentation and Significant Accounting Policies in Part II, Item 8 of this Annual Report on Form 10-K, the critical accounting estimates, assumptions, and judgments that have the most significant impact on our consolidated financial statements are described below.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis amounts. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. A portion of the carrying value of certain deferred tax assets are subject to a valuation allowance.