NR - Earnings call transcript Q2 2023 | NPK International Inc.

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Operator

Good morning. My name is Katie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Newpark Resources Second Quarter 2023 Earnings Conference Call. Today's call is being recorded and will be available for replay beginning at 12:30 p.m. Eastern Standard Time. The recording can be accessed by dialing (800) 934-3336, domestic, or (402) 220-1148, international. Instructions] [Operator

my President the and of Please ahead, now Rob over Corporate to go Vice Krotee, Investor sir. pleasure is floor turn to Development. It Relations, Strategy

Rob Krotee

Newpark of our to quarter XXXX entire behalf welcome call. second On conference operator. like to you, team Thank at Resources, results I'd you the

Lanigan, call our Officer. Chief Matthew and Executive our the Leading are Officer; Chief Financial President today and Piontek, Gregg

today's forward-looking in from the expectations. contains discussion in statements Actual by those undertake obligations statements significantly the may differ risks reports law, business various financial Today's to no required with about to and results including projected Except statements. risks our forward-looking due uncertainties, our as update SEC. we filed future and periodic described forward-looking

include also certain may call non-GAAP measures. today's on comments financial Our

most GAAP found to measures release, Additional financial included quarterly reconciliations be which in can details website. and directly corporate comparable our earnings our the on are

call, Relations current questions. replay conclusion the will our prepared the August be Investor our our note is on Please today's be information At XXXX. for X, open available of a remarks, of within that disclosed and line today's There section at we'll it newpark.com. call webcast will as of website the of by

the With Lanigan. President I'd call to that, turn and like over our to CEO, Matthew

Matthew Lanigan

joining Rob, on you, to today's everyone and us Thank welcome call.

continuing shareholders. meaningful while creation strategy, During priorities, value commercial the excellence second equipped quarter, build business capital to execute progress solutions around platform for allocation demonstrating our long-term on we transformation continued to an operational drive and our our industrial growth, to

the per XXX $X.XX quarter. to in in revenues per diluted to the $X.XX $X.XX year-over-year of million or basis million period. EBITDA share $X.X in income in increased on Adjusted in period. EBITDA came on year-over-year second adjusted XX.X% a $XX.X quarter at prior $XXX.X share, share increased Adjusted points improving EPS increasing diluted delivered net net second We of diluted the $X.X million quarter, income million, nearly basis margin second while the from XX% with per

positive of and quarter, return the generated equity in debt working sets Fluids reacceleration a continued cash through open of flow repurchases divestitures modest of of shareholders receivables. to reduction the capital second well continued free to our in monetize We and cash the which capital of contributed in the to The changes for our up QX QX collection market. timing free also flow generation of from in a

and to quarter. progress the growth have results. yielded our with growth basis revenue efficiencies. our the projects, improved second cost our EBITDA update respectively, material increased drive continued quarter, sourcing sustained through pricing, Industrial second raw trailing by and the Solutions by a Industrial in begin have operating now our encouraging On penetration segment, XX% of XX%, Let's adjusted with Within commercial segment utility and along driven profitable actions on Solutions XX-month

support service continue opportunities, Industrial significant continued year. a into have product our rental to pipeline rental the the second the of Importantly, scheduled Solutions offering. and we Across heading well expansion to prioritize which specialty to positions the of of higher-margin the we've business business, investment and half projects sales

and performance. new our During existing we associated investment further in impacting XX% which expand the mat reduction this was offers fleet. efficiency carbon emissions related weight, quarter, of million mat, rental nearly without Notably, costs of $X.X deployment roughly with integrates $X the driving a fully to product second transportation our million our to XXX in invested DURA-BASE and DURA-BASE format Series

we and demand infrastructure in organic the critical investment will our equip on markets believe serve. double-digit sustained drive us continued as in we capitalize fleet to annualized growth utilities We revenue accelerating

U.S. the employed U.S. from $XX cash from in million net in $XX the the time, record segment, terms Fluids from team, the to surpassed the million At performance reducing capital we've another our was primarily harvest our Systems reductions steps which by the yet coming revenue Within Eastern second continued take second Hemisphere same to quarter, Fluid with quarter our of by revenue generated contribution. Fluids and segment, highlighted in

now to recent across optimization progress drive Moving our global improvements a efforts update our to efficiency and on cost operating footprint.

to in million we've the across business first both our annualized As structure an Corporate outlined growth fixed in throughout for reduce taken with overhead taken Fluids, quarter cost while decisive durable cycle. redundancy optimization to initiatives. XXXX, actions we've of competitive our positioned building organization, profitable across remove call, actions $X layers and consistent costs In increasingly

we've meet the efforts, reduction areas that cost return thresholds. examine of closely these the to business addition required also continued to not In do

Dampier completion second U.S. stimulations of chemicals facility the business, substantial quarter, charges related asset down the as Gulf impairments of to exit discussed wind of the to in the we previously Australia. shutter with decision During to our our incurred Mexico related recent well in our to decision million the as $X along

we exit-related facility half as the the incur complete to second year. expect costs Dampier the of the We additional in of exit

is Fluid Further, that for press division. release exploring Systems on Newpark we a the alternatives long-term June issued positioning strategic announcing XX, of our

to the significant shareholders. improving our the business. operating committed the believe explore remain synergistic to of viable options the interest While performance we progress business best Fluid year, all Fluids that now in the of are last and is the appropriate We Systems opportunities that made business we've during exploring time for our

Industrial inherent growth, will the business industrial that confident of into for this company. service a positioning Fluids while of X we shareholders, the Newpark enhance in the business are divisions unlock and for positioning rental competitive scaled We our in transforming pursuing our and accelerated action value course our Solutions also

this Should overhead opportunity the structure reduction would simplify create drive meaningful further we organization. the our Fluids SG&A to we divest successfully business, believe and remaining a within

transaction required intend of we time progress to a the appropriate. until evaluation strategic or approved of developments disclose deem our a Board Directors has As disclosure we as options respect such do with reminder, of not any otherwise to a the or

within committed capital remain conservative, balance We markets demand for our our through while utilities our a critical a accretive one the and growing well-capitalized support discussion organic for conservative to investment to a plans profile to priorities. share leverage acquisitions prioritizes allocation sheet, capital that accelerate of net providing to infrastructure repurchases. maintaining and maintaining turning return growth Finally, positioning company with together of fleet

With that, I'll turn for Gregg his call the over remarks. prepared to

Greggg Piontek

update good for third Thanks, Matthew, summary near-term business by and a segment our quarter. quarter, morning, for the my our on followed the entering and level everyone. remarks consolidated with begin the I'll an outlook results of second

up service segment record though revenues quarterly margin Industrial segment the quarter expansion, million quarter year-over-year for the which flow XXXX rental revenue. Rental service to quarter, solid EMEA on the sales our sales $XX growth Growth from a Solutions our continued and Our revenues Industrial region million momentum generation, remain fluctuations in demand with second second XX% utility the the organic quarter XX% business sector. back revenue are within quarter, positive year-over-year, half order and on typical and second based service rental business. revenue in first for by was growth, shared results of second supported healthy. our service quarter May, rental $X utility call revenue million Fluids expectations pulled within reflects were continued for improvement. $XX continued in timing, markets, cash product infrastructure and strong revenues and XX% Product generally line another with in in of core the first activity highlighted representing the Solutions were by our

reflects margin fleet adjusted in as EBITDA improvement. price along Solutions reflected Industrial and of XX.X%, in growth utilization. the volumes by second discipline, segment the margin strong segment operating rental profitability cost including realization point and year-over-year with segment basis improved higher-margin remained quarter leverage, a XXX strong manufacturing continued Improved

basis of the EBITDA representing generated points quarter. a revenue segment the of $XXX Systems Segment decline in versus improved quarter, period. the to Fluids X.X% in margin adjusted prior million second The X% year second XXX

touched margin. on, which Matthew the the and chemicals, segment of charges offshore in incurred As operating second markets associated the GAAP stimulation $X impacted million primarily of exit with quarter Fluids

or business by as net reflecting of $XX asset million impairments. and the ongoing During the the the we employed effect in capital receivables, our well second as PP&E Fluid reduced of quarter, X%, excess the Systems inventories monetization

reflecting $XX of year-over-year Our most benefiting sequential customer International from Fluids activity million strong second operations improvement XX% growth, across XX% a revenues and quarter, the in Hemisphere. of delivered Eastern the

X% declined Canadian activity focus maintain market lower share spring $XX in Revenues on to to the on in in million land XX% overall wildfires and lower million, sequentially $XX and effects well market. year-over-year the of activity, U.S. second XX% quarter, our sequentially we the as year-over-year as relatively XX% line reflecting the market declined market revenues breakup of and discipline. and as Canada pricing the reflecting with expectations effects seasonal the

primarily working the net represents the quarter, second million the of receivables, of inventory a end which and over segment's net employed. business the consisting $XXX of of XX% little of As Fluids has capital, capital roughly

SG&A a overhead basis, expenses as associated on as our well increased reflecting second sequential efforts on and a planning May quarter strategic both the restructuring our primarily call our with costs discussed activities. year-over-year

of After expense totaled well included items, $XX.X as quarter office planning million. of million, costs these remaining office Second consideration corporate in the quarter two of corporate costs SG&A million of included severance $X.X strategic $XXX,XXX and expense. $X SG&A costs as the M&A including second

Tax of rate rates reflecting the relatively lower offset million tax effective borrowing second XX% at debt for sequentially and quarter, quarter million XX% balances. Interest by expense quarter, the was the expense in reflecting $X.X $X.X held overall flat the effect for net increased a year-to-date.

to benefit. foreign the impacted in jurisdictions certain negatively losses rate in was quarter tax unable a we by recognize second for which Our are elevated

along within $X.XX in X% improved a $X.XX quarter outstanding. was increase diluted EPS our per second substantial segments in profitability the last shares share in second a reflecting of both year, from per Adjusted diluted decline share the with quarter,

another the divestitures. from cash receivables ahead $X exceptionally was cash decline benefiting In impacted by as results, quarter, revenues of decline a solid payable the accounts decline. million flow generation terms had Fluids second payables of as strong million for following flow, of $XX in naturally we QX quarter our Operating

for second quarter from $XX the in flow slightly Fluids was cash positive generated Free with another the quarter the divestitures. million

we to fund again Matthew $X majority CapEx, once vast the highlighted, towards our with directed million net of As rental used expansion fleet. our the

reduce debt used and fund also to share repurchases. million $X We to $X million

Let's now turn near-term the to outlook. business

on the largely view respective Our remains and opportunity the unchanged. markets

utility near-term currently summer the for remains expect to we and we of to hot and the fundamentals seasonality grid projects provide some to support strong critical meet elevated Industrial although loading demand. on the For continue and dry has as which impact tailwind weather growth plans, will to potential much Solutions, spending, a our power impacting infrastructure multiyear extremely see typical U.S.

success. markets Hemisphere the Systems, and to in Eastern somewhat feel longer-term term, range the quarter We position revenue QX. we future as of the the timing of million, In anticipate business for product Solutions primarily including a third transform continue in for QX in effect delivered challenged $XX near continue we activity, mid- Fluid the while were and outlook to of Canada U.S. $XX Industrial outlook from orders product remains sales market the confident to and to improve sequentially that to early benefiting million

recovery Within a Systems the third effective range million the million Fluid primarily in for Eastern to expense while million anticipate should of $XXX total and quarter near by reflecting range U.S. Canada. to anticipate interest XX% EBITDA offset we quarter. of sequentially We $XX the million, segment, pullback partially tax a be our third and record quarter the the million, the decline rate from revenue in $X the seasonal level in of $XX a to $XXX a decline Hemisphere, in to

declining we've July. million In start terms cash with a $X the borrowings quarter third of seen our solid under in facility ABL to flow,

within Fluids cash free in solid generation benefiting of capital million expect business. primarily the third working to million $XX generation U.S. the flow net and We in quarter, $XX EBITDA in range from reductions the

return accelerate Beyond our third Solutions, growth used greater our further in or we shareholders reduce investments growth flexibility primarily expect to Industrial quarter share to value repurchase plans organic our our our to to generation program. through be providing cash continued debt,

the turn for call remarks. And over his to with Matthew that, back to like I'd concluding

Matthew Lanigan

build of pleased Thanks, efficient, progress very the a organic I'm Throughout more to made half the commercial year, growth to we've the business. first drive across enterprise competitive continuing the Gregg. with while

offsetting revenue, land since significant adjusted over to in with in EBITDA Solutions, Hemisphere declines markets, the year-over-year year. half year-over-year segment net our significant capital first Industrial significant North start and American realizing margins in growth the improvement margin employed the remains in Fluid in continued reducing and growth year. platform In Systems, which the $XX the term, of of by longer growth million for revenue, realization Eastern delivered core deliver

while continued expansion and generation repurchases At investment also debt. we've the fleet cash in share same time, to reducing allocate towards

Fluids not simplifying structure strategic for taken to mark for While does us lightly, business the our recent it our unlock towards significant value alternatives explore positioning go-forward decision to milestone shareholders. a was and

Fluids recently explore remains strong from we alternatives particularly benefit To the a Canadian to it Hemisphere market As future world-class in outlook, continues XXXX business, within our for fluids Newpark Eastern the the execution that operation fluid again point, and has technology that drilling and markets. providers, the performance customers Newpark excellence. by of and global once to strong issued Kimberlite, report underlying global the business recognition supplier brand showcasing outperformed for built service our the leading and value

the on the business the and track of it from to to continue our Fluids milestone to redeploy journey industrial third assets Solutions in are in thoughtfully being business have business by to platform, Industrial of yet we services from As this harvest quarter brand. another cash those to we important solutions lower-returning towards our industrial of an of company exceed net a the signaling leading end our areas oilfield transform the our year,

and continued we optimistic market, we've the the across prospects access remain EBITDA million our exceptionally expansion of developed high-performance consistent will segment and surpass global XXXX. organization teams our for of culture annualized anticipate at unwavering the proud commitment for $XX the growth second business near-term professionalism our their half our of to worksite in with With customers, multibillion-dollar I'm Newpark. in the about

our shareholders partnership. employees and I compliance, ongoing to for their dedication want our support, for ongoing and our their thank closing, their the to commitment to for their including business, safety In customers

And with questions. that, for I'll open the call

Operator

Instructions] [Operator

Our come first Bill from question with will Capital. Dezellem Tieton

William Dezellem

please? XX%. of release like business. the these group a with up the questions. discuss what the a services Would revenues press start being service to you Industrial I'd was are, reference have to I There in

Matthew Lanigan

both transportation to basket as well when look, They're of more do that will ancillary appreciate us service we're also out bucket our growth and include Yes, called to It's site. of and They'll services include that of on Matthew. in so. do mats Bill, is we're removal our that as sort expand Yes, to the services of happy I broad a the the of installation we any parties we as being customers we performance. and a quality this to seeing to that that. growth offer, service that site benefit safety revenue asking outpacing continue guess where can the revenue do on and at the broaden rental quarter. value-added you're with services

William Dezellem

back questions circle time a more to that, a that's but some direction in having review going of the the line couple resolution, detail that Fluids. kind I'm taking a ends strategic alternatives, whatever might discuss would you Okay. being? anticipate to to relative that of to bit and place you up Relative

Matthew Lanigan

over this to expect be will next resolved need the I mean, where I to kind the to review I Yes, expand a there quarters think would here, Bill. process be typical of sure. might you'd expectation I think with you just on our process. line, this time respect follow few

William Dezellem

really other than party? anything another there sale outright is under So an consideration to

Matthew Lanigan

Yes.

we've we're been going to forward open-minded think, opportunities that be Bill. to I whatever come there, clear

it's probably of point. to premature little this one ourselves So at a box line into thinking

Greggg Piontek

Yes.

will the creates think shareholders, value, most would our comes that's this guide that's the you consider I and as greatest logical, what ultimately but up our for that to what probably decisions. value what

William Dezellem

helpful. Fluids that Great. deploying you activity? was the how would then, the And foresee cash come that That's business do sold, if from

Greggg Piontek

accelerate we step how of it, very further a accelerate next looking obviously, think it can lot explore we We gaining at naturally yes, your powder. there that And think starts accelerate. We're lot would still share. product. do of is, I of it some Obviously, rate. have where I dry runway growth growth gives a we would flexibility we a but a differentiated that's how Obviously, that with generate significant builds to you really amount -- It plans. cash. that Well, with have

William Dezellem

that, many third it industrial think the said, is -- That comment: rental be solutions -- come to I that That in the be mat back propositions, the ways. release, phrasing with interpreted wanted the I the core expand Okay. vision specifically you Tier high-value composite was support related X while perfect actually business, our press access solutions, the ] different industrial to and segue like to one site made our high-margin the might in to I embed remain paragraph platform value a partner and of markets. products, and you [ and supplier technology or and the further energy could into as

could try Because all and tie what you I and to really statement. comment pull wrong with communicate your together trying maybe direction go it that in So don't to want that is the last you're to there?

Matthew Lanigan

two that Look, answer I'll of Bill. there's Thanks, it. parts question. really

we to market our right invest look they're grid there. be We service our continuing now, the our expansion efforts. being feel very where to long-term support that through offering like tie-ins electrification be maintenance in dynamics general priority #X the as renewable of is to and Firstly, rental us modernization, want or be to growth is demand, customers and our supportive and out the to it fleet in and geographic growth where see going on

we've touched that past. I the on think in

recent focus. Our quarters expansions of are in the benefits and Northeast show starting the over Southeast to that

customers, safety to the is, we're on of And the provide and while get we're on additional strong ourselves benefit where by that our added, and continue performance these to often value as and doing appropriate can the demonstrate we are and we it. right-of-way, our customers. on between we're services, -- as shared more touched this to site, -- continue earlier to I Secondarily reliability we asked

planning, were that that sort activities bit right-of-way prevention, are kind to there. other maintenance extra things of these asked little pollution like of provide that And storm water perform

So the our more more as we partner a ourselves embed we do with the that, customers. trusted

an your kind to of Bill. strength play point, it's approach really, really So organic at this

So the question. hopefully, answers that

William Dezellem

No, Okay. a that's starting great point.

I an relative that to Industrial So trying maybe comment then, fluid acquisition if that incurrent how and the that would for business time? really, acquisitions be in value-added that you was to areas bolting was sold, with generated the what be over to what And focus. Gregg, were that saying, be Would organic significant the talk and opportunities. about segment intended look the think, cash how there the talk opportunity most appropriate time, to maybe ] you're -- create would terms of you on likely [ would would

Matthew Lanigan

that Bill, scale Yes. grow market would in. a area consolidation low jump of understand, we to Look, I'll that near kind the in focus share, focus as space, term. that in in execution, the primary like, do. we think We be the where margin proven remain I most profile with what in our we would that ourselves with an to see continue still near-term

Beyond a talk that, that is accretive think exactly performance be anything obviously to we'd sure but may I do very to the been take, what mindful we that we've it's that making to -- about little to shape premature demonstrating. the strong

Greggg Piontek

that think Matthew of the it's Yes. cash on, lot that out, round ultimately to got we accretive. but capital is of shareholders, And here. your as to best then not, there's a product, to return be And to touches explore we can use well with if But to product. of accelerate have disruptive we a just growth very how kind rate yes, obviously,

Operator

[Operator Instructions] have We from follow-up Bill do a Dezellem.

William Dezellem

least I'll Actually, one at ask here. more right. All

charge that additional referenced to the the $X.X the Australia So the remarks? in press operations opening that exit fluid reference Was there million operations. release you in was to a

Greggg Piontek

So you pieces to it. two had

taking to business there and and just we exit underperforming clear kind associated saying necessary to You stimulation And had about then with charge continuing call. did of the that we chemical have the what path of on are there, areas the goes actions. of lack Australia the been and back other was a a May evaluate that talked one the that had again, was in

William Dezellem

Great. couple a more And here. then

did What of come had you the what So divestitures. benefit from did $XX fluid -- that million cash from?

Greggg Piontek

of Mexico of exit. rundown the associated collections was That primarily with the the Gulf

part primarily. we a of recall, you If the was that of few for allowed of so over it the inventory monetization that quarters, sale our and

William Dezellem

$X lastly, was or was income Okay. That's then performance? Was And that flat to operating leading million sequentially. the but sequentially, there revenues income grew mix, operating the that helpful. stellar that something Industrial were else

Greggg Piontek

a mentioned Yes, stronger pieces year it. do few my to you than was comments, in year-over-year On a was pricing as basis, a have ago. it

of, that et field from and grow that you're other are leverage operating thing level, getting costs at overall cetera. operational the material just you ago, benefits some you cost also as The a improving the are level, year seeing the manufacturing at raw

all So it combination kind of a of was those factors.

William Dezellem

some and And were was I factors mentioned those QX specifically focused Gregg, ago, really a QX. of versus on just you versus year

Greggg Piontek

it. Got

Sorry.

versus QX now that the you some is service in it pricing than the of if that flat. equation, kind one service thing factors rental The stronger actually, mentioned QX/QX, period-to-period. that on So does element, that those was have do in of side of are was QX, really QX. we of it in margins, QX same was there. out on side That fairly But fluctuate comes the

-- other So same. much pretty than it's the but that,

William Dezellem

sales, does sales, skew the mix then degree the And margins? to of mat what

Greggg Piontek

what mix rental on between when when because driver significantly, and look it skew shifts Because have really a the doesn't you our service. of -- strongest. you is is margins it rental think at when is three you about It bigger lines, big the

the are tends in at that end. and sales middle the have the be service to lowest You

the incremental is put of and the the activity. sales work line You direct typically together with in fairly R&S R&S margin profile

skew doesn't it it really significantly. So

Operator

or closing concludes This question-and-answer now any Krotee turn back program remarks. to today's over I'll session. additional for the Mr.

Rob Krotee

conclude e-mail, everybody any if requests, Katie. our don't to conference hosting on forward have look today. investors@newpark.com. for should out reaching in in the or hesitate anybody third quarter our call questions That We please using meantime, me But Thanks, our will call. to

Operator

concludes and ladies you, Thank event. today's This gentlemen.

You may now disconnect.

NPK International (NPKI) 2 Aug 232023 Q2 Earnings call transcript