Q1 2024 Kirby Corporation Earnings Call

Yeah.

Operator: Good morning and welcome to the Kirby Corporation 2024 First Earnings Conference Call. All participants will be in a 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. To ask a question during this session, you will need to press star 1-1 on your telephone. You will hear an automated message that your hand is raised.

Speaker Change: Good morning, and welcome to the Kirby Corporation 2024 first earnings conference call. All participants will be in a 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.

Speaker Change: To ask a question. During this session you will need to press star one one on your telephone you'll hear an automated message that your hand is raised to withdraw your question.

Operator: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. We ask that you mute all speaker lines. I would now like to turn the conference over today to Kurt Niemietz, Kirby's VP of Investor Relations and Treasures. Please go ahead.

Speaker Change: Please press star one one again.

Speaker Change: Please be advised that today's conference is being recorded.

Ask that your mute mute all speaker lines.

Speaker Change: I would now like to turn the conference over to des the curtain minute Kirby's VP of Investor Relations and Treasurer.

Des Kirby: Please go ahead.

Des Kirby: Okay.

Kurt A. Niemietz: Good morning, and thank you for joining the Kirby Corporation 2024 First Quarter Earnings Call. With me today are David Grzebinski, Kirby's President and Chief Executive Officer, Raj Kumar, Kirby's Executive Vice President and Chief Financial Officer, and Christian O'Neill, President of Kirby's Marine Transportation Group.

Desmond Kirby: Good morning, and thank you for joining the Kirby Corporation 2024 first quarter earnings call with me today are David Chris Belsky, Kirby's, President and Chief Executive Officer, Raj Kumar Kirby's Executive Vice President and Chief Financial Officer, and Christian O'neil President of Kirby's Marine Transportation group.

Kurt A. Niemietz: The slide presentation for today's conference call, as well as the earnings release, which was issued earlier today, can be found on our website. During this conference call, we may refer to certain non-GAAP or adjusted financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings press release and are also available on our website in the investor relations section under financial. As a reminder, statements contained in this conference call with respect to the future are forward-looking statements.

Desmond Kirby: A slide presentation for today's conference call as well as the earnings release, which was issued earlier today can be found on our website.

Desmond Kirby: During this conference call, we may refer to certain non-GAAP or adjusted financial measures reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings press release and are also available on our website in the Investor Relations section under financials.

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

Kurt A. Niemietz: These statements reflect management's reasonable judgment with respect to future events. Forward-looking statements involve risks and uncertainties, and our actual results could differ materially from those anticipated as a result of various factors. A list of these risk factors can be found in Kirby's latest Form 10-K filing and in our other filings made with the SEC from time to time. I will now turn the call over to David.

Desmond Kirby: Forward looking statements involve risks and uncertainties and our actual results could differ materially from those anticipated as a result of various factors a.

Desmond Kirby: A list of these risk factors can be found in Kirby's latest Form 10-K filing and in our other filings made with the SEC from time to time.

Desmond Kirby: I will now turn the call over to David.

David W. Grzebinski: Thank you, Kurt, and good morning, everyone. Before we begin, I would like to take a moment to announce that, effective tomorrow at Kirby's annual meeting, Christian O'Neill will become Kirby's President and Chief Operating Officer. In this new role, Christian will report to me as CEO and will be responsible for the day-to-day operations of both our marine transportation and our distribution and services business. With over 25 years with the company, spanning roles across various businesses, Christian brings a wealth of experience, a history of operational excellence, and a strong customer-focused mindset that will benefit KDS and Kirby as a whole as we continue growing the company. I'd like to congratulat Thank you, Dave.

David Belsky: Thank you Kurt and good morning, everyone.

David Belsky: Before we begin I would like to take a moment to announce that effective tomorrow at Kirby's annual meeting Christian O'neil will become Kirby's, President and Chief operating officer.

David Belsky: In this new role Kristian will report to me as CEO.

David Belsky: And will be responsible for the day to day operations of both our marine transportation and our distribution and services businesses.

With over 25 years with the company.

David Belsky: Spanning roles across various businesses Christian brings a wealth of experience.

David Belsky: History of operational excellence, and a strong customer focused mindset that will benefit <unk> and Kirby as a whole.

David Belsky: As we continue growing the company.

Speaker Change: I'd like to congratulate Christian on this new role and thanking for his many years of service at Kirby.

Christian O'Neill: Thank you, David. I'm humbled and excited to assume my new role, and I'm very optimistic about the future for Kirby. In all my years with the company, I can say that the market fundamentals we're enjoying today are the most promising and on par with some of the best times we've experienced. I'm looking forward to what lies ahead for us.

Christian O'neil: Thank you, David I'm humbled and excited to assume a new role and I'm very optimistic about the future for Kirby in all my years with the company I can say that the market fundamentals. We're enjoying today are the most promising and on par with some of the best times, we've experienced I am looking forward to what lies ahead for us.

David Belsky: Well said Christian.

David W. Grzebinski: Now, looking at our earnings, earlier today we announced first quarter revenue of $808 million and earnings per share of $1.19. This compares to 2023 first quarter earnings per share of 68 cents. Overall, both our segments performed well during the quarter, delivering significantly higher revenue and operating income year over year. The first quarter's results reflected steady market fundamentals in both marine transportation and distribution and services. These were partially offset by modest weather and navigational challenges for mariners and continued supply chain constraints in DNS.

Speaker Change: Now looking at our earnings earlier today, we announced first quarter revenue of $808 million and earnings per share of $1 19. This compares to 2023 first quarter earnings per share of <unk> 68.

Speaker Change: Overall, both our segments performed well during the quarter delivering significantly higher revenue and operating income year over year.

Speaker Change: The first quarter's results reflect a steady market fundamentals in both marine transportation and distribution and services.

Speaker Change: These were partially offset by modest weather and navigational challenges for marine and continued supply chain constraints in D&S.

David W. Grzebinski: During the quarter, we remained focused on operating safely and efficiently and delivered solid results, even with these headwinds. In inland marine transportation, our first quarter results were modestly impacted by delay days. Throughout the quarter, our operations were challenged by high winds, ice delays on the Illinois River, fog along the Gulf Coast, and lock delays throughout the system.

Speaker Change: During the quarter, we remain focused on operating safely and efficiently and delivered solid results even with these headwinds.

Speaker Change: In inland Marine transportation, our first quarter results were modestly impacted by delay days.

Speaker Change: Throughout the quarter, our operations were challenged by high winds ice delays on the Illinois River fog, along the Gulf Coast and lock delays throughout the system.

David W. Grzebinski: These weather and navigational issues slowed transit times and impacted the financial performance of our contracts for freight. Overall, delay days increased 22% compared to the fourth quarter of 2023, but we're down modestly year over year. From a demand standpoint, customer activity was strong in the quarter with barge utilization rates running in the low to mid 90% range throughout the quarter. Market conditions remain strong due to continued customer demand and limited barge availability, coupled with inflation, which contributed to favorable prices. Spot prices were up in the low to mid single digits sequentially and in the 15% range year over year. Term contract prices also renewed higher, with low double-digit increases versus a year ago.

Speaker Change: These weather and navigational life, you slowed transit times and impacted the financial performance of our contracts of affreightment.

Speaker Change: Overall delay days increased 22% compared to the fourth quarter of 2023, but were down modestly year over year.

Speaker Change: From a demand standpoint customer activity was strong in the quarter with barge utilization rates running in the low to mid 90% range throughout the quarter.

Speaker Change: Market conditions remained strong due to continued customer demand and limited barge availability.

Speaker Change: Bold with inflation, which contributed to favorable pricing.

Speaker Change: Spot prices were up in the low to mid single digits sequentially, and then the 15% range year over year.

Speaker Change: Term contract prices also renewed up higher with low double digit increases versus a year ago.

David W. Grzebinski: Overall, first quarter inland revenues increased 14% year-over-year, and margins were in the high teens. In the coastal market, market fundamentals remain strong, with our barge utilization levels running in the mid to high 90% range. During the quarter, we saw solid customer demand and limited availability of large capacity vests, which resulted in low 20% range price increases on term contract renewals and low 30% increases in spot market prices. These increases help mitigate inflation, particularly with shipyards, and partially offset the capital expense from the addition of the ballast water treatment system. Our planned shipyard maintenance on several large vessels continues to wind down, and we've brought back one large unit for maintenance this quarter.

Speaker Change: Overall, the first quarter inland revenues increased 14% year over year and margins were in the high teens.

Speaker Change: In coastal market fundamentals remained strong with our barge utilization levels running in the mid to high 90% range.

Speaker Change: During the quarter, we saw solid customer demand and limited availability of large capacity vessels, which resulted in low 20% range price increases on term contract renewals and low 30% increases in spot market prices.

Speaker Change: These increases helped mitigate inflation, particularly with shipyards and partially offset the capital expense from the addition of ballast water treatment systems.

Speaker Change: Our planned shipyard maintenance on several large vessels continues to wind down and we brought back one large unit for maintenance in the quarter.

David W. Grzebinski: Overall, first quarter coastal revenues increased 20% year-over-year, and operating margins were in the high single to low double-digit range. Turning to distribution and services, beginning this quarter, we are going to provide detail on DNS in three areas: Power Generation, Commercial and Industrial, and Oil and Gas, where commercial and industrial comprises 43%, power generation 41%, and oil and gas 16% of KDS revenues.

Speaker Change: Overall first quarter coastal revenues increased 20% year over year and operating margins were in the high single to low double digit range.

Speaker Change: Turning to distribution and services beginning this quarter, we are going to provide detail on D&S in three areas.

Speaker Change: Power generation, commercial and industrial and oil and gas.

Speaker Change: We're a commercial and industrial comprises 43% power generation, 41% and oil and gas 16% of <unk> revenues.

David W. Grzebinski: We are doing this to appropriately reflect the significance of the power generation market to our growth. Our power generation market is made up of installation and service of new power generation units, as well as standby and rental backup power equipment. The fundamental strength of this market is driven by the incessant demand for 24-7 power from data centers and other industrial, financial, healthcare, and retail customers. Power generation is a key driver of growth for distribution and services, and we are excited by the long-term outlook for this market.

Speaker Change: We are doing this to appropriately reflect the significance of the power generation market to our growth.

Speaker Change: Our power generation market is made up of installation and service on new power generation units as well as standby and rental backup power equipment.

Speaker Change: The fundamental strength of this market is driven by the incessant demand for 24, seven power for data centers and other industrial financial healthcare and retail customers.

Speaker Change: Our generation is a key driver of growth for distribution and services and we are excited by the long term outlook for this market.

David W. Grzebinski: In total, demand was stable across our markets in DNS, with continued new orders and high levels of backlog. In power generation, strong order growth drove a 42% sequential and 50% year-over-year increase in revenues, with several large project wins from data center customers. In manufacturing, revenues were up 8% sequentially, driven by deliveries of previously delayed shipments and healthy demand for our EFRAC and related products. In the commercial and industrial market, overall demand remains steady across our different businesses, with growth coming from the marine repair sector.

Speaker Change: And total demand was stable across our markets and DNS with continued new orders and high levels of backlog in power generation strong order growth drove a 42% sequential and 50% year over year increase in revenues with several large project wins from <unk>.

Speaker Change: Data center customers.

Speaker Change: In manufacturing revenues were up 8% sequentially driven by deliveries of previously delayed shipments and healthy demand for our E frac and related products and.

Speaker Change: In commercial and industrial market overall demand remained steady across our different businesses with growth coming from the marine repair sector.

David W. Grzebinski: In summary, our first quarter results reflected continued strength in market fundamentals for both segments, despite weather and supply chain issues. The inland market is strong, and market conditions continue to support higher rates. Industry-wide supply-demand dynamics is favorable, our barge utilization is good, and we are realizing real rate increases. Strong demand for power generation and distribution and services is mostly offsetting weakness in oil and gas and to a lesser extent in some other areas. I'll talk more about our outlook later, but first, I'll turn the call over to Raj to discuss the first quarter segment results and balance sheet in more detail. Thank you.

Speaker Change: In summary, our first quarter results reflected continued strength in market fundamentals for both segments. Despite.

Speaker Change: Weather and supply chain issues.

Speaker Change: The inland market is strong and market conditions continue to support higher rates.

Speaker Change: In coastal.

Speaker Change: Industry wide supply demand dynamics are favorable our barge utilization is good and we are realizing real rate increases.

Speaker Change: Strong demand for power generation and distribution and services is mostly offsetting weakness in oil and gas.

Speaker Change: To a lesser extent in some other areas.

Speaker Change: I'll talk more about our outlook later, but first I'll turn the call over to Raj to discuss the first quarter segment results and balance sheet in more detail.

Raj Kumar: Thank you, David, and good morning, everyone. In the first quarter of 2024, the marine transportation segment revenues were $475 million, and operating income was $83 million, with an operating margin of 17.5 percent. Compared to the first quarter of 2023, total marine revenues increased $63 million, or 15%, and operating income increased $40 million, or 93%. Compared to the fourth quarter of 2023, total marine revenues, inland and coastal together, increased 5%, and operating income increased 22%. As David mentioned, fog and high winds along the Gulf Coast produced a 22% sequential increase in delay days and negatively impacted operations and efficiency, while planned shipyard activity and weather impacted coastal business.

Raj Kumar: David and good morning, everyone.

Raj Kumar: In the first quarter of 2020 for Marine Transportation segment revenues were 475 million and operating income was $83 million with an operating margin of 17, 5%.

Raj Kumar: Compared to the first quarter of 2023, total marine revenues increased $63 million or 15% and operating income increased $40 million or <unk>, 93%.

Raj Kumar: Back to the fourth quarter of 2023 total marine revenues inland and coastal together increased 5% and operating income increased 22%.

Raj Kumar: As David mentioned.

Raj Kumar: <unk> and high winds along the Gulf Coast produced a 22% sequential increase in delay days and negatively impacted operations and efficiency, while planned shipyard activity and weather impacted the coastal business.

Raj Kumar: These headwinds were offset by solid underlying customer demand, improved pricing, and, most importantly, execution. Looking at the inland business in more detail, the inland business contributed approximately 81% of segment revenue. Average barge utilization was in the low to mid-90% range for the quarter, which is slightly better than the utilization seen in the fourth quarter of 2023 and compares similarly to the first quarter of 2023. Long-term inland marine transportation contracts, or those contracts with a term of one year or longer, contributed approximately 65 percent of revenue, with 62 percent from time charters and 38 percent from contracts of a freight. Improved market conditions contributed to spot market rates Term contracts that renewed during the first quarter were up on average in the low double digits compared to the prior year.

Raj Kumar: Alright.

Raj Kumar: These headwinds were offset by solid underlying customer demand improved pricing and most importantly execution.

Raj Kumar: Looking at the inland business in more detail the inland business contributed approximately 81% of segment revenue.

Raj Kumar: Average barge utilization was in the low to mid 90% range for the quarter, which was slightly better than the utilization as seen in the fourth quarter of 2023 and compares similarly to the first quarter of 2023.

Raj Kumar: Long term inland marine transportation contracts or those contracts with a term of one year or longer contributed approximately 65% of revenue with 62% from time charters.

Raj Kumar: 38% from contracts of affreightment.

Raj Kumar: Improved market conditions contributed to spot market rates, increasing sequentially in the low to mid single digits and in the 15% range year over year.

Raj Kumar: Term contracts that renewed during the first quarter were up on average in the low double digits compared to the prior year.

Raj Kumar: Compared to the first quarter of 2023, inland revenues increased 14% primarily due to higher term and spot contract pricing and fewer delay days. Inland revenues increased low to mid single digits compared to the fourth quarter of 2023, despite unfavorable navigation and operating conditions. Inland operating margins improved by nearly 150 basis points, driven by the impact of higher pricing and continued cost management, which helps stave off lingering inflationary pressure. Now, moving to the coastal business.

Raj Kumar: Compared to the first quarter of 2023 inland revenues increased 14%, primarily due to higher term and spot contract pricing and fewer delay days inland revenues increased low to mid single digits compared to the fourth quarter of 2023 despite unfavorable.

Raj Kumar: <unk> and operating conditions.

Raj Kumar: Operating margins improved by nearly a 150 basis points driven by the impact of higher pricing and continued cost management, which help stave off lingering inflationary pressures.

Raj Kumar: Coastal revenues increased 20% year-over-year due to higher contract prices and fewer shipyards. We had one large vessel conclude its planned shipyard and re-enter service during the quarter. Overall, Coastal had an operating margin in the high single to low double-digit range, resulting from higher pricing and cost leverage. The coastal business represented 19% of revenues for the marine transportation sector. Average coastal barge utilization was in the mid to high 90% range, which is in line with the first quarter of 2023.

Raj Kumar: Now moving to the coastal business.

Raj Kumar: Total revenues increased 20% year over year due to higher contract prices and fewer shipyard. We had one large vessel conclude it's it's planned shipyard and reenter service during the quarter.

Raj Kumar: Overall <unk> had an operating margin in the high single to low double digit range, resulting from higher pricing and cost leverage.

Raj Kumar: The coastal business represented 19% of revenues for the Marine Transportation segment.

Raj Kumar: Average coastal barge utilization was in the mid to high 90% range, which is in line with the first quarter of 2023.

Raj Kumar: During the quarter, the percentage of coastal revenue with under-term contracts was approximately 96%, of which approximately 98% were time-chartered. Average spot market rates were up in the low to mid-single digits sequentially and around 30% year-over-year. Renewals of term contracts were higher in the low 20% range on average year over year.

Raj Kumar: During the quarter the percentage of coastal revenue under term contracts was approximately 96% of which approximately 98% what time charters.

Raj Kumar: Average spot market rates were up in the low to mid single digits sequentially and are up 30% year over year.

Raj Kumar: Renewal of term contract were higher in the low 20% range on average year over year.

Raj Kumar: With respect to our tank barge fleet, for both the inland and coastal businesses, we have provided a reconciliation of the changes in the first quarter, as well as projections for 2024. This is included in our earnings call presentation posted on our website. At the end of the first quarter, the Inland Fleet had 1,078 barges, representing 23.8 million barrels of capacity. On a net basis, with the newly acquired barges we announced today, we expect to end 2024 with a total of 1,094 inland barges representing 24.2 million barrels of capacity. Coastal Marine is expected to remain unchanged for the year.

Raj Kumar: With respect to our tank barge fleet.

Raj Kumar: For both the inland and coastal businesses, we have provided a reconciliation of the changes in the first quarter as well as projections for 2024.

Raj Kumar: This is included in our earnings call presentation posted on our website.

Raj Kumar: At the end of the first quarter. The inland fleet had 1078 barges, representing $23 8 million barrels of capacity.

Raj Kumar: On a net basis with the newly acquired <unk>, We announced today, we expect to end 2024 with a total of 1094 inland barges.

Raj Kumar: Representing $24 2 million barrels of capacity.

Raj Kumar: Coastal marine is expected to remain unchanged for the year.

Raj Kumar: Now I'll review the performance of the DNS segment. Revenues for the first quarter of 2024 were $333 million, with an operating income of $22 million and an operating margin of 6.6%, compared to the first quarter of 2023. The DNS segment saw revenue decrease by 5 million, or 2%, with operating income decreasing by approximately 3%. When compared to the fourth quarter of 2023, revenues decreased by $14 million, or 4%, and operating income decreased by $7 million, or 23%.

Speaker Change: Now I'll review the performance of the D&S segment.

Raj Kumar: Revenues for the first quarter of 2024 were $333 million with an operating income of $22 million and operating margin of six 6%.

Raj Kumar: Compared to the first quarter of 2023.

Raj Kumar: The D&S segment saw revenue decreased by $5 million or 2% with operating income decreasing by approximately 3%.

Raj Kumar: When compared to the fourth quarter of 2023 revenues decreased by $14 million of 4% and operating income decreased by $7 million or 23%.

Raj Kumar: In power generation, revenues increased 50% year over year, as you saw a pickup in orders from data centers and other industrial customers for power generation and backup power installations. We also continue to see steady deliveries of natural gas-driven power generation equipment in the oil and gas space.

Raj Kumar: In power generation revenues increased 50% year over year as he saw a pickup in orders from data centers and other industrial customers for power generation in backup power installation.

Raj Kumar: We also continued to see steady deliveries of natural gas driven power generation equipment in the oil and gas space.

Raj Kumar: Our generation operating income was up 45% year over year and had operating margins in the high single digits. Power generation represented 41% of total segment revenue. On the commercial and industrial side, steady activity in marine repair partially offset lower deliveries due to supply chain bottlenecks in our thermal king business. As a result, commercial and industrial revenues were down 7% year-over-year.

Raj Kumar: Power generation operating income was up 45% year over year and had operating margins in the high single digits.

Raj Kumar: Power generation represented 41% of total segment revenues.

Raj Kumar: On the commercial and industrial side steady activity in marine repair, partially offset lower deliveries due to supply chain bottleneck in our thermo King business.

Raj Kumar: As a result, commercial and industrial revenues were down 7% year over year.

Raj Kumar: Operating income increased 11% year-over-year, driven by a favorable product mix and an ongoing cost-saving initiative. Commercial industrial made up 43% of segment revenues with operating margins in the high single digits. Compared to the fourth quarter of 2023, commercial and industrial revenues decreased by 13% as thermal king supply chain constraints were partially offset by increased activity in marine repair. However, operating income was up 28% over the same time period driven by favorable product mix.

Raj Kumar: Operating income increased 11% year over year, driven by favorable product mix and ongoing cost saving initiatives.

Raj Kumar: Commercial and industrial and made up 43% of segment revenues with operating margins in the high single digits.

Raj Kumar: Compared to the fourth quarter of 2023, commercial and industrial revenues decreased by 13% as thermo King supply chain constraints were partly offset by increased activity in marine repair.

Raj Kumar: Operating income was up 28% over the same time period, driven by favorable product mix.

Raj Kumar: In the oil and gas market, we continue to see softness in conventional frack-related equipment as low rig counts tempered demand for new engines, transmissions, and parts throughout the quarter. However, this softness is being partially offset by execution on backlog and new orders of e-frack equipment. Revenues in oil and gas were down 43% year-over-year and 38% sequentially. However, oil and gas represented 16 percent of segment revenue in the first quarter and had operating margins in the mid-single digits.

Raj Kumar: In the oil and gas market, we continue to see softness in conventional frac related equipment as low rig counts Tampa demand for new engines transmissions and parts throughout the quarter.

Raj Kumar: This softness is being partially offset by execution on backlog and new orders of E Frac equipment.

Raj Kumar: Revenues in oil and gas were down 43% year over year and 38% sequentially.

Raj Kumar: Oil and gas represented 16% of segment revenue in the first quarter and had operating margins in the mid single digits.

Raj Kumar: Now turning to the balance sheet. As of March 31st, we had $75 million of cash, with total debt around $1 billion, and our debt-to-capital ratio remained below 25%. During the quarter, we had net cash flow from operating activities of $123.3 million. First quarter cash flow from operations was impacted by a working capital bill of approximately $30 million driven by underlying growth in the business.

Raj Kumar: Now turning to the balance sheet.

Raj Kumar: As of March 31.

Raj Kumar: We had $75 million of cash with total debt around 1 billion and our debt to cap ratio remained below 25%.

Raj Kumar: During the quarter, we had net cash flow from operating activities of $123 3 million.

Raj Kumar: First quarter cash flow from operations was impacted by a working capital build of approximately $30 million driven by underlying growth in the business.

Raj Kumar: We continue to target unwinding working capital as the year progresses. We use cash flow and cash on hand to fund $81 million of capital expenditures, or CAPEX, primarily related to maintenance of equipment. During the quarter, we also used $41.8 million to repurchase stock at an average price just under $84. As of March 31st, we had total available liquidity of approximately $491 million. For 2024, we are on track to generate cash flow from operations of 600 to 700 million on higher revenues and EBITDA. However, we still see some supply chain constraints posing some headwinds to managing working capital in the near term.

Raj Kumar: We continue to target unwinding working capital as the year progresses.

Raj Kumar: We used cash flow and cash on hand to fund $81 million of capital expenditures, our capex primarily related to maintenance of it.

Raj Kumar: <unk> <unk>.

Raj Kumar: During the quarter, we also used $41 8 million to repurchase stock at an average price just under $84.

Raj Kumar: As of March 31, we had total available liquidity.

Raj Kumar: Approximately $491 million.

Raj Kumar: For 2024, we are on track to generate cash flow from operations of 600 to 700 million on higher revenues and EBITDA.

Raj Kumar: We still see some supply chain constraints, causing some headwinds to managing working capital in the near term.

David W. Grzebinski: Having said that, we are targeting to unwind this working capital as orders ship in 2024 and beyond. With respect to CapEx, we expect capital spending to range between $290 and $330 million for the year. Approximately $190 to $240 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements. Additionally, approximately $90 million is associated with gross capital spending in both of our businesses. The net result should provide approximately $300 million of free cash flow for the year.

Raj Kumar: Having said that we are targeting to unwind as working capital as other ship in 2024 and beyond.

Raj Kumar: With respect to Capex, we expect capital spending to range between 290 and $330 million for the year.

Raj Kumar: Approximately $190 million to $240 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements.

Raj Kumar: Approximately $90 million is associated with growth capital spending in both of our businesses.

Raj Kumar: The net results should provide approximately $300 million of free cash flow for the year.

David W. Grzebinski: As always, we are committed to a balanced capital allocation approach and will use this cash flow to opportunistically return capital to shareholders and continue to pursue long-term value-creating investment and acquisition opportunities. I will now turn the call back to David to discuss the remainder of our Outlook for 2024.

Raj Kumar: As always we are committed to a balanced capital allocation approach and will use this cash flow to opportunistically return capital to shareholders and continue to pursue long term value, creating investment and acquisition opportunities.

Raj Kumar: I will now turn the call back to David to discuss the remainder of our outlook for 2024.

David W. Grzebinski: Both of our segments performed well during the quarter, delivering improved revenue and operating income, and our team executed well despite weather-related delays in the marine transportation segment and continuing supply chain constraints in DNS. We continue to see favorable fundamentals as 2024 progresses, and we expect steady quarterly earnings progression for the remainder of the year. Our outlook for the marine market remains strong for the full year, and refinery activity is at high levels.

David Belsky: Thank you Raj.

David Belsky: Both of our segments performed well during the quarter delivering improved revenue and operating income and our team executed well despite weather related delays in the marine transportation segment, and continuing supply chain constraints and DNS.

David W. Grzebinski: We continue to see favorable fundamentals as 2024 progresses, and we expect steady quarterly earnings progression for the remainder of the year.

David Belsky: Our outlook in the marine market remains strong for the full year refinery activity is at high levels. Our barge utilization is strong in both inland and coastal and rates are increase increasing across the board.

David W. Grzebinski: Our barge utilization is strong in both inland and coastal waters, and rates are increasing across the board. In distribution and services, we are seeing an uptick in demand for power generation products and services, and we continue to receive new orders in manufacturing, both of which are helping to soften the inherent volatility of our oil and gas market. Overall, we expect our businesses to deliver improving financial results as we move through the remainder of 2024.

David Belsky: In distribution and services, we are seeing an uptick in demand for power generation products and services and we continue to receive new orders in manufacturing both of which are helping to soften the inherent volatility of our oil and gas markets.

David Belsky: Overall, we expect our businesses to deliver improving financial results as we move through the remainder of 2024 and inland Marine we anticipate positive market dynamics due to limited new barge construction in the industry and many units going in for maintenance.

David W. Grzebinski: In Inland Marine, we anticipate positive market dynamics due to limited new barge construction in the industry and many units going in for maintenance, combined with steady customer demand. With these strong market conditions, we expect our barge utilization rates to be in the low to mid 90% range throughout the year. Overall, inland revenues are expected to grow in the mid to high single-digit range on a full-year basis. However, I need to give the normal caveats.

David Belsky: Bind with steady customer demand.

David Belsky: With these strong market conditions, we expect our barge utilization rates to be in the low to mid 90% range throughout the year overall inland revenues are expected to grow in the mid to high single digit range on a full year basis.

Speaker Change: However, I need to give the normal caveats.

David W. Grzebinski: A potential recession, along with a drop in demand, could impact expected growth, as could unexpected lock delays or low water conditions. That said, we expect operating margins will continue to gradually improve during the year from the first quarter's level and average around 20% or higher for the full year. In the coastal market, market conditions have strengthened considerably, and supply and demand are favorable across the industry fleet. Strong customer demand is expected throughout the year, with our barge utilization in the low to mid 90% range.

David Belsky: Potential recession, along with a drop in demand could impact expected growth.

David Belsky: As could unexpected lock delays or low water conditions.

David Belsky: That said, we expect operating margins will continue to gradually improve during the year.

David Belsky: From the first quarter's level and average around 20% or higher for the full year.

David Belsky: In coastal market conditions have strengthened considerably and supply and demand is favorable across the industry fleet.

David Belsky: <unk> customer demand is expected throughout the year with our barge utilization in the low to mid 90% range with major shipyards and ballast water treatment installations, concluding revenues for the full year are expected to increase in the high single to low double digit range compared to 2023.

David W. Grzebinski: With major shipyards and ballast water treatment installations concluding, revenues for the full year are expected to increase in the high single to low double-digit range compared to 2023. Coastal operating margins are expected to be in the high single to low double-digit range over a four-year period.

David Belsky: Coastal operating margins are expected to be in the high single to low double digit range on a full year basis.

David W. Grzebinski: In distribution and services, we expect to see incremental demand for products, parts, and services in the segment. In commercial and industrial, the demand outlook for marine repair is strong, while on highway is somewhat weak, with the exception of refrigeration products and services. In power generation, we anticipate continued growth as data center demand and the need for backup power are very strong. However, you've heard us talk about supply chain issues. The bottom line is, if we could get more large engines, we would be able to package them into the power generation market, given the strength we see. Engine supply, however, is constraining our growth here.

David Belsky: And distributions and services, we expect to see incremental demand for products.

David Belsky: Parts and services in this segment.

David Belsky: And commercial and industrial the demand outlook in marine repair is strong well on highway is somewhat weak with the exception of refrigeration products and services.

David Belsky: In power generation, we anticipate continued growth as data center demand and the need for backup power is very strong however.

David Belsky: <unk> heard us talk about supply chain issues. The bottom line is if we could get more large engines, we would be able to package them into the generate the power generation market given the strength that we see.

David Belsky: Engine supply however is constraining our growth here.

David W. Grzebinski: In oil and gas, activity levels are lower but seem to be bottoming. Our manufacturing backlog does provide stable levels of activity throughout most of 24. We do anticipate extended lead times for certain OEM products will continue, and they will contribute to volatility in delivery schedules. But we're working through that.

David Belsky: And oil and gas activity levels are lower but seem to be bottoming or.

David Belsky: Our manufacturing backlog does provide stable levels of activity throughout most of 'twenty four.

David Belsky: We do anticipate extended lead times for certain OEM products to continue.

David Belsky: And they will contribute to volatility and delivery schedules.

David W. Grzebinski: [inaudible] The company expects segment revenues to be flat to slightly down on a full year basis with operating margins in the mid to high single digits, slightly lower year-over-year due to mixed. To conclude, overall, we're off to a solid start in 2024 and have a favorable outlook for the remainder of the year. Our balance sheet is strong, and we expect to generate significant free cash flow despite high levels of CapEx this year.

David Belsky: But we're working through that.

David Belsky: Overall, the company expect segment revenues to be flat to slightly down on a full year basis with operating margins in the mid to high single digits.

David Belsky: Slightly lower year over year due to mix.

David Belsky: To conclude overall, we're off to a solid start in 2024 and have a favorable outlook for the remainder of the year. Our balance sheet is strong and we expect to generate significant free cash flow. Despite high levels of Capex. This year and we expect to use the majority of that free cash flow.

David W. Grzebinski: And we expect to use the majority of that free cash flow for share repurchases or growth opportunities. We see favorable market conditions continuing and expect our businesses will produce improving financial results as we move through the year. As we look long-term, we are confident in the strength of our core businesses and our long-term strategy. We intend to continue capitalizing on strong market fundamentals and driving shareholder value creation. Operator, this concludes our prepared remarks. We are now ready to take questions.

David Belsky: So for share repurchases or growth opportunities.

David Belsky: We see favorable market, continuing and expect our businesses will produce improving financial results as we move through the year.

David Belsky: As we look long term, we are confident in the strength of our core businesses and our long term strategy.

Speaker Change: We intend to continue capitalizing on strong market fundamentals and driving shareholder value creation. Operator. This concludes our prepared remarks, we are now ready to take questions.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, we ask that you limit your questions to one and one follow-up. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list.

Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder, we ask that you limit your questions to one question and one follow up to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star.

David Belsky: One one again, please standby, while we compile the Q&A roster.

Operator: Let me guess: Ben's first.

David Belsky: Let me get <unk>.

Operator: Our first question comes from Ben Nolan at Stiefel. Ben, your line is open.

David Belsky: Our first question comes from Ben Nolan at Stifel Bank. Your line is open.

Benjamin Joel Nolan: Hey guys, appreciate it, and good quarter. Well, I guess, first, congrats, Christian, on the upgrade here, and since you're on, I'll go ahead and ask you this one if it's all right.

Benjamin Joel Nolan: Hey, guys I appreciate it and good quarter.

Benjamin Joel Nolan: Well I guess first congrats Christian on the on the upgrade here and since you're on I'll I'll go ahead and ask you. This one if it's all right.

Benjamin Joel Nolan: As I look at the first quarter, I think it was a whole lot better than what I thought it was going to be like on the marine side. Normally, we get 300, 400, 500 basis points of margin improvement moving into the second and third quarter. If I put all of that together, my numbers come up higher than the $600 million to $700 million of operating income.

Benjamin Joel Nolan: Yes.

Benjamin Joel Nolan: Look at.

Benjamin Joel Nolan: The first quarter.

David Belsky: With.

David Belsky: A whole lot better than what I thought it was going to be like on the marine side.

David Belsky: Normally we get three four or 500 basis points of margin improvement moving in in the second and third quarter.

David Belsky: If I put all of that together my numbers come up higher than $6 to $700 million of operating income.

David W. Grzebinski: Can you maybe walk me through sort of where the conservatism is on that? Or, or, I don't know, just how to frame in what looks like a lot more acceleration and then

David Belsky: Yes.

David Belsky: Can you maybe walk me through sort of what.

Speaker Change: Where the conservatism is on that.

David Belsky: Sure.

Speaker Change: And I don't know just how to how to frame in what looks like a lot more acceleration and then sort of as in the guide.

David W. Grzebinski: And this is David. I'll start and then kick it over to you.

Speaker Change: Hey.

David Belsky: Ben This is David <unk>.

David W. Grzebinski: Ill start and then Keith.

Speaker Change: Uh huh.

David W. Grzebinski: call; we don't want to scare anyone.

Speaker Change: However.

David Belsky: Chris This is Chris to his first call we don't want that.

David W. Grzebinski: Now, in all seriousness, you know, we talked about year over year. As you know, the quarters move around, and we can have hurricanes, low water, lock delays, high water. The way we like to look at it is, in 23 going into 24, we're talking about a 300 basis point pickup in margins on average for the full year. Obviously, we're off to a great start here.

Speaker Change: No in all seriousness.

David Belsky: We talked about year over year.

David Belsky: As you know the quarters move around and we can have hurricanes low water lock delays high water.

Chris: The way, we like to look at it is in 'twenty three going into 'twenty four we're talking about a 300 basis point pickup in margins.

Chris: On average for the full year, obviously, we're off to a great start here.

David W. Grzebinski: You know, part of that was a little better weather. But, you know, I think the way to look at it is, you know, kind of a full year average increasing by 300 basis points. I'll let Christian give you some color on, you know, kind of inflationary and some other things that are our headwinds. But I think the important thing, Ben, is this is multi-year. You know, we've said that we could see a similar rise in 25 in terms of margins, and based on what we're seeing in the market and, in kind of the supply-demand picture, we're probably likely to hit 26. But why don't I let Christian give you some more color on all the things that are happening around the margins.

David Belsky: Part of that was was a little better weather.

David Belsky: But.

David Belsky: The way to look at it as is.

David Belsky: Kind of a full year average increasing 300 basis points.

David Belsky: I'll, let Chris can give you some color on kind of the inflationary and some other things that are our headwinds but.

Chris: I think the important thing Ben is this is multi year, we've said that we could see a similar rise in 'twenty five in terms of margins.

David Belsky: And based on what we're seeing in the market and in.

Chris: Kind of the supply demand picture.

Chris: Probably likely to hit 2006, but one I'll, let Christian to give you some more color on.

Christian O'neil: All the things that are that are happening in and around our margins, yes, I mean, a couple of items that Mike.

Christian O'Neill: Yeah, I mean a couple of items that might justify a little conservatism are you know, there's a very high price for steel. Shipyard inflation is very high. David has referenced the maintenance bubble that the industry is experiencing in previous calls. You know that is real. There's a lot of equipment going through major cycles, and add to that tough labor inflation Just the cost of almost everything we do to feed and travel and crew the vessels. There's still a lot of pressure on the cost side that probably merits some of that conservatism. And then there are the unknowns. I mean, David referenced weather, hurricane season, lock delays, and other things.

Christian O'neil: Just to follow the conservatism is there is.

Christian O'neil: Very high price of steel shipyard inflation, very hi, David has referenced the maintenance bubbled at the industry industry is experiencing in previous calls.

Christian O'neil: That is real there is a lot of equipment going through major cycles and add to that tough labor inflation, just the cost of almost everything we do to feed and travel and crew the vessels.

Christian O'neil: There's still a lot of pressure on the cost side that probably merits some of that conservatism.

Christian O'neil: Then the unknowns I mean, David referenced weather hurricane season lock delays and other things.

David W. Grzebinski: But Ben, you know, I mean, we're pretty optimistic. You probably heard my comments at 20% or higher. It's hard to spike the football here in the first quarter, if you know what we mean.

David Belsky: But then I mean, we're pretty optimistic you've probably heard my comments.

David Belsky: 20% or higher.

David Belsky: It's hard to it's hard to spike the football here in the first quarter. If you know what we mean, yes.

Benjamin Joel Nolan: Yeah, I got you. Well, and then, I guess for my follow-up, just to change gears a little bit, I appreciate the breakout on the power generation side. I was curious about two things. First of all, when you did break that out, was it all on the industrial side of it, or was a portion of it from the oil and gas side? And then along those lines, as we think about power generation going forward, is there any recurring revenue element to that, or is it that you build and sell the equipment, and then you're done with it?

David Belsky: Gotcha.

Speaker Change: And then for I guess for my follow up just to change gears, a little bit I appreciate the breakout.

David Belsky: On.

David Belsky: On the power generation side.

Speaker Change: Was curious about two things first of all.

David Belsky: When you when you did break that out was it all out of the industrial side of it or was a portion of it from from the oil and gas and then along those lines as we think about power generation going forward is there any recurring revenue element to that or is it <unk>.

David Belsky: Build and sell the equipment and then and then Youre done with it.

David W. Grzebinski: Yeah, no, there is recurring revenue. But let me start with the first part of your question. In power generation, just to – you know this, Ben, because you've followed us, but let me just expand for those that aren't as familiar with power gen at Kirby. I mean, we've done backup power, whether it's for the New York Stock Exchange or financial institutions or rental backup power for large retailers like Costco and Target. And we also do it for like tenant healthcare and other places like that. But, you know, that's typically been – we've been doing that for decades.

Speaker Change: Yes, no there is recurring revenue, but let me let.

Speaker Change: Let me start with the first part of your question.

Speaker Change: In power generation just.

Speaker Change: You know the spin because you've followed us, but let me just expand for those that aren't as familiar with both power Gen and at Kirby.

Speaker Change: Done backup power.

Speaker Change: Whether it's for the New York stock exchange or financial institutions or or rental.

Speaker Change: Backup power for large retailers like Costco and target and we also do it for like tenant health care and other other places like that but that's been typically we've been doing that for decades, it's standby.

David W. Grzebinski: You know, it's standby diesel-generated power. We do it for nuclear power plants, for example. What we've seen, though, is that it's growing, and particularly with E-FRAC, you saw that in the fracturing market, they can use electric FRAC and save a lot of money, particularly if they burn natural gas. So that's power generation.

Speaker Change: Diesel generated power, we do it for nuclear power plants. For example, what we've seen though is that it's growing and particularly with E. Frac you saw that.

David W. Grzebinski: In the fracturing market.

David W. Grzebinski: They can use electric frac and save a lot of money, particularly if they burn natural gas.

David W. Grzebinski: But that power generation that we can do on a well site, for example, can be sold into the grid, and many of our customers are not just focused on their oil and gas-driven power generation needs. They're looking to sell it as prime power or onto the grid. So we are seeing a broad-based need for power, and it transcends oil and gas. It goes into industrials. Obviously, data centers and AI are huge, but we're seeing it in hospitals. We're seeing it everywhere.

Speaker Change: So that's power generation, but that power generation that we can do on on well site. For example can be sold into the grid in many of our customers are are not just focused on their oil and gas driven power generation needs. There theyre looking to sell as prime power.

David W. Grzebinski: We're into the grid.

Speaker Change: So we are seeing a broad base need for power.

Speaker Change: And it transcends oil and gas it goes into industrials, obviously, the data centers and AI are huge but we're seeing it in hospitals, we're seeing it.

David W. Grzebinski: Everybody needs power 24-7. Now, to your specific question, that 41 percent of our revenue from power generation, about half of that 41 percent is currently being used as power on frac sites. That said, it is expanding, and those uses of that power are expanding. Some of our customers are going into not just standby but prime power generation and selling into the grid. So it's exciting. You know, as you heard in my prepared remarks, we could sell more if we could get the large engines. Some of the engine OEMs are just flat sold out, but it's really promising, the kind of demand profile. Now, in terms of recurring revenue, it's everything you can think of.

David W. Grzebinski: Everywhere everybody needs power 24 seven.

Speaker Change: Now to your specific question.

David W. Grzebinski: That 41% of our revenue in power generation about half of that 41% is currently being used as power on frac sites.

Speaker Change: That said.

David W. Grzebinski: It is expanding in those uses that power generation.

David W. Grzebinski: Our expanding some of our customers are going into <unk>.

David Grzebinski: Not just standby, but prime power generation.

Operator: And selling into the grid.

David W. Grzebinski: So it's exciting.

David W. Grzebinski: As you heard in my prepared remarks, we could sell more if we can get the large engines.

David W. Grzebinski: Some of the engine Oems are just flat sold out, but it's really promising.

David W. Grzebinski: Kind of the demand profile now in terms of recurring revenue.

David W. Grzebinski: It's everything you can think of we do installations obviously.

David W. Grzebinski: We do installations, obviously. We do maintenance and service. So we're kind of a full shop. I would tell you that our strength in power generation is packaging. We are very good at packaging. You know, we'll take an OEM's engine and package it for a customer's specific application.

David W. Grzebinski: We do maintenance.

David W. Grzebinski: And service.

David W. Grzebinski: So we're kind of a full shop I would tell you that our strength in power generation as packaging, we're very good at packaging.

David W. Grzebinski: We will take an Oems engine package it for for our customers' specific application.

David W. Grzebinski: We're also very good at making things mobile and rugged. And, you know, we're excited about it. We see a huge amount of opportunity here, and we're looking forward to growing it. It's been growing. You know, oil and gas, as everybody knows, 23 to 24, you can listen to some of our customers out there in the public space. You know, they're down year over year.

David W. Grzebinski: We're also very good at making things mobile and rugged.

David W. Grzebinski: And.

David W. Grzebinski: We're excited about it we see a huge amount of opportunity here and we're looking forward to growing it it's been growing.

David W. Grzebinski: Oil and gas as everybody knows the 23% to 24, you can listen to some of our customers during the public space Theyre down year over year.

David W. Grzebinski: You know, fortunately, we've had PowerGen to kind of offset a little weakness in oil and gas. Now, all that said about oil and gas, I do think it's bothering me. We're starting to see signs.

David W. Grzebinski: Fortunately, we've had power Gen two kind of offset a little weakness in oil and gas now all that said about oil and gas I do think it's bottoming.

Benjamin Joel Nolan: At any rate, that's a long, rambling answer. No, I appreciate all the color, for sure. And I guess I better stop there with my two questions. So thanks and congratulations again, Christian. Thanks. Thanks.

David W. Grzebinski: Starting to see signs that it's bottom anyway, that's a long rambling.

Benjamin Joel Nolan: And.

Benjamin Joel Nolan: I appreciate all the color for sure and I guess I better stop there with my two questions.

Benjamin Joel Nolan: And congrats again Chris.

Christian O'Neill: Thanks, Dan.

Benjamin Joel Nolan: One woman for our next question.

Benjamin Joel Nolan: Okay.

Operator: Our next question comes from Sharif Al-Mugarbi at VTIG. Your line is now open.

Benjamin Joel Nolan: Our next question comes from series Al Mcguffey at BT IGD your.

Sharif Al-Mugarbi: Your line is now open.

Sharif Al-Mugarbi: Hey, good morning. Thanks for taking my question. I think last quarter you guys talked about having 80 barges offline at any one point this year. So, just to start, what's a normalized level, and are other operators going through a similar maintenance bubble?

Sharif Al-Mugarbi: Hey, good morning, Thanks for taking my questions.

Sharif Al-Mugarbi: You guys I think last quarter, you guys talked about having 80 barges inland barges offline at any one point this year.

Sharif Al-Mugarbi: Just to start what's a normalized level and our other operators going through a similar maintenance level.

David W. Grzebinski: Yeah, I'll start and turn it over to Christian, but the short answer is that the entire industry is going through a huge maintenance bubble which will last at least the next two years and probably into the third year. Yeah, we're probably, Christian has the details, I'll let him chime in.

Sharif Al-Mugarbi: Yes.

David W. Grzebinski: Start and turn it over to Christian but.

Christian O'Neill: Yes is the short answer.

Christian O'Neill: The entire industry is going through a huge maintenance level, which will last at least for the next two years and probably into the third year.

David W. Grzebinski: Yes, we're probably at what Christian has the details I'll, let let him chime in sure Sharif the maintenance bubble, we're referencing stems from the board on dates of the barges every five years for going into the major maintenance cycles.

Christian O'Neill: Sure. You know, Sharif, the maintenance bubble we're referencing stems from the birth dates of the barges. You know, every five years, we go in for major maintenance cycles. And, you know, those built 15, 10, and 5 years ago are coming around in a big way. You know, we're still in that range of 80-something barges in the yard any given day. That gets better a little bit as we get into the rest of the year. But, you know, on average, it's hard to say because there's some variation, but you're in the 40 to 50. A fleet like ours, with 1,100, almost 1,100 barges, is probably in the 40 to 50.

Christian O'Neill: And.

Christian O'Neill: Those built.

Christian O'Neill: $15 10, and five years ago are coming around in a big way.

Christian O'Neill: We're still in that range of 80, something barges in the yard any given day.

Christian O'Neill: That gets better a little bit as we get into the.

Christian O'Neill: The rest of the year, but.

Christian O'Neill: On average.

Christian O'Neill: Hard to say because because there is some variation, but you are in the 40 to 50, a fleet like ours to 1100, almost 100 barges is probably what you are looking at on average.

David W. Grzebinski: Yeah, but to be clear, all of our competitors are facing this. And yeah, look, our customer base understands it. You know, I think part of the kind of margin answer for Ben is just the maintenance costs alone are a headwind to margins. You know, everybody's experiencing it.

David W. Grzebinski: Yes, but to be clear all of our competitors are facing this and yes.

David W. Grzebinski: Look our customer base understands it.

David W. Grzebinski: I think part of the kind of the margin.

David W. Grzebinski: Answer for Ben is just the maintenance costs alone is is a headwind to margins.

David W. Grzebinski: The shipyards are full. You know, the shipyards have had labor issues, you know, just hiring people and paying higher wages because they need them. So we are seeing, you know, kind of maintenance inflation plus just the strong demand for maintenance, and capabilities across the industry are part of that margin question. I know that wasn't your question, Sharif, but I would just tell you that every competitor is experiencing the same thing right now. It's just an odd, acute time for maintenance in our industry, but that's very positive for us in terms of the supply and demand picture.

David W. Grzebinski: Everybody is experiencing at the shipyards are full.

David W. Grzebinski: The shipyards have had labor issues. These unit, just hiring people and paying higher wages, because they need them.

David W. Grzebinski: So we are seeing kind of the maintenance inflation.

David W. Grzebinski: Plus just the strong demand for maintenance.

David W. Grzebinski: Capabilities across the industry is as part of that margin question that I know that wasn't your question, Steve, but I would just tell you that.

David W. Grzebinski: <unk>.

David W. Grzebinski: Every competitor is experiencing the same thing right now it's just it's just an odd acute time for maintenance in our industry.

David W. Grzebinski: But that's that's very positive for us in terms of the supply and demand picture right.

Sharif Al-Mugarbi: But that wasn't, you didn't answer my question, but you segued very well into my follow-up question. Oh, I'm sorry. What question did I miss? I'm sorry. No, you didn't miss anything. You set me up for the second question.

Speaker Change: But that wasn't you didn't answer my question, but you segway very well into my follow up question.

Speaker Change: Im sorry.

Speaker Change: First question that I missed I'm, sorry, no you didn't miss anything.

Sharif Al-Mugarbi: So I guess with the supply-demand balance kind of improving and this big chunk of the fleet on the sidelines, does that introduce kind of more volatility into barge pricing? And then, you know, could we see some reactivations or, like you said, because of the cost associated with it and the lack of shipyard availability, is that sort of stopping more barges entering the market?

Speaker Change: Good question.

Sharif Al-Mugarbi: So I guess the supply demand balance kind of improving and this big chunk of the fleet.

Sharif Al-Mugarbi: On the sidelines.

Sharif Al-Mugarbi: Does that does that introduce more volatility into barge pricing and then.

Sharif Al-Mugarbi: Could we see some reactivation or like you said because the costs associated with it and with <unk>.

Sharif Al-Mugarbi: Lack of shipyard availability.

Sharif Al-Mugarbi: That sort of stopped more barges entering the comp.

David W. Grzebinski: I understand. Yeah, that's a good question. You know, during COVID, there were a number of barges. We did it ourselves, but throughout the industry, a number of barges were parked on the bank, just because during COVID, it didn't make sense to maintain them. But I would tell you that, by and large, almost all of the stuff that was put on the bank during COVID has now been reactivated. So I don't think there's a shadow fleet, to use a word, to be reactivated.

Sharif Al-Mugarbi: The market.

David W. Grzebinski: Understand.

David W. Grzebinski: Thats a good question during Covid there were.

David W. Grzebinski: Sure.

David W. Grzebinski: A number of barges, we did it ourselves, but but throughout the industry a number of barges put on the bank just because during COVID-19 it makes sense to maintain them.

David W. Grzebinski: But I would tell you that the by and large almost all of the stuff that was put on the bank. During Covid is now been reactivated so I don't think Theres, a shadow fleet to use a word.

David W. Grzebinski: I think anything that could have been reactivated has been. Furthermore, the price of new barges is still very high. It used to be five, six, seven years ago that it was a couple million dollars for a clean 30,000 barrel barge. Now what's the price?

David W. Grzebinski: To be reactivated I think anything that could have been reactivated has been.

David W. Grzebinski: <unk>.

David W. Grzebinski: Further the price of new barges is still very high used to be 567 years ago. It was a couple million dollars for clean 30000 barrel barge now what's the price Christian for 40.

Christian O'Neill: Yeah, you're $4 million north of $4 million for a plain vanilla clean 30,000 barrel.

Christian O'Neill: $4 million and north of $4 million for a plain vanilla clean 30000 barrels so.

David W. Grzebinski: So, you know, prices to justify new construction are still, you know, 40% plus away. So, we just don't see any new buildings. People are busy trying to maintain their fleets.

Christian O'Neill: Two prices to justify new construction are still.

David W. Grzebinski: 40% plus away.

David W. Grzebinski: So we just don't see any new building.

David W. Grzebinski: People are busy trying to maintain their fleets cost of money has gone up so we don't see a lot of new supply coming in demands pretty solid right now so we feel really optimistic.

David W. Grzebinski: The cost of money has gone up. So, we don't see a lot of new supply coming in. Demand is pretty solid right now. So, we feel really optimistic. You know, I think Krishna and I and Raj have been thinking this has got three to five years to run.

David W. Grzebinski: I think Christian <unk> and.

David W. Grzebinski: And Raj we've been thinking. This is this has got three three to five years to run.

Christian O'Neill: Yeah, and Sharif, I would add, you know, if you look at the last three years, we've seen the lowest amount of new construction activity in 20 years. So the last three years are the lowest we've ever seen. And consider that you still have another 500 barges in the market that are over 30 years old that are candidates for retirement. So the supply side looks pretty good going.

Speaker Change: Yeah, and sorry, if I would add if you look at the last three years.

Christian O'Neill: We've seen the lowest amount of new construction activity within 20 years, So the last three years or.

Christian O'Neill: The lowest we've ever seen and consider you still have another 500 barges in the market that are over 30 years old that are candidates for retirement, so supply side looks looks pretty good going forward.

Sharif Al-Mugarbi: Got it, Jeff. I appreciate the color. All right, thanks.

Speaker Change: Got it I appreciate the color.

Speaker Change: Alright. Thanks.

Operator: One moment for our next question. Our next question comes from Danielle Imbro at Stevens Inc. Your line is now open.

Speaker Change: One moment for our next question.

Danielle Imbro: Our next question comes from Danielle Enbrel at Stephens, Inc. Your line is now open hey.

Grant: Hey guys, this is Grant on for Daniel. Thank you for taking my questions. At Coastal, you saw a pretty huge step up in profitability in the first quarter, which is kind of with a pretty wide full year range for your margins at Coastal for the rest of the year. I was hoping maybe you could help us size up kind of the magnitude and cadence of the sequential improvement throughout the year in that segment as you continue to see pricing renew higher. Thanks.

Operator: Yes. This is Greg on for Daniel Thank you for taking my questions.

Grant: Coastal you saw a pretty huge step up in profitability in the first quarter, which is kind of with a pretty full of pretty wide full year range for your margins.

Grant: So for the rest of the year I was hoping maybe you could help us size up kind of the magnitude and cadence of the sequential improvement throughout the year in that segment as you continue to see.

David W. Grzebinski: Yeah, sure. Thanks for the question, Grant. Christian, I'll tag team this one.

Grant: Synchrony higher thanks.

Christian O'Neill: Sure. Thanks, Thanks for the question Grant Christian I'll Tag team. This one.

David W. Grzebinski: Let me just start by looking, kind of like we talked about the margin profile in inland. The best way to look at this because of the way shipyards are and certain activities is kind of a year over year. You know, in 23, our coastal business kind of bounced along, broke even, you know, a couple quarters we made a little money, a couple quarters we lost a little money.

Christian O'Neill: Let me just start by look in kind of like we've talked about the margin profile and inland and the best way to look at this because of the way shipyards are.

David W. Grzebinski: Certain activities as kind of a year over year and 23, our coastal business kind of bounced along breakeven Cup.

David W. Grzebinski: A couple of quarters, we made a little money couple of quarters, we lost a little money.

David W. Grzebinski: You know, this year we're projecting high single digits, low double digits. So, you know, that's a 10% improvement in margins roughly just year over year. Why is that?

David W. Grzebinski: This year, we're projecting high single digits low double digits. So that's a 10% improvement in margins roughly.

David W. Grzebinski: Year over year.

David W. Grzebinski: It's the same supply and demand story as Inland. The industry's full. We're all running 95 plus percent utility.

David W. Grzebinski: Why is that it's the same supply and demand story is inland.

David W. Grzebinski: The industry's full.

David W. Grzebinski: All running 95 plus percent utility.

David W. Grzebinski: Demand's good. I would say, there's an even longer outlook. A positive outlook for Coastal because it takes three years to build something new, and nobody's even contemplating building new right now. So, best case, you won't see any new supply probably for five years. So we're pretty bullish. You know, Christian, you could probably describe some more about the pricing environment, what we're seeing in coastal. Yes.

David W. Grzebinski: Demand is good.

Christian O'Neill: I would say.

David W. Grzebinski: There is an even longer outlook positive outlook for coastal because it takes it takes three years.

David W. Grzebinski: To build something new and nobody is even contemplating building new right now so.

David W. Grzebinski: Best case, you won't see any new supply probably for five years.

Christian O'Neill: So we're pretty bullish.

David W. Grzebinski: Christian you could probably describe some more about that.

Speaker Change: The pricing environment.

Christian O'Neill: Yes, thanks, David. I think what you see in the pricing right now is the industry is trying to help offset the capital expenses that came with the ballast water treatment systems that we installed. You know, for example, at Kirby over the last five years, we had to deploy just shy of $100 million to get our ballast water treatment systems installed. I think the industry as a whole is recouping that. Inflation is definitely a part of the rate story, and David explained it well. There is no new construction in the offshore space right now, and supply and demand are working well to help that rate strike.

Christian O'Neill: What we're seeing in coastal yes, thanks, David I think.

Christian O'Neill: What you're seeing the pricing right now is as the industry is trying to help offset the capital expenses that came with the ballast water treatment systems that we installed for example at Kirby over the last five years, we had to deploy just shy of $100 million.

Christian O'Neill: To get our ballast water treatment systems installed I think the industry as a whole as recouping that.

Christian O'Neill: Inflation is definitely a part of the rate story and David explained it well there is no new construction in the offshore space right now and a supply and demand is working well to help that rate structure.

Grant: Thanks, guys. And maybe we can just get back to power generation real quick. You know that the demand for the service has increased sharply. I'm just kind of curious what you've seen from a margin perspective, you know, with the trend there over the last couple years. And do you think you can see kind of continued sustained margin improvement as you scale that business? And also, I guess, just on the in-market side, is there a margin differential between the data centers and maybe the FRAC sites?

Speaker Change: Thanks, guys and maybe just back to power generation real quick.

Grant: Noted that the demand for this service has increased sharply kind of curious what you've seen.

Grant: From a margin perspective with the trend there over the last couple of years do you think you can see kind of continued sustained margin improvement as as you scale that business.

Grant: And also I guess just on kind of the end market side is there a margin differential between the data centers and maybe the frac sites.

David W. Grzebinski: Yeah, let me take the last one first. I mean, basically, fracking has a slightly better margin profile, and that's because it has to be more rugged. It has to be mobile, whereas a data center is a kind of a stationary, non-harsh environment. So margins are a little better on the frack environment power generation side, but that said, you know, margins and power gen are kind of mid to high single digits.

David W. Grzebinski: Yes.

David W. Grzebinski: Let me take the last one first I mean, basically fracking has a little better margin profile and that's because it has to be more rugged it has to be.

David W. Grzebinski: Mobile, whereas datacenters that kind of a stationary.

David W. Grzebinski: Non harsh environment, so margins are a little better on the on the Frac environment power generation side, but that said.

David W. Grzebinski: Margins in power Gen are kind of mid to high single digits.

David W. Grzebinski: You know, with some scale, maybe we could, you know, get closer to the high single digits, low double digits, but inherently, a big piece of any power generation is the large three-megawatt type engine that comes from one of the big engine manufacturers. And those prices are pretty well known, so it's hard to mark up one of the biggest component pieces. Where we're able to get after margin really is in our packaging. You know, that's our strength: packaging and making it customer-specific. And, you know, that's where our margin is. That said, though, obviously, as volumes increase and we look at some vertical integration, you know, we would hope to bring margins up higher.

David W. Grzebinski: With some scale, maybe we could get closer to the high <unk>.

David W. Grzebinski: Single digits low double digits, but.

David W. Grzebinski: Inherently a big piece of any power generation is the large.

David W. Grzebinski: Three megawatt type engine that comes from one of the big engine manufacturers and those those prices are pretty well known so it's hard to mark up one of the biggest component pieces.

David W. Grzebinski: Where we're able to capture margin really is in our packaging. That's our strength is packaging and making it customer specific and that's where our margin is inherently.

David W. Grzebinski: We don't get much margin on the engine itself, it's really everything that goes around it.

David W. Grzebinski: That said, though we are obviously as volumes increase and we look at some vertical integration, we would hope to bring margins up higher.

David W. Grzebinski: Thanks, David. Congratulations on the quarter. Thank you. One moment for our next question.

Speaker Change: Thanks, David Congrats on the quarter.

Speaker Change: Thank you.

David W. Grzebinski: One moment our next question.

Operator: Our next question comes from Greg Wazowski at Weber Research and Advisory. Your line is now open.

David W. Grzebinski: Our next question comes from Greg <unk> Zaki at Weber Research and Advisory Your line is now open.

Gregory Adrian Wasikowski: Hey, good morning, everyone. Kristen, congratulations. Welcome to the call. Thank you very much. Much appreciated. Good morning, Greg. Yeah, good morning.

Gregory Adrian Wasikowski: Hey, good morning, everyone Christian congratulations and welcome to the call. Thank.

Gregory Adrian Wasikowski: Thank you very much much appreciate it.

Gregory Adrian Wasikowski: Good morning, Greg.

David W. Grzebinski: I appreciate, David, your color earlier from Ben's question on the PowerGen stuff. I wanted to follow up on that if I could, and specifically the data centers and the stationary power side of things. I'm curious how you think about the environment as it pertains to technology. So you have diesel generator sets, batteries, hydrogen, combinations of all kinds of different alternative fuels and microgrids, et cetera. You know, all at different price points and different levels of maturity.

Gregory Adrian Wasikowski: Turning.

Gregory Adrian Wasikowski: Appreciate it David I appreciate your color earlier from Ben's question on the power Gen stuff.

David W. Grzebinski: I wanted to follow up on that if I could and specifically the data centers in the stationary power side of things.

Speaker Change: Excuse me.

David W. Grzebinski: I'm curious, how you think about the environment as it pertains to technology.

David W. Grzebinski: You got diesel Gen sets batteries hydrogen combinations of all kinds of different alternative fuels, a micro grid et cetera.

David W. Grzebinski: Different price points and different levels of maturity.

David W. Grzebinski: So I'm just curious how Kirby's viewing and approaching that market within that context, kind of as an add-on, you know, whether or not that's an area of opportunity for you guys with respect to M&A, if that's something that you're paying attention to or not.

David W. Grzebinski: Just curious how how kirby's viewing.

David W. Grzebinski: In approaching that market within that context and.

David W. Grzebinski: And then kind of as an add on whether or not that's an area of opportunity for you guys with respect to M&A and if that's something that you are paying attention to or not.

David W. Grzebinski: Yeah, the short answer is yes, of course, it's an area for M&A. But, you know, in terms of the technology, a data center, it's generally standby power. They're not running prime. They're not generating power, generally speaking, for their own use. It's really just backup, so diesel-powered backup power is a good fit for that. That said, you know, with natural gas, the operating costs of natural gas are cheaper. The problem with the data centers is, you know, just getting the natural gas to the data centers.

Speaker Change: Yes, the short answer is yes of course.

David W. Grzebinski: Area for M&A.

David W. Grzebinski: But in terms of the technology.

David W. Grzebinski: <unk> Center.

David W. Grzebinski: It's generally standby power theyre not running prime theyre not generating power general generally speaking for their own use it's really just backup so diesel.

David W. Grzebinski: Diesel powered.

David W. Grzebinski: Backup power is is a good fit for that.

David W. Grzebinski: That said with natural gas the operating cost of natural gas are are cheaper the problem with the data centers.

David W. Grzebinski: Just getting the natural gas to the data centers.

David W. Grzebinski: That said, obviously, with natural gas prices being cheap, everybody's looking for ways to burn natural gas. I think that is actually helping the prime Power kind of efforts. You know, people see that if you can get natural gas cheap, you can generate power pretty cheaply and sell it to the grid at the right time. So we're seeing a lot of interest in that. We're agnostic. Again, that's our strength -- packaging what the customer needs for their specific application.

David W. Grzebinski: That said, obviously with natural gas prices being cheap everybody is looking for for for ways to burn natural gas.

David W. Grzebinski: I think that is actually helping the prime power.

David W. Grzebinski: The efforts of people see that if you can get natural gas cheap you can generate power pretty cheaply.

David W. Grzebinski: Sell it to the grid at the right time, so we're seeing a lot of interest in that we're agnostic we build we build anything were.

David W. Grzebinski: Again, that's our strength packaging with the customer needs for their specific application.

David W. Grzebinski: And I would just tell you that the variety of applications is enormous. You can imagine that a Walmart target has a different view of how backup power could work versus a fracker versus a data center versus a Bitcoin mining shop. You know, we try and be agnostic about it.

David W. Grzebinski: I would just tell you the variety of applications is enormous.

David W. Grzebinski: You can imagine that.

David W. Grzebinski: Walmart target has a different view of how backup powers could work versus.

David W. Grzebinski: Fracas versus data center versus.

David W. Grzebinski: A bitcoin mining shop.

David W. Grzebinski: We try and be agnostic to it.

David W. Grzebinski: You know, look, we're excited about this space. We're looking for ways to grow it, obviously. There's a lot of inherent growth, which is pretty much limited by engine availability. But clearly, we'd be open to vertically integrating and adding some, ability to add our share of wallets in terms of packaging.

David W. Grzebinski: Look we're we're excited about this space, we're looking for ways to grow it obviously.

David W. Grzebinski: There's a lot of inherent growth.

David W. Grzebinski: Which is pretty much limited by engine availability, but.

David W. Grzebinski: Clearly, we'd be open to vertically integrating and adding adding some.

David W. Grzebinski: Ability to add our share of wallet in terms of packaging.

Gregory Adrian Wasikowski: Got it. There is a big pie out there for sure. I appreciate the color.

Gregory Adrian Wasikowski: Got it.

Gregory Adrian Wasikowski: Big Pie out there for sure I appreciate the color.

Gregory Adrian Wasikowski: Next one, pretty similar. And I think I've asked you this before, but can you talk a little bit about growth for backup power? And I think I'm speaking mostly to the rental or temporary housing. And I mean, I'm no meteorologist, but you know, I keep hearing that we're on pace for the hottest summer of the year and potential, you know, worse than normal extreme weather for later in the year. And who knows if that's true or not?

Gregory Adrian Wasikowski: Next one pretty similar and I think I've asked you. This before but can you talk a little bit about growth for the backup power and I think I'm speaking, mostly to the rentals are temporary.

Gregory Adrian Wasikowski: And I mean.

Gregory Adrian Wasikowski: No meteorologists, but I keep hearing that.

Gregory Adrian Wasikowski: We're on pace for the hottest summer of the year and potential.

Gregory Adrian Wasikowski: Worse than normal extreme weather for later in the year and who knows if that's true or not but is that something that.

Gregory Adrian Wasikowski: But is that something that, You know, Kirby, is actionable for you guys? Is that something that you can prepare for? And how does that play into, ultimately, like, you know, growing that segment? Or does the uncertainty of the weather kind of make that too difficult? How do you think about that? Yeah, Greg.

Gregory Adrian Wasikowski: Kirby is that actionable for you guys is that something that you can prepare for.

Gregory Adrian Wasikowski: And how does that play into ultimately like.

Gregory Adrian Wasikowski: Growing that segment.

Gregory Adrian Wasikowski: The uncertainty of the weather.

Gregory Adrian Wasikowski: Make that too difficult how do you think about that.

David W. Grzebinski: Greg, we're all grinning here because you can imagine our marine fellows do not like adverse weather and hurricanes, but our Power Rental Group loves hurricanes. And so we kind of have a smile on our faces as we think about that because we hate hurricanes for all the right reasons in the marine business and from a, you know, just the impact on people.

Gregory Adrian Wasikowski: Greg.

David W. Grzebinski: We're all grinning here because.

David W. Grzebinski: You can imagine our marine.

David W. Grzebinski: Hello.

David W. Grzebinski: Got like adverse weather and hurricanes, but our power rental group loves Hurricanes and so we can kind of it.

David W. Grzebinski: A smile on our face as we think about that because we hate hurricanes from for all the right reasons in the marine business and from a.

David W. Grzebinski: But yeah, we do rent a lot of large power, and a lot of that power that we rent is kind of on a We have a fairly large power rental fleet. Last year we expanded that a bit, and we have about $10 million in new capital to build new power generation. We continue to build new power generation capabilities for rental. But, you know, that's a small part in terms of our power generation revenue. The bigger pieces are packaging, you know, for whatever application.

David W. Grzebinski: Just the impact to people.

David W. Grzebinski: But yes, we do rent a lot.

David W. Grzebinski: Large power.

David W. Grzebinski: And.

David W. Grzebinski: A lot of that power that we rent is kind of on a.

David W. Grzebinski: Standby basis that.

David W. Grzebinski: They pay a standby fee and then once it's deployed in a hurricane situation or an adverse weather searched duration.

David W. Grzebinski: The rate goes up considerably.

David W. Grzebinski: We have a fairly large power power rental fleet.

David W. Grzebinski: Last year, we expanded that a bit and I think we spent.

David W. Grzebinski: That $10 million in new capital to build new new power generation, we continue to build new power generation capabilities for rental.

David W. Grzebinski: But.

David W. Grzebinski: That's a small part in terms of.

David W. Grzebinski: Hopefully, helpful content. Yeah, no. I appreciate it, guys. I'll turn it over there. Thanks, Greg.

David W. Grzebinski: Our power generation.

David W. Grzebinski: Revenue the bigger pieces are packaging.

David W. Grzebinski: For whatever application.

David W. Grzebinski: Hopefully that's helpful context.

Speaker Change: Yes, no I appreciate it guys I'll turn it over there.

Speaker Change: Thanks, Greg.

Operator: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by as I compile the Q&A roster. Our next question comes from Adam Rosowski of Bank of America. Your line is now open.

Speaker Change: Thank you.

Operator: As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby as I compile the Q&A roster.

Operator: Our next question comes from Adam Brzozowski of Bank of America. Your line is now open.

Adam Rosowski: Hi, thanks. Good morning, Dave, Raj, and congrats to Christian. I'm on for Ken Hoexter today.

Adam Rosowski: Hi, Thanks, Good morning, Dave Raj and congrats to Christian monitor Contexture today.

Adam Rosowski: Morning, maybe just starting with the inland spot rate momentum, you know, trending up mid-teens. What's your view of the base case for continued momentum here? And is it fair to think that this could turn into similar levels of contract gains later in the year?

Adam Rosowski: Maybe just good morning.

Adam Rosowski: Good morning, maybe just starting with the inland spot rate momentum trending up mid teens.

Adam Rosowski: What's your what's your view of the base case for continued momentum here and is it fair to think that these could turn into similar levels of contract gains later in the year.

David W. Grzebinski: Yeah, yeah, look, um... We're in a very healthy market, and, as Christian said, this is one of the best environments we've seen in a very long time. I would tell you that the good news is that spot rates are well above term rates, probably 15% above term, which is what you want in a healthy market. That way, you have some ability to raise term prices. That said, our customers are very sophisticated.

Speaker Change: Yeah look.

David W. Grzebinski: We're in a very healthy market as Christian said this is one of the best environments, we've seen in a very long time.

David W. Grzebinski: I would tell you that the good news is that.

David W. Grzebinski: Spot rates are well above term rates, probably 15% above term, which is what you want in a healthy market.

David W. Grzebinski: That way.

David W. Grzebinski: You have some ability to raise term pricing.

David W. Grzebinski: That said our customers are very sophisticated they understand what's going on with the maintenance bubble they understand what's going on with inflation and how we need to recover that.

David W. Grzebinski: They understand what's going on with the maintenance bubble. They understand what's going on with inflation and how we need to recover that. You know, I would say the rate momentum for term contracts should continue, kind of like we saw this summer. I think we said in our prepared remarks that year-over-year term contracts that renewed in the quarter were up double digits, low double digits.

David W. Grzebinski: <unk>.

David W. Grzebinski: It's.

David W. Grzebinski: I would say the right moment momentum for term contracts should continue.

David W. Grzebinski: Like we saw.

David W. Grzebinski: I think we said in our prepared remarks that year over year term contracts that renewed in the quarter were up double digits low double digits. So I would suspect that goes I don't know if Christian you want to add anything to that no I think thats well said I think the momentum we see as real.

David W. Grzebinski: So, I would suspect that goes like this: I don't know. Christian, do you want to add anything to that? No, I think that's well said.

Christian O'Neill: No, I think that's well said. I think, you know, the momentum we see is real. The pricing that the industry needs to get to, to get to replacement capital or the point where people are reinvesting again, there's still room to go. We're seeing that in the spot market, and we'll continue to press and try to cover our inflationary pressures with our terminals as the year continues.

Christian O'Neill: No.

Christian O'Neill: The pricing that the industry needs to get to to get to a replacement capital are the point, where people are reinvesting again theres still there's still room to go and we're seeing that in the spot market and we will continue to press and try to cover our inflationary pressures with our term renewals as the year continues.

Adam Rosowski: Great, very helpful, thanks. And then just on the barge addition in the quarter. You added 13 barges. You know, is this just private owners looking to sell more? Can you talk about how that transaction developed and, you know, if there's potential for any more down the road here?

Adam Rosowski: Great very helpful. Thanks, and then just on the barge addition in the quarter you added 13 barges or is this just private owners looking to sell more can you talk about how that transaction developed and if theres potential for any more down the road here.

David W. Grzebinski: Yeah, I mean, periodically, we have various people that want to sell for various reasons. I mean, it could be that they just have some excess equipment. They could have, you know, some cash flow needs or whatnot.

David W. Grzebinski: Yes.

David W. Grzebinski: Periodically we have various people that want to sell for various reasons I mean, it could be that they do.

David W. Grzebinski: Just have some excess equipment.

David W. Grzebinski: But it could have.

David W. Grzebinski: Some some cash flow needs or whatnot.

David W. Grzebinski: Yeah, this, this, this is we did several of these types last couple years. We do them opportunistically; we've stepped into, you know, shipyard contracts for people we'll, we'll, we'll take. Look, our ecosystem knows we're a logical buyer, and we get the opportunity to get them. I'll let Christian talk about the desirability of what we just got, kind of a home run.

David W. Grzebinski: Yes.

David W. Grzebinski: We did have several of these type last couple of years.

David W. Grzebinski: We do them Opportunistically, we've stepped into shipyard contracts for for people.

Christian O'Neill: We will take.

Christian O'Neill: Look our arc.

Christian O'Neill: Our ecosystem knows we're a logical buyer.

David W. Grzebinski: We get the opportunity to get them, all let Christian talk to the desirability of what we just got it.

Christian O'Neill: home run. Yeah, no, thanks very much, David.

Christian O'Neill: It's kind of a homerun.

Christian O'Neill: The opportunity to acquire two high-horsepower river line haul class vessels is really fortuitous for us, and we're very happy to have them. They improve our fuel efficiency, our performance, and our emissions footprint in our big, big line haul operation. And the 30,000 barrel barges and specialty barges, you know, fit right into what we do, and we'll feather that equipment into the portfolio here in about the next 30, 60 days very easily. I appreciate the time. Thanks, y'all.

Christian O'Neill: Thanks, very much David and.

Christian O'Neill: Now the opportunity is it.

Christian O'Neill: Acquired two high horsepower river long haul class vessels.

Christian O'Neill: Is really for two it is for US we're very happy to have them they improve our fuel efficiency our performance our emissions footprint and our big Big line haul operation.

Christian O'Neill: And the 30000 barrel barges and specialty barges fit right into what we do and we will feather that equipment into the portfolio here in about the next 30 to 60 days very easily.

Christian O'Neill: Appreciate the time.

Speaker Change: Thanks, Jeff.

Adam Rosowski: One moment for our next question. Our next question comes from Derek Ponizer at Barclays. Derek, your line is now open.

Speaker Change: One moment for our next question.

Derek Ponizer: Our next question comes from Derek Partners There at Barclays. Eric Your line is now open.

Operator: Hey, good morning, David. I appreciate you letting me on the call.

Derek Ponizer: Yeah, good morning, Derek. Glad to have you here. Thanks.

Derek Ponizer: Hey, Good morning, David I appreciate you letting me on the call Yeah. Good morning Derek.

David W. Grzebinski: Just wanted to ask about your outlook on EFRAC pumping equipment, your message being constructed on the power generation side. But could you talk to us about customer conversations, ordering potentially additional EFRAC equipment, or potentially new customers that you're speaking with looking to acquire some of the EFRAC equipment or do a leasing model? Just maybe some more thoughts and color on that. Sure, I would tell you that...

Derek Ponizer: Thanks, just wanted to ask about your outlook on a frac pumping equipment, you message being constructive on the power generation side, but could you talk to us about customer conversations ordering potentially additional E frac equipment or potentially new customers that you are speaking with looking to acquire some of the frac equipment or do a leasing model I'm just maybe some more.

David W. Grzebinski: Our thoughts and color on that.

David W. Grzebinski: Sure I would tell you that.

David W. Grzebinski: It's very active on the EFRAC side. Nobody's really building conventional fracs anymore, you know, I think. You know, I don't know if it's dead forever, but it's hard to see people building conventional fracks going forward, I think. Some people have converted, and we were involved in converting a lot of conventional fracs over to DGB, you know, dynamic gas blending units. It's really just about economics, right?

David W. Grzebinski: It's very active on the Frac side.

David W. Grzebinski: The.

David W. Grzebinski: Nobody is really building conventional fracs anymore.

David W. Grzebinski: I think.

David W. Grzebinski: I don't know if it is dead forever, but it's hard to see people building conventional fracs going forward I think.

David W. Grzebinski: Some people have converted and we were involved in converting a lot of convention fracs over to DGB dynamic gas blending.

David W. Grzebinski: Units.

David W. Grzebinski: Okay.

David W. Grzebinski: I mean, burning gas is so much cheaper than burning diesel, and electric takes it to the next level, right? You'll see, not only is it cheaper to operate because you're burning 100% natural gas, but the maintenance cost goes down for the operators as well. That's not to say it's simple equipment. I mean, it's just very sophisticated equipment. So, it's a long answer here, but we are seeing continued demand, and I would say they're not expanding the frack horsepower that's really replacement at this point.

David W. Grzebinski: It's really just about economics right burning gas is so much cheaper than burning diesel.

David W. Grzebinski: And electric takes it to the next level right I mean youll see.

David W. Grzebinski: Not only is it cheaper to operate you're burning 100% natural gas, but with the maintenance cost goes down for the operators as well.

David W. Grzebinski: That's not to say, it's simple equipment is very sophisticated equipment. So it's a long answer here, but we are seeing continued demand and I would say they're not expanding.

David W. Grzebinski: Frac horsepower Thats really replacement at this point, if anybody's got some old frac equipment that they're going to cut up they're going to replace it with.

David W. Grzebinski: If anybody's got some old frack equipment that they're going to cut up, they're going to replace it with electric. So, we're seeing new demand. We're seeing it from existing customers and new potential new customers. And we're pretty excited about it. You know, we think we've got the best widget out there.

David W. Grzebinski: With electric.

David W. Grzebinski: So we're seeing new demand, we're seeing it from existing customers and new new potential new customers and.

David W. Grzebinski: We're pretty excited about it.

David W. Grzebinski: We think we've got the.

David W. Grzebinski: Obviously, other people think the same, but, you know, I would put our equipment up against anybody. It's state of the art, and we're excited about it. We have done some leasing, you know. I think we're pretty happy with our lease portfolio. We're not anxious to add to it now. We've deployed quite a bit of capital in that space, but we are seeing a lot of activity and interest in electric track.

David W. Grzebinski: The best Widget out there obviously other people think the same but.

David W. Grzebinski: I would put our equipment up against anybody.

David W. Grzebinski: State of the art and we're excited about it we have done some leasing I think we're pretty happy with our our lease portfolio.

David W. Grzebinski: We're not anxious to add to it now we've deployed quite a bit of capital in that space.

David W. Grzebinski: But but we are seeing a lot of activity and interest in electric frac.

David W. Grzebinski: I appreciate that, and do you think you are happy with kind of your capacity cadence as far as ability to get X amount of e-frack pumps out per year? Do you see that expanding over time as more and more of the pressure pumping companies adopt this, you know, next generation crack equipment? Yeah.

David W. Grzebinski: I appreciate that and do you think are you are you happy with kind of your capacity cadence as far as ability to get X amount of E. Frac pumps out per year do you see that expanding over time as more and more of the pressure pumping companies.

David W. Grzebinski: The opt to this.

David W. Grzebinski: Yeah, I'd love to give our manufacturing guys the challenge. I mean, I think we've got an evening shift.

David W. Grzebinski: Next generation Cracker equipment.

Speaker Change: Yes, I'd love to give our manufacturing guys. The challenge I mean, I think we've got an evening shifts I'd like to go to 24, 7% to expand but.

David W. Grzebinski: I'd like to go to 24-7 to expand, but, you know, we're supply constrained more than anything right now. Yeah, it's the same type of engines that you see for power generation, right? I mean, we're talking about natural gas recip engines, and they go, you know, they generate the electricity on the well site, and those same engines are being used, as we talked about, in other power generation activities. So we're supply constrained more than any. Again, if we could get more engines, we'd certainly take them.

David W. Grzebinski: We're supply constrained more more than anything right now.

David W. Grzebinski: Yes, it's the same same type of engines that you see for.

David W. Grzebinski: For power generation right I mean, we're talking about natural gas Recip engines.

David W. Grzebinski: And they go they generate the electricity on the well site and those same engines are being used as we talked about other power generation activities. So we're supply constrained more than anything.

David W. Grzebinski: Again, if we could give more engines, we certainly take them.

Derek Ponizer: Great. Thank you, David. I appreciate the color. I'll turn it back.

Speaker Change: Great. Thank you David appreciate the color I'll turn it back.

Kurt A. Niemietz: This concludes our question and answer session. I would now like to turn it back to Kurt Niemietz for closing remarks.

Speaker Change: Thanks Derek.

Kurt A. Niemietz: This concludes our question and answer session I would now like to turn it back to Curt limits for closing remarks.

Kurt A. Niemietz: Thank you, Amber, and thank you everyone for joining us today. Should you have any follow-up questions, please feel free to reach out to me.

Kurt A. Niemietz: Thank you Amber and thank you everyone for joining us today should you have any follow up questions. Please feel free to reach out to me.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Kurt A. Niemietz: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

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