providing leading technology solutions for….. oil & gas ...leveraging ecommerce benefits and...

Performance Driven Technology

Oil & GasProduction Enhancement

IndustrialPerformance Enhancement

Providing leading technology solutions for…..

GRINDING MEDIA CASTING MEDIA

CONTRACT MANUFACTURINGCARBOBEAD MEDIA

Peening, Scouring,Blasting, Filtration,

Heat Transfer,Catalyst

EnvironmentalProtection

Frac Sand Industrial Sand

Oil & Gas

Industrial


Forward Looking StatementsThe statements in this presentation that are not historical statements, including statements regarding our future financial and operating performance and liquidity and capital resources, are forward‐looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward‐looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may”, “will”, “estimate”, “intend”, “continue”, “believe”, “expect”, “anticipate”, “should”, “could”, “potential”, “opportunity”, or other similar terminology. All forward‐looking statements are based on management’s current expectations and estimates, which involve risks and uncertainties that could cause actual results to differ materially from those expressed in forward‐looking statements. Among these factors are changes in overall economic conditions, changes in the demand for, or price of, oil and natural gas, changes in the cost of raw materials and natural gas used in manufacturing our products, risks related to our ability to access needed cash and capital, our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants, our ability to manage distribution costs effectively, changes in demand and prices charged for our products, risks of increased competition, technological, manufacturing and product development risks, our dependence on and loss of key customers and end users, changes in foreign and domestic government regulations, including environmental restrictions on operations and regulation of hydraulic fracturing, changes in foreign and domestic political and legislative risks, risks of war and international and domestic terrorism, risks associated with foreign operations and foreign currency exchange rates and controls, weather‐related risks, risks associated with the successful implementation of our transformation strategy, and other risks and uncertainties. Additional factors that could affect our future results or events are described from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”). Please see the discussion set forth under the caption “Risk Factors” in our most recent annual report on Form 10‐K, and similar disclosures in subsequently filed reports with the SEC. We assume no obligation to update forward‐looking statements, except as required by law.


Question?

• Today, according to I.E.A., the world consumes approximately 100,000,000 barrels of oil a day

• What would you do if you were the leading oil producer in the world, and that oil demand dropped by 80% in 18 months to 20,000,000 bbls/day?

__________________________________________________________

• This scenario is what CARBO faced in the period from 2015‐Q216 when as the world’s largest producer of ceramic proppant, we saw ceramic demand drop by ~ 80%, and we saw quarterly revenue drop from peak to trough by ~ 90%

• What did we do? In response to this, we developed a strategy to transform CARBO, based upon the strengths and assets of the Company.


The Path Forward

Transformation


Core Differentiators – Our Critical Strengths

MATERIALS SCIENCE

CUSTOMEREXPERIENCE

MANUFACTURINGEXPERTISE

TECHNOLOGY SOLUTIONS


Materials ScienceFLUID DYNAMICS

ENERGYSURFACE

FUNCTIONALITY

MINERALS

APPLIED PHYSICS

METAKAOLIN

CERAMIC

PIGMENT

CHEMICALS

INFUSE

ACTIVATE

COATINGS


• Product Development focused – Start with the end application in mind. Work with customers to develop valued solution products.

• Deliver products for a wide range of applications in different industries.

Examples of Oilfield Technology transformed into Industrial Technology

‒ KRYPTOSPHERE transformed to CARBOGRIND MAX‒ SCALEGUARD transformed to CARBOULTRACLEAR‒ GROUNDGUARD transformed to SHOPGUARD

Technology Solutions


• Over 40 years of manufacturing experience

• State‐of‐the‐art manufacturing facilities

• Strict standards across all product lines to consistently ensure the highest quality and process efficiency

• Manufacturing process expertise can be applied to numerous industries‒ Grinding‒ Mixing, Pelletizing‒ Particle size manipulation‒ Coating‒ Sintering‒ Chemical‐infusion‒ Polyurea coating, forming and composite products‒ Packaging

Manufacturing Expertise


• Reputation for solving customer problems with technology solutions with our technical and operational specialists

• We have a responsive culture – employees take a great deal of pride in helping customers

• We receive high marks in customer satisfaction surveys

• With the change in customer buying habits, we are further differentiating CARBO with an “easy‐to‐buy” digital experience for them

Customer Experience


The Market – The Starting Point For DecisionsOilfield• The good news for CARBO is that Technology is still in demand in good reservoir rock –

primarily Offshore, International• The challenge is lower quality rock (low perm, low porosity) is demanding the cheapest,

commoditized products/services – primarily North America Onshore

Industrial• The need for our Technology products exists in a lot of industries beyond Foundry and

Grinding, we are at the start of a long journey to grow into new industries• One key to financial success is to utilize our idle plants to produce products besides

proppant

Environmental• The need for our products exists in most industries, and societal pressures demand

more environmental stewardship

Digital Age – Changes in Buying Trends and Data Opportunities • Consumer buying habits have changed significantly, rapid B2B/B2C eCommerce growth• Potential opportunities exist for Fracpro growth through a cloud solution


Strategy – Transform to Grow• Grow diverse profitable revenue streams in Oilfield, Industrial, and

Environmental sectors, with a focus on growing technology products

• Target asset‐light business growth, that requires minimal future capex requirements

• Maintain a strong balance sheet. Execute a sales business model change to lower inventory, and improve cash flow by lowering receivable days.

• Expand Industrial and Environmental businesses revenues, to help offset the highly cyclical, over‐capitalized Oil & Gas industry. – Focusing on growing these two business sectors to be a significant portion of the Company– Industrial. Produce new industrial products from our underutilized proppant plants– Environmental. Market our existing environmental products into new industrial sectors

• Increase the profitable products sales by leveraging B2B/B2C eCommerce– Expand our client base and the number of industries we sell into, and lower execution costs– Leverage our high quality manufactured products. More applications in more industries.


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ASSETGUARDContract ManufacturingIndustrial CeramicOFS FracproOFS StrataGenOFS SandOFS Technology CeramicOFS Base Ceramic

Transformation

• In 2014, ~ 85% of our revenue was Base Ceramic

• In 2019, we expect ~ 20% of our revenue will be Base Ceramic

• Focus on growing higher margin products ‐ Oilfield Technology Ceramic, Industrial Ceramic, Software, Environmental

• Contract Manufacturing growth is important to help overcome the financial drag of underutilized plants, and helps to diversify from the highly cyclical oilfield into industrial products

• Create CARBO marketed industrial products – Example: METAKAO

Revenue Evolution – The Transformation % of Total Revenue


Digital Age


Shift in Buying Habits to eCommerce

0%

10%

20%

30%

40%

50%

60%

70%

3rd PARTY SELLER GROWTH, LAST 20 YRS

% Share (physical gross merchandise sales by 3rd party)

$0.1B

$160B

*2018 Letter to ShareholdersToday, 74% of B2B buyers report researching at least half of their work purchases online.**Forrester Research


Leveraging eCommerce Benefits and Expectations

• Expand our client base, and industries

• Get paid quicker

• Reduce internal business process costs

• Initial push with ASSETGUARD, followed by Industrial and Oilfield

• We are differentiated from others in that we produce our own products, and we have a great reputation and the highest quality products

• Provide the capability to more easily sell direct to the Consumer bypassing middlemen

‒ Our Brands, Our Profit‒ B2C versus current B2B2C

Broaden Client & Industry Base

Lower Costs & Improve DSO

Leverage Reputation & Quality

Support Online Buying Habits

eCommerce


Data Project – Leveraging Fracpro through the cloud

Treatment schedule

Real Time

Data Acq

Cloud Data real time dashboards

data vaultSecure user logon & administration

Fracpro is present on ~ 40% of frac jobs, gathering data


Finance


$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000ASSETGUARDContract ManufacturingIndustrial CeramicOFS FracproOFS StrataGenOFS SandOFS Technology CeramicOFS Base Ceramic

• Revenue is growing with a strong focus on growing the more profitable businesses

• The incremental Adj EBITDA fall‐through on the revenue growth is high. In 2018, it was ~ 90%. We expect 2019 to again see very high fall‐through.

• Targeting neutral/positive AdjEBITDA in 2020

• Cash balances have been fairly stable and following our expectations. We have been paying down debt, and may pay down more debt before year‐end.

Financial Progress Revenue


Cash and Debt ‐ TTM

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120Cash Balance

Debt

• Cash flow fairly neutral in TTM

• In Q4‐18, Millen plant was sold

• On April 1, 2019, we paid down $27 million debt, resulting in proforma Q1‐19 net debt of ~ $10 million

• Continue to focus on reducing debt and growing cash flow

• Continue to reduce costs


Summary

• The strategy we developed based upon the core strengths of the Company, is leading to a successful Transformation

• We have a management team that is seasoned and committed to executing the strategy

• Transformations take time and enormous energy, but we are seeing good progress on reaching our primary goal of positive cash flow and positive Adj EBITDA


Thank You

Questions?


Net Debt Reconciliation

ProformaMarch, 31 March, 31 December, 31

Net Debt 2019 2019 2018(in thousands)

Long Term Debt, Current $ 15,733 $ 15,733 $ 15,733 Long Term Debt 45,820 45,820 45,650 Notes Payable, related parties ‐ 27,040 27,040 Unamortized Debt/Warrant Costs 3,447 3,447 3,617 Less: Cash and cash equivalents 44,150 71,190 72,752 Restricted Cash 10,578 10,578 10,565 Net Debt $ 10,272 $ 10,272 $ 8,723


Revenue and EBITDA Reconciliation

Adjusted EBITDA is used by management to evaluate and assess our operational results, and we believe that Adjusted EBITDA allows investors to evaluate and assess our operational results.

Revenue 2018 2017(in thousands)

Revenue $ 210,745 $ 188,756

Twelve Months EndedDecember 31,

Reconciliation of Reported Net Loss to EBITDA and Adjusted EBITDA(in thousands)

2018 2017Net loss (75,433)$ (253,116)$ Interest expense, net 8,503 7,700 Income tax expense (benefit) 892 (2,027) Depreciation and amortization 34,605 44,282 EBITDA (31,433)$ (203,161)$ Loss (gain) on disposal or impairment of assets (1,089) 125,778 Loss on sale of Russian proppant business 350 26,747 Loss on sale of Millen plant 2,305 — Other charges 1,543 287 (Gain) loss on derivative instruments (1,195) 917 Adjusted EBITDA (29,519)$ (49,432)$

Twelve Months EndedDecember 31,

providing leading technology solutions for….. oil & gas ...leveraging ecommerce benefits and...

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