KEX - Earnings call transcript Q2 2022

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Operator

Good morning, and welcome to the Kirby Corporation 2022 Second Quarter Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. We ask that you limit your questions to one question and one follow up. [Operator Instructions]. being is this note recorded. Please like I to the over turn would now Mr. conference to Kirby's Relations Kurt of VP Niemietz, Investor and Treasure. Please go ahead.

Kurt Niemietz

our thank be Grzebinski, well earnings issued Chief slide presentation and today as President and Kumar, the morning you today's found www.kirbycorp.com. Officer. us. Vice today, Web joining earlier Good A Financial With Kirby's are site Executive David was Officer; conference Kirby's release, Executive and for on which Chief President at can and Raj for me call as

conference call, under Web adjusted press most earnings are this in site measures the we During measures certain may Relations our our the non-GAAP financial non-GAAP release the Investor refer and or directly to Financials. of financial in to comparable are GAAP measures. section also Reconciliations included on financial available

this respect reminder, are future reasonable statements. to a contained As future statements to call events. judgment with respect reflect the conference These management's with statements forward-looking in

Forward-looking those XX, Kirby's actual statements I including of involve risks on in will differ the risk over various A of for factors COVID-XX found the as year the the the these result anticipated turn materially be can factors, impact list pandemic XX-K our December of could call results business. a company's Form and ended uncertainties, and now from XXXX. to David.

David Grzebinski

sequentially of XXX share, Both quarter. earnings second and delayed in million distribution and well Thank and The the higher of This per services, Earlier per challenges of $X.XX XXXX revenue cost that and supply and revenue quarter $X.XX and second results announced as in in partially segments of distribution transportation million improved both per excluding our morning, inflationary sales the XXX improve quarter, that you, quarter earnings one-time we compares reflected occurred and services. second higher pressures good steadily by fuel continued operating during to $X.XX or Kurt, chain today, fundamentals market year-over-year. nonrecurring were share. and offset continued marine share and of quarter's delivering everyone. and revenue income to as items

to of Offshore Before like to one business would second to lines, our in comment quarter take moment newest recent on I developments Kirby turning a Wind. the results,

pleased Following quarter a partner Equinor in congratulate announcement, our for first X.X our Empire BP X we gigawatt preferred is are Beacon project. on offshore for to agreement signing Wind Maersk addition and the and with This X. the to Wind awards supplier

relationship to its about outlook this our on excited strong Maersk very building look are the with customers. for and forward We business new and

the high second quarter. XX% improvement high inland Now, approximately year-over-year. in into with the Pricing in range. spot mid quarter demand margins XX% prices segments. impacted by improved limited part upward barges, term second were increases single revenues the to In turning to to put the low inland Tight pressure on looking in a led utilization up market steady barge overall utilization transportation, our of due continued at supply range. with to our conditions, increasing XX% teens refinery marine prices, contracts results well digit up increased sequentially pressures as fuel into Overall, inflationary teens. in higher costs, term on with contracts moved coupled sequentially quarter renewing and the with and in The mid

increased were Overall, second double operating quarter coal low operating spot up in sequentially pricing and contract with further We into reset clauses Improved and XX% business increased barge revenues in the conditions and utilization incremental and some as dry low remained backlog the the commodity improved prices revenue very and and digits. our XXXX. cost oil and markets the in XX% expect will improve shipments market escalation gas, segment meaningful and services, oilfield improvement contributed range with contributed healthy In high generation addition margins margins our to other coastal, equipment to to fuel services. in gains and as activity for progresses low In cargo the revenues environmentally-friendly also for new of digits. the active with and single year equipment better contributed improved orders pumping margins. our demand prices sequential our in In and transmission across operating pressure parts new increased remained and our for In year-on-year and power margins. E-frac. manufacturing, distribution

during deliveries However, as delayed chain new expected, supply many significant issues the equipment quarter.

businesses, are the ongoing work chain year-on-year, and in commercial on-highway quarter, moving segments. industrial supply continued significant market double and The In the challenges from Demand chain refrigeration quarter sequentially our the manage current and diligently strengthening rates demand digit King results and market supply second environment. delays. across sectors. chain inflationary market, nicely, to and demand was with different reflected and supply our We to Thermo despite marine summary, business is improving despite In coming repair continue growth higher. strong solid inland our with growth overall fundamentals remains both improvement for is in also

supply rate distribution market barge is strong services and good Demand by and utilization our and improvements. is dynamics, While is we in industry coastal challenged the backlog remains our healthy. realized modest

see continued chain While forward. going the expected supply future, to are growth persist issues foreseeable for we

drive In our But over And efficiently and expect exceed positive we segment All the results and for to we turn moments, to talk outlook. discuss about earnings of in as a safely, the second quarter first, and the few continue needs, the a responsibly balance customers' our second half. call I'll this to I'll incremental to growth to is meet sheet. work Raj Kirby. more

Raj Kumar

$XX.X were revenues pricing. morning, quarter strong operating operating $XXX.X demand or the income or income $XX.X XX%. of XX% million transportation second by David, quarter million, of increased marine the million everyone. good XX.X increased and margin and revenues increased to you, These million or operating In first increased were million Compared improved XXXX, X.X%. marine Compared income an quarter increases operating of to revenues XXXX, with of XXXX, and of XX% or million customer Thank the and $XX.X XX%. marine $XX.X and driven second

increased were are dilutive margins fuel increased revenues by costs but that As quarter impacted rebuilds, expected, operating to margins. through second

transportation quarter, also first rates inflationary and contributed and a contract or into barge year continue in to mid face longer remainder with revenue the contracts XX% year approximately contributed with market of low in pressures the was these XX% affreightment. quarter range term inland range contracts XXXX. the second recover of the average were increases in XX% and teens cost utilization of Average XX% contracts the from revenue. XX% and up of and reprice of as The mid sequentially compared the those spot the one the range second Improved inland the for to low escalators on charters costs contributed teens Long-term to in conditions from double the in are segment expect XXXX. in the mid Term market year-on-year. of the We going XX% low the during XX% compares prior to throughout increasing in approximately contracts XXXX year. mid quarter to of to renewed time quarter digits which that business

renewed and rising rebuilds Inland than XXXX, as and cost spot increased revenues However, margin increased average during only more up XXXX, increased fuel a mainly of quarter. by pricing, year-over-year. rapidly saw approached fuel inland first the increased primarily of the operating higher prices. second higher barge XX% contract by pricing, and the rebuilds. smaller XX%, contracts to by we barge quarter increase Compared of term term were of inland and spot Compared the to diesel fuel XX% quarter utilization due handful market to revenues digits driven was average double and term utilization, higher impacted

low margins marine XXXX. utilization kick the in business of for the the escalators the mid improve the range into transportation second segment. XX% XX% low to throughout year. which of coastal digits The was double the as fuel Average begin revenues XX% range, to compares the represented to We quarter in balance in low coastal of barge expect to

of During time in approximately revenue the of and approximately the charters. percentage coastal rates digits. spot were low XX% Average XX%, which higher renewals were contracts term contracts double under market term the of quarter, was

increased remainder pricing barge for of included With the Web low a single operating for rebuilds. higher the quarter XXXX. digits, fleet presentation barge businesses, quarter, and the our is the fuel in to reconciliation marking have as the to posted in provided the a both inland Overall, our business. we had the changes improved XX% positive contract revenues This with and earnings of year-on-year higher respect for coastal on margin projections site. tank as profitability call our utilization, in coastal During well return coastal second the

Compared rig the to revenues oil the and segment for XX% with by In favorable and contributed or revenues. XX.X by demand the second income increased the sequential $XXX.X activity a of income performance throughout to quarter or operating the million, of XX.X operating XXXX, increased commodity increased of and $X.X a XXXX, and I'll experienced new by in million, We completions million, $XX.X with for of million, services of revenue services review and compared quarter and to year-on-year and $XX.X first the parts increased XX%, XXXX XXX%. increase distribution the transmissions distribution the Revenue segment. or prices million. or XX% improving income market, by second operating and XX%. When XX%, increase increase gas were million quarter saw Now quarter.

single business. supply the Overall, the manufacturing oil mentioned, to in to and segment mid in quarter represented continued see orders we operating the David XX% revenue digits. especially continue and experienced chain challenges, gas business in chain headwinds, in As and supply Despite approximately deliveries. of margins favorable new low trends the second our manufacturing

marine increased industrial on-highway to XX%. industrial Power due XX% for in commercial service XXXX, and to year-on-year major Compared of up was modestly and by timing year-on-year commercial the improved increase generation activity the a and with On contributed in first to and repair revenues of equipment, our projects. revenues demand side, quarter parts strong businesses.

business second activity constraints. operating supply represented in an This strong marine and high segment on-highway in XX% continued and growth, the Overall, sequential by due had year-on-year and industrial headwind single margin Our of delays achieved Thermo revenue the experience repair. commercial during but approximately and the increased quarter. King digits offset business to was to chain

the balance Now to sheet. turning

$XX.X $X.XX ratio had at we cap XX, XX.X%. cash and with debt June total improved billion, to to of million our of debt As

sales operations or $XX.X from million of the fund use expenditure flow capital assets cash we and on marine from proceeds from cash We flow and the cash quarter, million cash generated During $XX CapEx. of vessels. had of of $X million from hand to retirement

by of a at an share shares debt XXX,XXX more decreased we price total million quarter, the for $XX.X $XX.X consideration average of than per repurchased slightly During million. and $XX.XX

had million. total of we XX, maintenance available liquidity June our million expect year $XXX full As to to CapEx, of respect for fleet. we required million, $XXX to of $XXX continue marine approximately With CapEx on primarily approximately

flow to We $XXX reflecting from from to working expectations from with flow also in strong free of slight to $XXX operations operations chain of minus million capital XXX expect XXX the as defined CapEx near constraints generate million cash as flow decrease supply prior challenged cash cash million, a million term.

capital this orders We first year and of working later as expect half this the into XXXX. to shipped unwind

David investment continue shareholders. We call for capital opportunities, we'll use creating as now are debt well return as discuss XXXX. to flow of to to niche value and the acquisition and pursue I allocation remainder turn balanced to long-term the back will to a our this approach outlook capital committed opportunistically to repay cash and

David Grzebinski

Raj. you, Thank

by we quarter marine, healthy to is second In continue. both barge services, we the utilization. not we increase and our our improvements segment strong expect to demand and refinery delivered incremental across chemical receive and without supply, part further plant trend barge high this the in driven expect increases inland orders. In challenges, limited our and rates. the Combined utilization to we continue continue contribute should was to in distribution with to in this manufacturing new While segments demand

new prolonged inflationary this of macroeconomic including of slowing and all mindful potential economic very COVID are pressures encouraging, sub growth, headwinds, variants. we While is near-term

we and over continue control As containment will factors on focus the will and always, working our management. have cost capital manage we we

maintenance our of improvement but expected The during approximately to currently range. expected the barge factors we material resulting construction. in as contracts continued negative the and the margins to across revenues in to record for in year be full flat market, low at well expect with to treatment expected the supply represents to half there occur. our coastal and our the market increased somewhat mitigated of rapid to near further barge Looking will is Refinery is at renewed to improve industry. digits, inland inflation as installations These offshore margins improving exit margins of year, the grow low repricing through softness, digits a These the the continue market XX% fundamentals expected be is levels operating range. to contribute by digits Barge are in be remainder to constrained remainder operating water to second escalations but the inland near-term contracts barge coastal are primarily renewals core year. in and to from to when continued fuel are supply operating impacts expected breakeven the the certain in some the shipments businesses, shipyard be by expect which and be in increases the for contract the costs expected conditions the ballast double more in inland XX% business the challenged Overall, term single petrochemical low offset year. utilization on for expected mid costs by to XX% of as detailed to ongoing In and minimal headwinds, conditions we improves are our and improvements pressures, Overall, XXXX. cargo mid expect progressive XX% cost steadily approximately growth XX% fuel favorable year, to running revenues liquid will low of planned to year. are to company's will impacted vessels. range customer year we utilization year business, demand improve in to further continue the underutilized business be in as remainder in favorable the is single cargo be in in inland new later remain and dynamics utilization and near Revenues drive throughout gradually Barring are spot higher of of or coastal, expected plant the volumes. coastal revenues capacity to as Full for with barge are Even also inflationary marine. Kirby's dry up Hawaii. the term in low occur outlook by coal into in driven

be over completions expect product XX% equipment strong cases and long new distribution continue. incremental the OEM and represents we a in parts, equipment, are with supply are healthy In industrial, between potentially for expected with issues expect this, commodity to and counts we deliveries, which Similarly, parts U.S. and trend expect and the Offsetting for for issues of expect manufacturing. in municipal shifting lead repair supply offset services, likely we as a generation, will remainder rig are increasing and time and and year, and power second strong the and rigs, and With chain distribution frac improvement approximately average refrigeration have backlog in have for the oil representing service chain growth markets in In remain and this solid and installations, trucking counts average increasing which also land with to well by with extending is some activity quarter, XXX ridership, beyond are demand and full year. and choppiness to and frac part, throughout the activity 'XX we XX% In yield 'XX. a demand at in service prices, Coasts. increase power the remain Mexico commercial transmissions, is year new Marine and growing demand increased see orders gas Looking increasing of increase grows. into and expected rig and the in East favorable for lingering oil we count activity distribution. These to on steady to parts backup high healthy electrification outlook of demand a this commercial Gulf expected some surpassed contribute strong a continued expected to are now we and improved position. engines, that work, with In in and counts oil demand approaching XXXX. King service XXXX. we quarters current rig products, price gas, gas manufacturing, forecasting strong and continue increase for backlog Thermo spread expect added We repair market, demand parts XX/X XXX, power into challenge. activity delays. further a growth, In the the distribution commodity environment OEM new to business. a increased and to West bus services on-highway will

commercial year, revenue range. we low percentage full in double the growth For the industrial expect in digit

While supply chain half other XX% distribution we representing commercial expect oil to approximately with services, gas and half. product XX% and will XXXX the to new continue of equipment issues year-over-year, industrial are and segment increase expected deliveries to revenues and revenues continue and impacting and segment representing

are of highs. as historical segment new we working utilization, barge improving operating continuing duration quarters. coastal, watchful businesses. our conditions to sequentially improvement showed customer areas demand market will digits exited and steady To expect expect demand quarter XX%. overall the We're financial during push and enter need utilization segments strong will in year-over-year. can of control. a above our And the performed barge coming continued in remains in near keeping these rates to In improvement. results quarter income tight operating we well growing earnings businesses market our we year overall, We to with the to We and lead and and conditions market revenue with strong single although and conditions Kirby recover, of We managing healthy gradually to Despite see fundamentals still time We contribute we a for margins the believe high improvement the headwinds barge economic favorable higher. be delivering with will modest factors price results the both the on XXXX. on markets focused in are and our produce high eye headwinds, in improvements mid inflationary quarter, inland, 'XX. In conclude, second saw progresses more the improved

equipment pressure and businesses. price is for We also and remainder the our a These parts business. in demand to in We grow, previous healthy OEM activity the distribution is across expected with and to favorable high this activity unprofitable with commodity In returns pose and both remains to very headwind, profitability backlog believe environment. our equipment to combined markets, our services services, well improved the through business realized with continues some This incremental and environmentally-friendly supply coastal efforts manufacturing, and In remained led and revenue in our industrial rate rightsize modest issues levels continue current for chain of ongoing spot expected strong. lead contracts. and factors, term and gains although fleet to XXXX. return exit positioned we new for pumping to improved Demand commercial and continued the fundamentals and our see saw oilfield distribution an we very into year profitability. to

the businesses. concludes driving core to we the are now this value intend growing Operator, confident uncertainty fundamentals are take but ready remarks. We strong attentive We're our continue market economy, As capitalizing prepared questions. to creation. to on and to strength our of ahead, shareholder in we look in

Operator

session. the begin [Operator now will Instructions]. We question-and-answer

up. please yourself and we question reminder, a one As limit follow to one that you ask

Our Jack Stephens. first of comes line from Atkins from question the

David Grzebinski

there? you are Jack,

Jack Atkins

hear can you David, Yes. me?

David Grzebinski

Yes. you. Thank

Jack Atkins

Thanks my Okay, great. morning. taking questions. Good for

Sorry about that.

encouraging across it early to environment, versus a momentum into the So start, about into can kind thinking were about for ago? feels It and Maybe up momentum start year it of we hear -- months that ago, the XXXX, you of like it today there. maybe months you're you three half business. about maybe go as the how think like sort guess maybe pricing to maybe to six inland, you feels back the the kind your as how with is I of commentary about thinking it's outlook accelerating of increasing with maybe frame bit

will where a XXXX So would guess curious I just levels? just XXXX if perspective be levels, curious from that? view say versus of then to And from today today have like you costs you we on would kind level relative be I that. also bigger about a are a pricing set perspective, to picture And

David Grzebinski

Well, Yes, pretty right good Jack. morning, strong feels now. Sure. inland Yes.

heard chemical our running Demand demand. on You've pretty is moving. plants flat and running is The up. got Crude heavy. comments supply out. We've are refineries

way new it's not side, demand the you of as on And in there's So pretty strong. construction. know, much the

the better here. head would important So in strong a in renewals. momentum is And I and We've adding we've say supply is long that That's anything, And say as increase would stronger. we if than very time. into seen spot to demand contract market. it dynamic an is getting I seen a

As you quarter. heading contract typically late And market. half renewals, are back those we're fourth about given the into excited loaded, renewals know,

up costs. you did Now, inflation bring and

headline XXX%. Steel you is a I We lot in barges. of repair up you are tell steel, The it. if over -- PPI is we can X%. seeing But

digit. inflationary pricing. everybody need about of is to it to costs. able pressures, Food, absorb of seeing this is for knows that's the up we're considerably. and the So industry food It's get being why some transportation, up. costs double Crude frankly inflationary example, We some

very inflation. we're I price inflation, you [ph]. this the we healthy are offset you to challenging real crewing tell also do So that increases industry increases. but need we situation is the But getting I'd seeing across would tell

the COVID that. hasn't I Certainly, the of crewing critical. is is As think you industry And the problems horsepower helped having side equation know, boats.

in it And is So tell dynamic. would just call recent that momentum find you helping whether mariners. contributed you or more not, certainly can't months. that I it's, pricing the it's We

And we last captains. been up opened as and they've and own training and tanker in school. men Kirby, January fortunately, year that has its you hiring deckhands Now and school know,

So is horsepower we're crews tight. it is phenomenon to to to and shape. that experiencing you been pretty but in we're to vessels, now And pay get up good our it got industry an able helping crew move get barges. We've to rates, because is and the

the where excited So and answer. we're we're looking about And is into I would at forward say rolling short momentum is term to contracts better 'XX.

Jack Atkins

that's guess And to follow-up repurchases. to then on I'd the great maybe I Well, for hear. question, my share like touch

the since stock. about it's know I you quite I think the that guess to back some I walk what probably I do M&A, kind if sort M&A how moving us been -- all prefer strategic repurchased it's you opportunities for of time kind if versus would some stock through and may thinking capital available. turning could terms of you talk you of repurchasing maybe you're on in signal forward? of about -- guess guys allocation? buybacks

Raj Kumar

Yes, Jack, Raj good morning. here. It's

did of QX. repurchase we million in $XX share So

in balanced is we allocation very manner. a capital Now the approach way

side are having debt to to powder returning The priorities execute goal capital sub to get near-term on creating on main point, investments. the debt three the to and, Our dry X.Xx your debt repayment, X.Xx. EBITDA to shareholders or is value

recall. seen to continue execute last and months, XX But down I we be opportunistically, think do we'll pay the over that. share looking also You've to will debt on us

in good because the seeing, dynamic of working cash some are progresses, saw as position for are even flow we that think powder are headwinds noted building year. for we dry investments growth remaining as that's after You in a especially that will we creating. to be of as the this going the do have KDS well that that we're in generating, the share part the repurchases free some year flow that, terms Actually, cash we're value business. for I have debt, But capital good pay of a a with down bit slight to

continue focus. balanced going We approach, that's and our to this will have main to be

Jack Atkins

Thank appreciate great. for you, Raj, turn it over. that. I Okay, I'll guys. it, really

David Grzebinski

Thanks, Jack.

Operator

Thank you.

BofA. question Ken from the Hoexter next of Our line from comes

David Grzebinski

morning, Good Hi. Ken.

Unidentified Analyst

but for Ken. my so for to you taking a Thank just Difficulty] the still this [Technical in question. some the dynamics Maybe coastal on over you challenged. remain momentum supply/demand business switching bit mentioned side,

talk of this a things So to thinking turn into back some you into it Thank just of on, parts these what about how pricing maybe you. take your standpoint? And about are kind the will some 'XX? moving favor of from

David Grzebinski

the of the business and Sure. increments coastal Thanks Yes, capacity, for cycle inland the business about it's right. the much longer is really question. than

it's XX,XXX On barrel the barges. inland side, XX,XXX and

they On from just XXX,XXX to barrels. all the coastwise, XX,XXX range anywhere up barrels under the way

the are bigger is and and more increments So of the cost much equipment capacity expensive. the

a in business it's overbuilt before when much longer That crude by was got the was So coastwise business. business cycle exported. and there be barge to crude allowed

on the I So expect of momentum profitability. back just out that taking gain. We've the finally old And contracts to been quarter would got as that into are overbuilt. been We renewed. has well. handful industry is balance. getting this some the back others market capacity, We got into price in increases

and very I coastwise market into business. I to be think going 'XX strong for 'XX, expect the the would

capacity maybe steel with to probably million takes cost prices. business. and three million, it As million oh you're $XX new two barge aware, towboat new gosh, or $XXX $XX so, To a build in build years barrel the coastwise XXX,XXX you, or to

interim. So nobody's going increases price dynamic in I build tighten. and and to that We're continue to new see capacity demand And think to to those. certainly push starting allow the going to supply that's

we've process. adding we're water installing and Another us. of tell water coastwise systems. that industry, cost Kirby, for got ballast in almost all it business the would of which And I you systems ballast terms behind our treatment. needs complete recovered. capital sets to we're water treatment dynamic because ahead That's that be in in is We've of our of competitors some that to up treatment nicely the most been barges bulk ballast putting of the

in for new long to do, quarters just you'll five capacity dynamic right it in our three about around as and nice we're coastwise through. next business. no But new because there's a certain model some shipyards see are And the Now and reiterate, considered in we for years. have should still to even excited being Again, so go shipyards we takes now. that the to really capacity come be to it where

coming So coastal can where go we're excited year. the in about

Unidentified Analyst

Thanks that then just do fuel And and for recapture With that. following you pricing XX% is margins margins on attainable? up in inland think accelerating, plus XXXX.

David Grzebinski

is Margins answer yes. to short progress. the have Yes,

The As for probably really get spot to a big good thing rollover to pricing all those contract it this is XX% good portfolio have humming. takes pricing. takes contract while several you and and it contracts know, is -- a to them frankly, we news that above years is,

So the and And in into renewals margins to into inland we're business. for the with get up in terms the to should the sometime end in contract XX% quarter, fourth 'XX. margins renewals, would the kick starting touch contract teens 'XX. it by mid in of hope should us I the of show start

that. depends We on nicely. But haven't excited And offset how contract And renewal cycle up just there. to this this are. lot setting to paper is goes. lot where are of again, pressures needed A on a we put inflationary pencil very it's But reiterate, to pricing we're about inflation.

Operator

Thank you.

of comes Ben the Nolan question Our from from line Stifel. next

David Grzebinski

Ben. morning, Good

Ben Nolan

business to D&S over bit. jump I wanted side to of a the the little

right bit. your down little because And that's took supply chain a you think assume guidance just the revenue to all being I shifted I of constraints. growth

a to or demand do a guess that anybody's see think when And all, -- healthy for business of forward, or of do secondly, a realistic maybe realistic, think year then environment? you your it's are I to where you First validate greater as given that, substantially look deliver, ability what as some power we that function in it there? is that. is margin But ability pricing you next seems just than beginning to like to

Raj Kumar

the is That's we It's good the we about Demand outlook morning. number want we out months the grown point say due lack end has for didn't business. over the about it's seeing come that provided too strong. talk I was The slightly of to XX spectrum. with given with on supply The and the Ben, Yes, the didn't I'll what for you. are for outlook experience conservative demand. this still starts, to to So that want now, strong. past our want order fits -- to make supply bottlenecks right we chain. probably I'm sporty to book Xx. been lower So that going that's still chain. Backlog right? of is not recent be has

we're So encouraged. this is -- And we're business activity. of very lot seeing a

and at that building have into I as into think I of growth. to a I anticipated for early spoke the because are capital earlier next that working this look the year. about going we positive working we're demand capital very year later part sign, going And

David Grzebinski

Yes.

On comment that, the me pricing, Ben. let on

are getting some pricing increases sure. We for

feel the some supply starting but chain real. supply issues, small like America out worn seeing and pricing as parts terms and being in is in a We It's it pushing that. It's the we're we away. excited the is. fulfilling it OEM margins. about It's get going. with. backlog is We're the excuse it. the across should And chain a helps pretty bigger corporate We're about the to little today, of And we're chain. there that the of the is to actually absolute about shift some gone because demand has to hasn't demand can. through think high the a single says, just I'm that it judicious digits. I But everybody everybody's I fact news just pieces demand Raj is that's But a able the working well. where think think shifted there, KDS the into bit. dealing of picture the it's margin as right, be demand as is way Certainly, good really But supply

Ben Nolan

or Okay, to guys that question, direction. going appreciating that's look going guidance leverage you any in is little Cash the haven't I But everything seems better, it business a bit next for you then can Jack's back flows given go And are is helpful. year whatever. the is forward, like down. if right -- as coming getting

get alternatively flow? to about of at point if going need cash trying of, any I'm are substantial we be As sense here, just about thinking sort to a that there's you or more CapEx cash we where what free think to cash improve, outside the and you've and here flow a you forward, dropping spent more free that flows be spend kind the incrementally offshore of of you maybe kind wind, as to should of of needed --

David Grzebinski

Yes.

latter is correct. I think the

wind. half wind that's million outside spread two and spending big We XXX the -- even the And of than next a have the probably no CapEx is less over years.

So I've young, it's tell shape We've would barge We've seen very it. not maintaining on it fleets got going boat best Really, been I to big headwind the that well. our are in CapEx. healthy be a and CapEx. a we've got about just fleet. you maintenance

expenditures horizon. it's the just big We CapEx. on capital have So really don't any maintenance

kind So And repurchases. little the Raj share an higher a I but first about more that's why of in then there's accelerate. of there, say talk out maybe heard right at free and acquisition debt pay now. down are cash priorities terms a our And look opportunistic here priority two should would flow you

Ben Nolan

know Well, it. dividends versus weigh But you how tag right, the Kirby to that, -- do at that part of to that on All it's all, actually I appreciate buyback? I is just never been theme.

David Grzebinski

Yes.

I think something I over at buyback say dividend. a Board before discussed the we dividends But we'd level. is buyback share we prefer a certainly would prefer

Ben Nolan

appreciate I Thank right. you. it. All

David Grzebinski

Thanks.

Operator

you. Thank [Operator Instructions].

next line the Research. from Webber question from Greg of comes Wasikowski Our

Greg Wasikowski

all you guys hear Can Good morning. me right?

David Grzebinski

Greg. Good Yes. morning,

Greg Wasikowski

morning. Good

Sorry, I questions. and connection had few some a issues missed

market So now? the the compared repeating I'll me lag, the the that of the about right case? any market talk feel to of give sort why be anything, with of health if XX,XXX does start if seeing to arm. you kind I'm stiff you're can But inland. How And free may XX,XXX

David Grzebinski

The they're the very strong; be a on I'd of XX,XXX because lot And be honest, that river. chemicals, it more stronger up just market. It up Yes. very pretty to been little, just XX,XXX lot to a little than XX,XXX both margin, But say. the strong small strong. a goes is they're tends market's both This river. -- that's is and

and And little line both a goes river. be they're the XX,XXXs strong right very But a they're tight. But to margin, more tighter. At now. pretty up balanced. the that down tend news XX,XXXs So haul in both good the service is, I very yes, would maybe it's say

Greg Wasikowski

you'd billion, ballgame would to this XXXX? place, X.X thing If we constraints, point? now maybe touching billion only different it heyday way D&S, high there D&S even supply revenue digits, really or X.X single be right factors Got with supply the the in in holding do you here just you. of XX% And the in remove your compared characterize back to chain chain is on think it's operating back how you then effects are Thanks. on sort margins? at other Or a of

David Grzebinski

say would pretty holding I'd really holding XXXX yes. supply But the Would chain back. Yes, back. it's levels? some chain are is much the There I be at we pressures. say supply it's it just inflationary it

our comment, up Xx ago. XX Raj was heard months You what it backlog is

So the backlog's there.

together frac you, choice that. some seeing I distribution quite getting is, a strong. either for frac based equipment on E-frac type are that a or generation, power a It's that's We're basically power demand tell very with to Electric right put of electric distribution orders site. the well recip and gas We natural equipment would of frac been on a the bit electric now. equipment, generate equipment, preferred lot we

increasing. And been so that's

if Is then yet? there. companies So customers, pressure very are caveat root the like be think at like close say we we is our And Sure in not supply chain, feels I being were They're only yes. XXXX capriciously. doing XXXX? to of But the for business. didn't spending the actually I question, pumping we it. have the demand being the that's -- what is would They're it and disciplined, would healthier disciplined. the very your

Greg Wasikowski

David. Thanks, Got you.

here, And point? back squeeze work? more, labor is in that at so, think potentially to a you still And to then, of just this sideline I I'll line mind. if so have inland? you guys capacity able in that when be if one get you last I'm if expect do maybe don't function Do so, capacity in to

David Grzebinski

just have it. a the we very would of small we is Yes, bank what on call bit capacity

in maintenance and to That's back. a pullback, or You bank. don't it material. so may the about more off It's more saw help during brought it's equipment amount. We the capacity. bringing of not put I terms on It bank we will think on we're COVID. nine even maybe Obviously, industry. we another And barges us. small material but it's XX that's in have deferred or the

bank, of horsepower. that's horsepower I facing think factor There's thing, environment material, for some getting up question. It pricing equipment. tightens that towboats mentioned, pull point, across And the is, but the the And makes can thanks to you that's gauging really nicely. good. to industry. frankly, market Greg, not the we do the as But have, a shortage the that that the we right? off your equipment it's It that. but Everybody's run good a

Greg Wasikowski

Got you.

Okay. Thanks, David.

Operator

you. Thank

the from next BTIG. Greg Our question Lewis comes from of line

David Grzebinski

Hi. Good morning, Greg.

Greg Lewis

Good morning, everybody.

David Grzebinski

Greg, are you there?

Greg Lewis

hear me? Hello. Do not you

David Grzebinski

Yes, a we pause there second. you seems was It like can hear now. for a

Greg Lewis

Well, question some difficulties been had hi, thank having I morning, great. and and this Okay, a technical everybody. I've morning. David, you good

a -- environment pricing inflation market spot in are -- headwind we any a color inflation cycle in try as we pricing at where think we terms they're are is we about of thinking where to inland of on and if adjustment in kind someone clearly, in that time may about be kind terms margins were and asked to about how we an being -- kind or the and now, time mid we? think But of adjust may I like of spot where of are charters, inflation, highlighted we Are should are charters? where around and But going, where I a are we right are you So to already margins, have this. have et as cetera.

David Grzebinski

great a I question. think, that's one, Yes,

got It's right. I mid question you were probably of or We're the in? probably was inning. asking is third million. the thinking barge, as a the barge ways a what at about new well And think Again, we you cost -- building is are baseball of It's go. up. barrel cycle to over we've over I XX,XXX really just new inning analogy, $X fourth look tightening $X that, million, the

I labor is We I offset talked the is it. That up. early think are do this have but real. increases about price the inflation. steel, going to costs So innings to is way have about

are like XX%. things Just changes hotels Hotels, XX%. XX%, cars up paint paint, up we are crew do up right? is Rental and

is we're that of increases that real. the So inflation That's price part getting.

We've going early demand get say innings. that's return long supply and on So check. the to the there. in is a is is a to to I the go we're capital, good very way got why news get and to And there it's reasonable

probably early innings, So innings. guess, I think we're third I to and just reiterate, fourth

Greg Lewis

equipment future. I the parcel have Is revenue, Okay, is no out change difference the there know way there chain momentum gaining on and side? we've around any between with out the that, did kind for do is to and been way Clearly, E-frac of is and to D&S dropping talking great. pushing supply kind more and conventional supply any the that equipment? guess frac But of is And versus anything the E-frac the then parcel in rights. maybe the of the there I the to of chain the And guidance?

David Grzebinski

a that pressure a holding particular or natural It's any major we or could yes, regulate circuit like regulator. printed a across it regulator flow gas be that can. gas to It's the that it funny. and one of chain, you the pretty pressure it's like need I engine from regulator It pressure much It's entire seems A No. supply one recip, like, shipment? board. up thing chain. in things a not And be, expect, could an a say, is supply just the OEMs $XXX wouldn't weird into

it. not one revenue from the just of The just they're any the than hard managing or more it's But more ones the size packages of associated impactful ones say the We're bigger it's that it's engine thing, It's those because not, items them. any to through are that. So OEM, particular broad-based right that -- Greg. the thing. one with whether are

customers But manage to we everything just get to grind through it's orders. trying still good all the nobody's is suppliers the are I day. growing, Demand every it. out, and got and think is, just canceling the a lined and news

Greg Lewis

rest you Perfect. Okay. the time. have for Everybody, day. a great of Thank the

David Grzebinski

Thanks, right. Greg. All

Operator

Thank you.

of from comes the Nolan Ben question next line Our from Stifel.

David Grzebinski

Hi, Ben.

Ben Nolan

two I done. in do wasn't appreciate letting want me overstay my don't time, the again. to quite first I welcome more, if didn't I I you mind. have you but

one doing. we've people So of things a the the and is having out heard talked rails what is things in and the one the addition if over just particular they've people of the little -- to shortages bit hiring, first into a labor, in and like we've about are retention but you has spills challenges that lifestyle or lost all don't whatever. been because big problem I'm at curious guys that of

David Grzebinski

a little Yes, It of living year. different working your vessel is on a lifestyle portion bit. good a for a

little -- a haven't kind and was have of wages get occasional We felt we I would you'll that work and somebody else raised seen an levels. necessary a hear you'll different say, and you from we historical But It's hey, seen healthy earlier hear it's pivot you, to home going our than job. that. mariners. anybody anecdotes, X% I'm we But just to tell our up. go turnover a of increase, look, to at

There's the some there exiting anymore. that want We industry. material impacting of No, have a us? it or out But to are but certainly enough it's we seen impact know work it. is don't to

turnover than a I for think others. we're KDS, industries it and the side It's our been It's probably labor grinding our think and assemblers. is stability tough I somebody market it the The to than on some benefits now. But the side. of working you has Kirby package a don't would we're of marine like different and terms in lower tight. it. through wages challenge. I tell most an That's attraction for keeps to is right any find tough on little find mechanics. technician

the think of one you that's about recession, As probably caveats.

want you to would that jobs You There normally don't recession. if see out the are there a people work. unemployment within see

little bouncing it we're it. -- going. of normal higher what that's keep side, about through out But but is economy the employment in is of our kind the and long recession there's KDS managing enough I us turnover a a maybe keeps marine, our I'm short demand around but of here, out guess this there to So is we're in

Ben Nolan

Okay, the last honestly and me. one is that's last, helpful. And for this then

tightening ride market think bit already year. that a is around and you'd it's spot mix improve the that. comfortable think shifting XX% spot. of to the all we more up and a a market's tightening. I to of market's in -- end trying the the inverse are inland saying, market of or the we're maybe you letting said tight renewals at little about margins Contract a the little bit be at Do But so of think way, going coming little sort

business lock go ahead the and in? good, You is you so it

David Grzebinski

question. intuitive very a Yes,

in may the gone about You to noticed spot that XX% spot. spot from market, market. rising a XX% we've we have prefer being In

kind done will another customers I tell we've are intentionally So now the of strength is of market sign that. starting availability. you the about to of worry

to up trying So they're term more.

interesting So dynamic what market, that's that's an a happening usually in availability. about happens. The a worried little now. get tight And very customers that's

environment. to see conversely, it's term well, like, in here. like them our That we're they're customers rising start nice But to but And barge to market of foremost, a spot going course, worrying care better we up. So of the now rate first dynamic and about being shift take will we in availability.

Ben Nolan

it. All Thank appreciate guys. right. you, I

David Grzebinski

Ben. Thanks, Yes.

Operator

remarks. to session. closing for back to conference our like concludes the Kurt Mr. This you. any would Niemietz turn Thank question-and-answer I over

Kurt Niemietz

participating for everyone on the you Thank today. call

questions, please If at XXX-XXX-XXXX. me you any follow-up call have

Operator

attending The conference Thank you is presentation. now today's concluded. for

You disconnect. may now

Kirby (KEX) 30 Jul 222022 Q2 Earnings call transcript