NR - Earnings call transcript Q1 2024 | NPK International Inc.

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Operator

[Operator Instructions] Good morning. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Newpark Resources First Quarter 2024 Earnings Conference Call. Today's call is being recorded and will be available for replay beginning at 12:30 p.m. Eastern Standard Time. accessed for (XXX) International. be or for can XXX-XXXX (XXX) recording by XXX-XXXX dialing domestic The [Operator Instructions].

of go now the Gregg Officer floor is over Resources. It my to Piontek, pleasure Chief ahead. to turn Newpark Please Financial

Greggg Piontek

Thank Newpark Conference First the everyone Resources I'd you, Quarter like operator. welcome to to Call. XXXX

our is Executive and Officer. Joining me President today Matthew Lanigan, Chief

due those and handing in to projected differ forward-looking statements. statements by to contains over today's with Except that discussion risks may statements forward-looking to Before today's results risks various future obligation in and uncertainties, forward-looking required our the the including Matthew, financial as law, described business no highlight our filed we undertake significantly Actual periodic reports I'd from like update to SEC. expectations. regarding

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

within Additional on the details GAAP can call, conclusion we by line of questions. be available May are included at directly XXXX. release, corporate that the Please our note a as prepared it our financial will of our be be website. measures comparable which and quarterly will replay in our earnings information the to in found is and X, most reconciliations section today's the disclosed Investor newpark.com. the of today's At website will call webcast open remarks, of Relations current for There

to call to over like the our CEO, turn would I Matthew and that, Lanigan. with And President

Matthew Lanigan

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

growth continue our strategy. our a central our value plan into of driver the strategic business quarter our for the second levels of with accelerated Industrial quarter first level, At sequential transformation expectations quarter investing Solutions activity EBITDA. year-over-year the adjusted to consistent year, first business, Solutions growth Industrial first the one remains to in highlighted Our XXXX. was which and quarter, progressed, by a both advance we a performance start us during solid the project long-term strong multiyear positioning as coming in creation

those a that resilience as adjacent to fleet our we've spent access customers along servicing Solutions In ongoing electric story, we to to X Composite of become pure-play allows services the revenues construction nearly a largest leading all-weather their rental critical the projects with multiyear infrastructure load-bearing of worksite undertaken DURA-BASE reliable within grid. newer our our surface work be expansion, utility, a the business focused and infrastructure last the of System, Newpark Matting nation's customers Operating global with beneficiary the the For our provide leading specialty market. of years and positioning an on positioning safely investment hardening electrical, Newpark Industrial were market, efficiently. XX% XXXX, cycle the

the design, support electrical demand service Solutions. unique Composite for our vertically rent, these model, manufacture, the on AI and industry With significant centers, see improving in electricity a of infrastructure, DURA-BASE we multibillion-dollar government creating our our programs, growth nation's Matting programs sell on-shoring cycle and segments solutions. access we several the sustained and integrated investment grid Through with combined long-term to worksite focused data in

of Our the of world-class varying making and and the rental to quickly a we industries us allow respond capabilities customers and the needs partner needs our fleet serve. manufacturing for reliable to us responsive customers,

XX% mats, safer, U.S. the an around the of a With the to estimated offers years, replacement system represent service to longer-lasting which life XX of currently XX% XX we wooden believe DURA-BASE to traditional market.

traditional for a applications of opportunity business. penetration our represents timber Continued significant

composite the setting strategic over standard our products U.S. partners to critical Beyond of XX world. around years for support our continue our with infrastructure projects matting, markets, and the

can into can role us creating to mat an made be so improved for we've unit business, reprocessed superior cycle. XX- upon be the compared but in not that an to service initial to manufacturing whereby and progress to unit building responsibly play our circular recyclable, back exciting fully growing are XX-year significantly far. It's also an plastic economics, into Mats new at placed DURA-BASE the economics allowing its our a reground time end-of-life Our we're additional and only life looking discussion, forward

overview, a that modestly year was first look XX% deeper at a On With our period. let's the consolidated increased sequentially quarter adjusted and prior quarter basis, first take up performance. EBITDA versus

Systems conditions EBITDA the to businesses We mix driven for a more in also sales favorable and as quarter, start operating growth quarter, cost in stronger primarily through and Solutions year, year-over-year a Industrial we us both following demand accelerated subdued a sequential pace putting the margin our first by our combination during adjusted leverage. Within delivered of moved and segment, both Industrial Solutions the Fluid on the the versus declines in revenues from Rental in which utility sectors. Service QX to the blended and the volume improved first Solutions gas performance. basis, oil XX.X% leverage EBITDA and by as revenues Notably, increased quarter first prior XXX on operating quarter both year-over-year offset margin sequential lower improved Industrial the pricing. sector basis was and year from and points and adjusted offset pipeline

of of stated we on also of but our coverage tend projects. structure pricing a an increased and pursue on fleet to U.S. below also expansion. calls, larger prior scale to projects enhanced our continuing investment actively These create our longer-duration shorter-term rental Midwest In markets, while return more support stable targeted projects. out Coast number that in West a we're strategy, carry and As building teams, growth continue can rental revenue longer-term in sales investment commercial base infrastructure of expanding we've

of quarter, drivers growth demand to referred first matting customer we I strengthening in the earlier. the fleet, million given the our invested During $XX

to to a performance EBITDA year-over-year. with the and XXX cash anticipated contributed quarter together XXXX. first improved basis investment of adjusted combination expansion first strong pricing demand, Within points free generation actions, for our our a cost quarter, of international return see continued from which quarter negative year segment, to led and in benefited Fluids While margin we a this along full in an cash capital second free the positive

segment Hemisphere increased and Eastern year, growth prior Our operations. from XX% operations our international from versus Canadian supported revenues strong the by

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

Greggg Piontek

I'll Thanks, good quarter, segment morning, consolidated followed Matthew, everyone. our an remarks the of begin update summary our my results by level on first the outlook and with and a XXXX. for for

as improved first first units. XX% shared the our in in was down on Our Service quarter, business EBITDA, the strong but and sequential call. Industrial anticipate of $XX sequentially, and for by sequential was the year-over-year to line a first within segment adjusted basis revenues The primarily basis. with to quarter product due basis. This Solutions was International line at with result on a timing project sales, ramp slightly quarter revenue activity both our Rental Solutions a million improvement our on year-over-year XX% through profitability down segment generally were expectations previous timing and on up in in highlighted driven and the the Fluids first by our quarterly revenues up Total million customer we expectations X% generally Consolidated sequential quarter, year. $XX Industrial X% a

to though revenues. sequential through a project our X% As on, to led a service the steadily revenues improvement decline service-intensive leading quarter, projects improved rental in mix sequential activity in Matthew of less rental first touched

our a The quarter full stronger improved for than rate improvement first utilization though average, and fleet industries sequential quarter the quarter, positions QX into oil sequential exit the other meaningfully nearly modestly us strong was rental which utility on a QX. and industry, and the basis, of year-over-year on pipeline sector contributed revenues service decline. a XX% both gas rental while By growth for sequential delivering and basis,

a million, to sequential sales product improvement project issues. levels quarter $XX prior were though year below meaningful First timing due

contributed last revenues, Rental basis solid line year-over-year a sale the and than due Systems with XXX of segment quarter revenues. in first Service versus mix business Solutions primarily was to of quarter, of in and XX% XXXX Our $XXX first the delivering Rental mix and with quarter Service more XX.X% from a our sequential up the and EBITDA adjusted revenues million units favorable segment delivering Industrial profitability with more operating the growth first Fluids strong in The on a year our both margin, revenues generated basis. international leverage. segment product points

or Systems' in region of revenues QX. contributed Our million Fluid XX% Hemisphere Eastern our total $XX

results of improvement broad-based quarter the million year-over-year, increased Middle and East and Pacific. with in by which year-over-year the Canada from $XX X% sequentially an first driven improvement. year-over-year XX% X% Asia within from quarter, the Europe, reflects The Revenues XX% reflect markets improvement improvements a to first sequentially several

a service. and reflecting notable of sequential the the combination million in U.S. driven market average revenues quarter, year-over-year continued first share XX% XX% the are the the from year-over-year Our market and well decline. sequential of contributed revenue the contribution as as a activity by The primarily rig and a lower U.S. decline of declines in softening $XX operations

the expense discipline, are of balance and softness, market maintaining along focus the pricing with effects sheet With U.S. efficiency. we on our

Fluids' basis the expense. first adjusted in of efforts in improved the U.S. EBITDA our expenses benefiting to quarter, revenue segment X.X% including $X.X were $XX.X margin from in continued office higher cost year-over-year quarter, business points million international the first and corporate XXX from million SG&A the

million $X.X in includes a expense and effective directed expenses which effect all employee sale effects to was $X while our $XX expense from of U.S. was million overall $X.XX year. SG&A X.Xx nearly share tax in was total planning down first XXXX primarily quarter, fund fourth both Interest of Solutions' unbenefited and million quarter, Adjusted cash to quarter expansion flow activities. $XX the and primarily the toward $X.X including compared for the the million, the Fluids in The the corporate first sequential million was opportunities incentive the quarter the reflecting in payouts, down total conditions. reflecting which to elevated debt We quarter, ended process, first last of quarter reflecting previously net first million first $X.XX program leverage million, seek modestly cost first $X.X XXXX, carryforwards. of $X.XX first million of fluid net and net an year-over-year $XX $XX includes U.S. a of related to quarter impact efforts NOL fleet of growth the rationalization with office. Industrial favorable the on EPS project in in ratio. our the in debt for diluted included of strengthening $XX quarter lower Operating of CapEx, cash Despite on basis, the annual as resulting a million $X.X first XXXX of was of the effects was strategic we balances. Tax in per capitalize million matting quarter debt is substantially demand while and the rate the XX%, used year-over-year,

now business to Let's turn our outlook.

the on businesses. remains Within strong our to outlook demand fundamentals constructive highly which see multiyear market. spending, critical As for utilities remain we before, largest continue we for customer Industrial and Solutions, both infrastructure

year Solutions XXXX Industrial expectation unchanged. Our segment remains full the for

Solutions continue of to million. and range, to in adjusted CapEx segment forecast $XXX to with $XXX Industrial We revenues $XX million EBITDA XXXX the $XX $XX of million million million in the range segment $XX to million

terms QX. with quoting our current near-term and in to strong to revenue a Industrial XX% projects total deliver we've quarter, activity anticipate of seen In XX% product pipeline start growth second in and we both combined rental outlook, sales levels, Solutions of to year-over-year the and

Overall, as at Systems, a level, our while of in perform effects XX% of in margins low the improved to somewhat and in revenue units, effects EBITDA the on offset lower the segment are a activity the to XX% the expect U.S. challenged, segment's expect we high reductions lower the Canada lower outlook year-over-year Hemisphere and in remains U.S. to Systems business largely the continued XX% which adjusted Fluid primarily reflecting QX digits contributed basis, be level. U.S. QX lower to Fluid revenues by In market of pricing the we the overhead mid-single volume Eastern At

rental view organic terms allocation of capital to fleet. prioritize the of growth our In into our relatively unchanged continue remains priorities, investments as we

rate. We projected net upon remain our will capital investments rental XXXX revenue expect growth our dependent

through our Review in to liquidity used share investments our be generation our Fluids free or will program a programmatic organic we completion continued Industrial capital of primarily this year return through Solutions, repurchase our inorganic growth Beyond cash process. shareholders expect flow following of to opportunities Strategic for the build

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

Matthew Lanigan

Thanks, Gregg.

at look we priorities XXXX, are our remainder clear. the As of

prioritizing in become capital our level, to returns rental an the continue business will specialty continue System. organic to our we access cash pure-play global of First, of to At plans worksite rental XX%. has investment generated which execute growth we intend the market leading we excess with DURA-BASE a our as build leading historically in position Matting Composite fleet serving upon the

total first CapEx of quarter, our Solutions directed towards XX% the the segment. During was Industrial

across will Second, corners we to to all leverage. the drive operating us efficiency improvements improved of continue further organization, realize positioning

quarter and $X the actions million first we to continue our corporate cost segments across to the streamline both XXXX, generating overhead During of annual approximately in take structure savings. office,

combination we capital and committed returns-focused inorganic remain a that investment, includes of capital of Finally, growth to return allocation a to strategy internal shareholders.

increased remaining February, to our return to capital program. In repurchase we support $XX share authorization our million of

positioning positive the While advance cash in employee to rental we XXXX, reduced incentive capital us cash that our first priorities. flow expect annual investments the be free free generation, allocation included program and quarter fleet to of flow payouts, duration for

review. strategic business briefly our Turning Fluids to

having alternatives, midyear for their thank employees and to substantially business, and customers for safety diligently We ongoing our including dedication for to their I the on support, In their continue shareholders to XXXX. process want closing, focused their partnership. and to we compliance by remain to ongoing completed commitment our work the evaluate our

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

Operator

And Spychalla Craig-Hallum. Aaron from with Instructions] we first have question [Operator our do

Aaron Spychalla

us First pipeline talked quarter? the away any just you're last like XX%, it You composites teens about this then or give composites? to talked the high XX% the for growth, to first wood or today. an seeing market fleet market And lumber from within seems me, quarter Can the you changes in kind of considering mid- wood being you've starting in especially of Industrial. additions of in prices update the about the to just there, kind competitively see towards wood transition we're really given just

Matthew Lanigan

growth we representing is Look, Thanks, seeing in start are one. been robust Aaron. of project the that have It's still terms duration. more Matthew. material pipeline we terms the of in pipeline, hasn't growth What I'll quarter-on-quarter forward-looking there. of seen that change in pipeline. see take a There view we

back look that were projects now seeing a for historically, the of If out our they quarter us so that within and you roughly is which or us. into future, was We're positive starting It the plus gives the quarter pipeline push XX% to robust, future But quoted. other the sight remains market to think that, of the year better to supported quarter. a half continue from utilities. line reinforcement of in the than second views and CapEx by quoting I the which is of activity stronger plans a

So all there. looking positive

that's competitive On different side, not a to there. report the lot

the note I large look as they're still that composite looking tightening, calling fleets think some to I there's now of out believe, supply timber in participants positions a and demand we who have forward. fleets. in that build in Interesting the market are to

economics of that advantage So advantages. I accurate there terms is are your lifetime and the inference people mats composite think the value of unit seeing in

signals those by well. encouraged we're So as

Aaron Spychalla

Great. cost you've efficiency And the second, then good progress efforts. maybe had on reduction and

of million called I annual $X savings. out think you

you high about line some the kind progress and just costs So that Can things. of around it for teens of for those time of kind target kind there? of looks towards corporate to get like mid-XXs we're kind adjusting talk

Greggg Piontek

Gregg. is this Yes,

related, If here, costs really related you carve now the the out sale XX% mentioned a you're that a, range in of in XX%, running transaction we terms it, call process had your cash the expense look for ways past, continue organization. about corporate And while to you're at streamline to -- in continuing to we we're the had as looking always level. talked

more of the meaningful Fluids. you the really That's ability is to adjust review the structure. shift cost post-completing think when I greater really your have strategic

Operator

next from Dayal Wainwright. comes question H.C. Amit Our with

Amit Dayal

rest to respect improvements cadence XQ. the year-over-year indicated of the you the So year, with in for

the maybe point any in quarters? sort improvements? X that lumpiness from Or onwards, next sequential again of So

Matthew Lanigan

Yes. I'll mean attempt one. I that

on to are, strength have direct pipeline, changed. pipeline, growth we typically, rental would we're the side. on growth depending can nicely. out causes during seeing months, with to year the continuing on We're not then feel on is the which think of a goes, months We see those our continued and on And QX rest quite just grid the the the the that year suggest good visibility of loads how have stronger the in dry us the as longer-term activity throughout based here, do comfortable far that we side. the that call build service And year. As anything seen trends every and sales building the slow summer that the summer

Amit Dayal

to And rental then you come maybe your business? highlighted longer-term pursuing those with lower margins. contracts be margins could rental slightly relative lower and much those would How legacy

Greggg Piontek

the driver way these frame of profitability. you Gregg. your term greater bringing projects this Again, visibility, down. I at guess fleet overall you wouldn't stability, their large longer to terms you your it a allows look would that utilization. is terms got think gives in to to be higher overall a is would I gives in you Yes, of more The pricing I manage

So of net the return projects really shorter-term debt, what you're the difference. profile but is project of is and length and it's on generating function a can size be a pricing a that drives lower -- solid just of investments as

Amit Dayal

Okay. Understood. bit are room further where you of on done Maybe a Then last Is I cuts for with this little one. corporate touched now? we overheads, those guess any on types already, are or that just there side? savings

Greggg Piontek

we're structure I of structure near overall in movement Fluids. the would for But meaningful in more cost strategic always completion term. would looking streamline. not generally we're say our comes the change in our I to I of expect opportunities review really -- meaningful again, the said, following Like

Operator

Sweeney question with next ROTH comes Gerry our from And Capital.

Gerard Sweeney

Question on Midwest, West. the

those sales out areas. building in discussed You've your

then especially sort in see to questions here. little start that an I some meaningful a the a enough curious you're in of big opportunity through Southeast, little get take versus bigger, is I know to of a it Southeast? does it And of how couple dollars we compared would How bit how Just to a zone coming big the presence that there way? long think

Matthew Lanigan

look market couldn't no Gerry, our that Texas reason the be there. it at Yes, I there's a is infrastructure requirements we market the think way as based or something say, on that substantial, like

project reasonably depends traditionally be on anticipation a we meaningful months, get efficient that cycle fairly and see So we XX would some penetrate customers that a But The within our serviced. ability should and at timing piece. haven't really sales operating our that there to level. in

We relationships So markets. the the move start is sales first. build those we assets getting thing about the we're great start to into this with to business there then

committing be of here can capital dictate. in for We large amount levels not we're waiting a that and So flex it the to productive. as activity

Greggg Piontek

was just build I going you our went up. I to kind that the Yes. when XX-month think into And as look add, Mid-Atlantic previous those the Southeast XX- examples we we to was that the East of Coast, can of a sort to regions. the expansion, out, and ramp of at process

Gerard Sweeney

an And opportunity speed especially I to or say, area, more the that gain little a was in be process acquisitions going bit to would up scale?

Matthew Lanigan

on kind that Yes, safety and culture we said consider that well having has and If relationships it those basis. Gerry, appropriate in we've always for, there doing as that acceleration would the we look an obviously has ourselves. organically the already as markets of somebody that evaluate we'd operational efficiency

Gerard Sweeney

or seeing speed same bit bit little are seeing through, of is coming a expectations the dollars that's the a you spending, more 'XX. had little to lot through just One back of end, the i.e., in always with earlier? et a more at guys a This Most of seeing flow it. companies stimulus going commentary dollars 'XX, Are boat, "hey, working of But is you them question. Got are from spending cetera." we're them a today to we're the spending. government up bunch of stimulus lot approved, and projects

Matthew Lanigan

we're Gerry. the Look, Yes. boat, same in

to seeing will the still flow through I this I where outset, be those that at point. think sort we us. our be view from think of would impactful were a the way that year And funds 'XX in is to start would

Operator

Min Riley from B. with Cho comes question next Securities. Our

Min Chung Cho

U.K.? revenue, my in talk I'm regarding quick of on a this strong demand any have the the have the I have there? the in maybe rental U.S. difference versus little breakdown quarter. for dynamics Alex Most know Great that but about in I answered, business Rygiel morning. bit one U.K. you been questions you Can a a

Greggg Piontek

the Well, -- start mix. let me I'll with

our of XX% Rental U.S., overall, First at roughly when and XX% you Service is all, look split U.K.

of terms In dynamics. the demand

Matthew Lanigan

the U.K., of electrical is in the the dynamics, also we the terms more in demand market think utilities look, the I primarily, rail. Yes, U.S. get tend in to

other If on you consumers large look access. going there, they at some High-speed projects of are and X infrastructure

So business the that looking real But thematic difference U.K., and there of the see the service. forward sort we in industry the we're years and strong, here the of to supporting both infrastructure improvement investment to of is is both and only come. for

Greggg Piontek

Yes.

to just out of supporting we U.K. in the U.S. also both the and terms the that In I CapEx wanted that is fleet. mentioned, growth point that,

Min Chung Cho

and Also, run higher this pretty SG&A Gregg Excellent. bit to we of a be basis quarterly expect rate had expected. on than was a year? -- for the rest little good the a Do you

Greggg Piontek

is the rate at that, when the and the well think rate that, run going do a severance. I I items at had again, you as look for it's underlying important related that you think that out called accurate yes, fairly But the we process growth as forward. that look adjusting transaction, think I sale quarter,

Min Chung Cho

Excellent. you you Or backlog just could you're projects. anything Do talk the And then of those have projects targeting finally, so progress you larger far? yet? in about on making had that types if mentioned

Matthew Lanigan

Yes. Thanks, Min.

we our distribution pipeline, larger forward seeing at are look we projects. towards a shift As

in So describe we would are start backlog backlog, a in that that through. to And build as flow that are seeing then those seeing projects. we if larger we

So working we that feel is like for us. focus

Operator

Capital. Tieton next Dezellem from our comes And Bill question with

William Dezellem

up pipeline happening a market? new last projects is to has why, ask what's and question, on becoming of emphasis own that? your Is function that the like what actually in of the to projects? Or that those larger follow I'd that led on

Matthew Lanigan

a of it's think bit Yes, Bill, little I both.

have oil into from these and fleet concern types we've markets, we needs of our capacity we've think was would the and Over needs. that gas some the larger things that the service we and that confidence meet invested have coming the to some meet their we those there of more service demonstrated of as fleet ability execute space, our T&D project projects. with I can time, project traditionally in to One and one the we varying were owners

as we invest forward, continue Moving so. being to see fleet, our in that more we even

So them of there's customers, bit projects that helping and more continue a out safely to service B, that efficiently volume of is space. we and I requirements think through A, little pull and can our are the demonstrate there; we meet all the of in which

Greggg Piontek

more it this, stability the improves improves service obviously, just And visibility, penetrate and you overall your operations. rental your in your

William Dezellem

Industrial as That as is simple then the project bigger that's is it the to the strength Solutions what's on first something timing? helpful. taking quarter? Great. led segment, place exiting there? And continuing Or Is there

Matthew Lanigan

think Bill, getting in projects the nailed underway. I you first it's bit just there, the really

but that, say magic way really is than things more have out. just the So there these to I'd was timed it like

William Dezellem

credit opportunity set the to and you're that for I've Magic you given to take aside. going just

Greggg Piontek

Yes.

focus think sort they goes do to swings, year. continually we timings on out of resulted over and the you TTM. do the year why these this in quarter-to-quarter balance I full emphasize back but have project the Again,

William Dezellem

the on process? books please. going now a And still couple to of business? the out then And out? Great. business, Fluids Are phase those Or of are relative we're Fluids in the the next questions

Matthew Lanigan

moving in and the put optimistic it's revert kind we to that the to forward for trying think the our safer that script just of in probably first us forward, to which conclusion about leave and process half. I Bill, is Yes, one we're

William Dezellem

swing $XX million $X-plus being to operating led a Okay. decline. that revenue Fluids with And what, please then would I on think, up the the you it factors income million discuss

Greggg Piontek

Yes. Overall, it anything. is more than

mix is the got International has U.S., And here the -- the a business profitability about the always historically versus we've shift. been You've talked stronger international which the we've performer. of

mix have well. as shift you that So

which renewals the the pricing. year strength impact contracts. We drive talked some through had had inflation, for over to to the had push wait continuing pricing. the with also we've that to through of overall of of we're in to the benefit unable We come contract the We had that's past

And then the the side. last factor U.S. also on there is

market a the being offset of much U.S. the tougher take out deterioration. cost With some continuing landscape to to

things you what to together, ago. leading it was a So year a it's all more ultimately, put those business and profitable than

Operator

time team now the call And management for we allotted for have I turn reached our to back closing the remarks. session today. question-and-answer over our will

Greggg Piontek

concludes today. Should have And or we to our Sure. requests, Thank forward reach you investors@newpark.com. talking any That our next you. e-mail at call you us quarter. please questions to out again using to look

Operator

for This Thank participation. you does your today's conclude program.

You may now disconnect.

NPK International (NPKI) 3 May 242024 Q1 Earnings call transcript