Q1 2024 Newpark Resources Inc Earnings Call
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Operator: Please stand by. Your program is about to begin. If you need assistance during today's program, please press star zero. Good morning, my name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Newpark Resources First Quarter 2024 Earnings Conference Call. Today's call is being recorded and will be available for replay beginning at 12:30 p.m. Eastern Standard Time. The recording can be accessed by dialing 800-723-6062 for domestic calls or 402-220-2665 for international calls.
Please standby your program is about to begin.
If you need assistance during todays program. Please press star zero.
Mike: Good morning, My name is Mike and I will be your conference operator today.
Mike: At this time I would like to welcome everyone to the New Park resources first quarter 2024 earnings Conference call.
Mike: Today's call is being recorded and will be available for replay beginning at 12 30 P M Eastern standard time.
Mike: The recording can be accessed by dialing 870 236062 for domestic or four zero to 220 to 665 for international.
Operator: All lines are currently muted, and after the prepared remarks, there will be a live question and answer session. If you would like to ask a question during the Q&A segment, please press star 1 on your telephone keypad. If your question has been answered, you may remove yourself from the queue at any time by pressing star 2. We do ask that you please pick up your handset for optimal sound quality. It is now my pleasure to turn the floor over to Gregg Piontek, Chief Financial Officer of Newpark Resources. Please go ahead.
Mike: All lines are currently muted and after the prepared remarks, there will be a live question and answer session.
Mike: If you'd like to ask a question during the Q&A segment. Please press star one on your telephone keypad.
Mike: If your question has been answered you may remove yourself from the queue at any time by pressing star too. We do ask that you. Please pickup your handset for optimal sound quality. It is now my pleasure to turn the floor over to Gregg Piontek, Chief Financial Officer of New Park Resources. Please go ahead.
Mike: Yeah.
Gregg S. Piontek: Thank you operator.
Gregg S. Piontek: I'd like to welcome everyone to the Newpark Resources first quarter 2024 conference call. Joining me today is Matthew Lanigan, our President and Chief Executive Officer.
Gregg S. Piontek: I'd like to welcome everyone to the New Park resources first quarter 2024 conference call. Joining me today is Matthew Lanigan, our president and Chief Executive Officer.
Gregg S. Piontek: Before handing over to Matthew, I'd like to highlight that today's discussion contains forward-looking statements regarding future business and financial expectations. However, actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statement. Our comments on today's call may also include certain non-GAAP financial measures.
Gregg S. Piontek: Before handing over to Matthew I'd like to highlight that today's discussion contains forward looking statements regarding future business and financial expectations.
Gregg S. Piontek: Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC.
Gregg S. Piontek: Except as required by law, we undertake no obligation to update our forward looking statements.
Gregg S. Piontek: Our comments on today's call May also include certain non-GAAP financial measures additional details and reconciliations to the most directly comparable GAAP financial measures are included in our quarterly earnings release, which can be found on our corporate website.
Gregg S. Piontek: There will be a replay of today's call and it will be available by webcast within the Investor Relations section of our website at new parks Dot com.
Please note that the information disclosed in today's call is current as of May 3rd 2024.
Gregg S. Piontek: At the conclusion of our prepared remarks, we will open the line for questions.
Gregg S. Piontek: Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our quarterly earnings release, which can be found on our corporate website. There will be a replay of today's call, and it will be available by webcast in the investor relations section of our website at newpark.com. Please note that the information disclosed in today's call is current as of May 3, 2024. At the conclusion of our prepared remarks, we will open the line for questions. And with that, I would like to turn the call over to our President and CEO, Matthew Lanigan.
And with that I would like to turn the call over to our president and CEO Matthew Lanigan.
Matthew S. Lanigan: Thank you, Gregg, and welcome to everyone joining us on today's call. Our first quarter performance was a solid start to the year, one highlighted by both sequential and year-over-year growth in adjusted EBITDA. Industrial Solutions project activity levels accelerated as the first quarter progressed, positioning us for a strong second quarter, consistent with our expectations going into 2024. At a strategic level, we continue to advance our multi-year business transformation plan during the first quarter, investing in the growth of our industrial solutions business, which remains the central driver of our long-term value creation strategy. For those newer to our story, we've spent the last three years positioning Newpark to become a leading pure-place specialty rental business servicing the global worksite access market.
Matthew S. Lanigan: Thank you, Greg and welcome to everyone joining us on today's call.
Matthew S. Lanigan: Our first quarter performance was a solid start to the year, one highlighted by both sequential and year over year growth in adjusted EBITDA.
Matthew S. Lanigan: Industrial solutions project activity levels accelerated as the first quarter progress positioning us for a strong second quarter consistent with our expectations coming into 2024.
Matthew S. Lanigan: At a strategic level, we continued to advance our multi year business transformation plan during the first quarter investing in the growth of our industrial solutions business, which remains the central driver of our long term value creation strategy.
Matthew S. Lanigan: Because I was new to our story, we spent the last three years positioning <unk> to become a leading pure play specialty rental business servicing the global Worksite access market.
Matthew S. Lanigan: Operating the nation's largest fleet of the Jura-based composite matting system, along with our adjacent services, we provide customers with a reliable, all-weather, load-bearing work surface that allows their critical infrastructure construction projects to be undertaken safely and efficiently. In 2023, nearly 60% of our industrial solutions revenues were to customers within the electrical utility infrastructure market, positioning Newpark as a leading beneficiary of an ongoing multi-year investment cycle focused on the expansion, hardening, and resilience of our electric grid.
Matthew S. Lanigan: Operating the nation's largest fleet of the euro based composite matting system, along with our adjacent services, we provide customers with a reliable all weather load bearing work surface that allows that critical infrastructure construction projects to be undertaken safely and efficiently.
Matthew S. Lanigan: In 2023, nearly 60% of our industrial solutions revenues, where the customers within the electrical utility infrastructure market positioning <unk> as a leading beneficiary of an ongoing multi year investment cycle focused on the expansion hardening and resiliency of our electric grid.
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Matthew S. Lanigan: With multi-billion dollar government programs focused on improving the nation's electricity infrastructure, combined with the onshoring of several industry segments and growth in AI data centers, we see a significant and sustained investment cycle in the electrical grid to support these programs, creating long-term demand for our worksite access solution.
Matthew S. Lanigan: With multibillion dollar government programs focused on improving the nation's electricity infrastructure combined with the onshoring of several industry segments and growth in AI data centers, we see a significant and sustained investment cycle in the electrical grid to support these programs, creating long term demand for our website excess dilution.
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Matthew S. Lanigan: Yeah.
Matthew S. Lanigan: Through our unique vertically integrated model, we design, manufacture, rent, sell, and service our JIRA-based composite matting solution. Our rental fleet and world-class manufacturing capabilities allow us to respond quickly to the needs of our customers, making us a responsive and reliable partner for the varying needs of the industries and customers we serve. With a service life of around 12 to 15 years, we believe the DuraBase system offers a safer, longer-lasting replacement for Traditional Wooden Mats, which currently represent an estimated 75-80% of the U.S. market.
Matthew S. Lanigan: Through our unique vertically integrated model, we design manufacture ramped Salim serviced Algeria based composite matting solutions.
Matthew S. Lanigan: Our rental fleet and world class manufacturing capabilities allow us to respond quickly to the needs of our customers, making us a responsive and reliable partner for the varying needs of the industries and customers we serve.
Matthew S. Lanigan: With the service life of around 12% to 15 years, we believe the jury based system offers a safer longer lasting replacement.
Matthew S. Lanigan: Traditional wooden mats, which currently represents an estimated 75% 80% of the U S market.
Matthew S. Lanigan: Continued penetration of traditional timber applications represents a significant opportunity for our business. Beyond our U.S. markets, with over 25 years of setting the standard for composite matting, our products continue to support critical infrastructure projects and our strategic partners around the world. Our DuraBase mats are fully recyclable, not only allowing us to responsibly play our role in the growing circular plastics discussion but also creating superior unit economics whereby an end-of-life mat can be reground and reprocessed back into a new unit that can be placed into an additional 12 to 15 years of service life at significantly improved economics compared to its initial manufacturing cycle.
Matthew S. Lanigan: Continued penetration of traditional timber applications represents a significant opportunity for our business.
Matthew S. Lanigan: Beyond our U S markets with over 25 years of setting the standard for composite matting power prices continue to support critical infrastructure projects in our strategic partners around the world.
Matthew S. Lanigan: Hi, Jerry base Mats are fully recyclable, not only allowing us to responsibly play a role in the growing secular plastics discussion, but also creating superior unit economics, whereby an end of life, Matt can be re ground and reprocessed back into a new unit that can be placed into had been an additional 12 to 15 years to have a slot at significantly.
Matthew S. Lanigan: Proved economics compared to its initial manufacturing socket.
Matthew S. Lanigan: It's an exciting time for our business, and we're looking forward to building upon the progress we've made so far. With that overview, let's take a deeper look at our first quarter performance. On a consolidated basis, first quarter adjusted EBITDA increased 31% sequentially and was up modestly versus the prior year period. We also delivered both sequential and year-over-year growth in adjusted EBITDA margin in both our industrial solutions and fluid system businesses during the quarter, primarily driven by a combination of a more favorable sales mix and operating cost leverage.
Matthew S. Lanigan: It's an exciting time for our business and we're looking forward to building upon the progress we've made so far.
Speaker Change: With that overview, let's take a deeper look at our first quarter performance.
Speaker Change: On a consolidated basis first quarter, adjusted EBITDA increased 31% sequentially and was up modestly versus the prior year period.
Speaker Change: We also delivered both sequential and year over year growth and adjusted EBITDA margin in both our industrial solutions and fluid system businesses during the quarter, primarily driven by a combination of more favorable sales mix and operating cost leverage.
Matthew S. Lanigan: Within our industrial solutions segment, following a subdued start to the year, demand conditions accelerated as we moved through the first quarter, putting us on pace for a stronger Q2 performance. Notably, first quarter rental and service revenues from the utility sector improved on both a sequential and year-over-year basis, which was offset by declines in revenues from the pipeline and oil and gas sectors. Industrial Solutions' Adjusted EBITDA Margin increased 150 basis points versus the prior year to 36.8% in the first quarter as volume and improved operating leverage offset lower blended pricing.
Speaker Change: Within our industrial solutions segment, following a subdued start to the year demand conditions accelerated as we moved through the first quarter, putting us on pace for a stronger Q2 performance.
Speaker Change: Notably the first quarter rental and service revenues from the utility sector improved on both the sequential and year over year basis, which was offset by declines in revenues from pipeline and oil and gas sectors.
Speaker Change: Industrial solutions adjusted EBITDA margin increased 150 basis points versus the prior year to 36, 8% in the first quarter as volume and improved operating leverage offset lower blended pricing.
Matthew S. Lanigan: As we've stated on prior calls, we continue to pursue an increased number of larger-scale, longer-duration infrastructure projects. These longer-term projects can create a more stable base of revenue and enhance return on investment, but they also tend to carry a pricing structure below that of shorter-term rental. In support of our growth strategy, we're actively building out our U.S. commercial sales teams, expanding coverage in targeted Midwest and West Coast markets, while also continuing our investment in rental fleet expansion.
Speaker Change: As we've stated on prior calls we continue to pursue an increased number of larger scale longer duration infrastructure projects.
Speaker Change: These longer term projects can create a more stable base of revenue and enhance return on investment, but also tend to carry a pricing structure below that of shorter term rental projects.
Speaker Change: In support of our growth strategy, we're actively building out our U S. Commercial sales teams expanding coverage in targeted Midwest and West coast markets. While also continuing our investment in rental fleet expansion.
Matthew S. Lanigan: During the first quarter, we invested $12 million in the growth of our matting fleet, given the strengthening customer demand drivers I referred to earlier. While this capital investment led to an anticipated negative free cash generation in the first quarter, we see a return to positive free cash in the second quarter and for full year 2024. Within our fluid segment, our first quarter performance benefited from a combination of strong international demand along with improved pricing and continued cost actions, which together contributed to 120 basis points of adjusted EBITDA margin expansion year-over-year. Our segment revenues from international operations increased 19% versus the prior year, supported by strong growth from our eastern hemisphere and Canadian operations. With that, I'll turn the call over to Gregg for his prepared remarks.
Speaker Change: During the first quarter, we invested $12 million in the growth of them, adding fleet given the strengthening customer demand drivers are referred to earlier.
Speaker Change: Wireless capital investment led to an anticipated negative free cash generation in the first quarter, we see a return to positive free cash in the second quarter and for full year 2024.
Speaker Change: Within our fluid segment, our first quarter performance benefited from a combination of strong international demand along with improved pricing and continued cost actions, which together contributed to a 120 basis points of adjusted EBITDA margin expansion year over year.
Speaker Change: Segment revenues from international operations increased 19% versus the prior year supported by strong growth from our eastern Hemisphere and Canadian operations.
Speaker Change: With that I'll turn the call over to Craig for his prepared remarks.
Gregg S. Piontek: Thanks, Matthew. And good morning, everyone.
Craig: Thanks, Matthew and good morning, everyone.
Gregg S. Piontek: I'll begin my remarks with a summary of our consolidated and segment-level results for the first quarter, followed by an update on our outlook for 2024. Our first quarter was highlighted by a 31% sequential improvement in adjusted EBITDA driven by strong profitability within our industrial solutions segment and the international fluids business unit. Consolidated first quarter revenues improved 1% sequentially, generally in line with our expectations shared on our previous quarterly call. The industrial solution segment revenue was $49 million in the first quarter, down 12% on a year-over-year basis due primarily to the timing of product sales, but up 5% on a sequential basis. This result is generally in line with our expectations as we anticipate customer activity and project timing to ramp up through the year.
Craig: I'll begin my remarks, with a summary of our consolidated and segment level results for the first quarter, followed by an update on our outlook for 2024.
Craig: Our first quarter was highlighted by a 31% sequential improvement in adjusted EBITDA, driven by strong profitability within our industrial solutions segment.
Craig: And the international fluids business units.
Craig: Consolidated first quarter revenues improved 1% sequentially generally in line with our expectations shared on our previous quarterly call.
Craig: The industrial solutions segment revenue was $49 million in the first quarter down at 12% on a year over year basis, due primarily to the timing of product sales.
Craig: But up 5% on a sequential basis.
Craig: This result was generally in line with our expectations as we anticipate customer activity and project timing to ramp up through the year.
Gregg S. Piontek: Total rental and service revenues were $35 million for the first quarter, down slightly on both a sequential and year-over-year basis. As Matthew touched on, rental project activity steadily improved through the first quarter, leading to a 5% sequential improvement in rental revenues. However, our mix of less service-intensive projects led to a sequential decline in service revenue.
Craig: Total rental and service revenues were $35 million for the first quarter down slightly on both a sequential and year over year basis.
Craig: As Matthew touched on rental project activity steadily improved through the first quarter, leading to a 5% sequential improvement in rental revenues.
Craig: Though our mix of less service intensive projects led to a sequential decline in service revenues.
Gregg S. Piontek: The first-quarter rental fleet utilization improved modestly on a sequential basis, though our Q1 exit rate was meaningfully stronger than the full-quarter average, which positions us for strong sequential improvement into Q2. By industry, the utility sector contributed nearly 60% of rental and service revenues for the quarter, delivering growth on both a year-over-year and sequential basis, while oil and gas, pipeline, and other industries declined. First quarter product sales were $14 million, a meaningful sequential improvement, though below prior year levels, due to project timing issues.
Craig: The first quarter rental fleet utilization improved modestly on a sequential basis, though our Q1 exit rate was meaningfully stronger than the full quarter average, which positions us for a strong sequential improvement into Q2.
Craig: By industry.
Craig: The utility sector contributed nearly 60% of rental and service revenues for the quarter delivering growth on both a year over year and sequential basis, while oil and gas pipeline and other industries decline.
Craig: First quarter product sales were $14 million.
Craig: A meaningful sequential improvement, though below prior year levels due to project timing issues.
Gregg S. Piontek: Our rental and service revenues contributed more than 70% of our first quarter segment revenues, in line with the 2023 mix of rental and service versus product sale revenue. Industrial Solutions profitability was strong in the first quarter, with the segment delivering a 36.8% adjusted EBITDA margin, up 150 basis points from last year due primarily to a more favorable mix and operating leverage. The fluid systems segment generated revenues of $120 million in the first quarter, with our international business units delivering solid growth on both a year-over-year and sequential basis. Our Eastern Hemisphere region contributed $68 million, or 57% of our total fluid systems revenues in Q1.
Craig: Our rental and service revenues contributed more than 70% of our first quarter segment revenues in line with the 2023 mix of rental and service versus product sale revenues.
Craig: Industrial solutions profitability was strong in the first quarter with.
Craig: With the segment delivering a 36, 8% adjusted EBITDA margin up 150 basis points from last year, due primarily to a more favorable mix and operating leverage.
Craig: The fluids systems segment generated revenues of $120 million in the first quarter with our international business units delivering solid growth on both a year over year and sequential basis.
Craig: Our eastern Hemisphere region contributed $68 million or 57% of our total fluid systems revenues in Q1.
Gregg S. Piontek: The first quarter results reflect an improvement of 8% sequentially and 24% year-over-year, with the year-over-year improvement driven by broad-based improvements from several markets within Europe, the Middle East, and Asia-Pacific. Revenues from Canada increased 1% sequentially to $21 million in the first quarter, which reflects a 10% year-over-year improvement. Our U.S. operations contributed $30 million in revenues in the first quarter, reflecting a 17% sequential and 56% year-over-year decline. The year-over-year and sequential declines are primarily driven by a combination of the continued softening of the U.S. market activity and lower market share, as well as a notable decline in the average revenue contribution from the RIG service.
Craig: The first quarter results reflect an improvement of 8% sequentially and 24% year over year with the year over year improvement driven by broad based improvements from several markets within Europe, the middle East and Asia Pacific.
Craig: Revenues from Canada increased 1% sequentially to $21 million in the first quarter, which reflects a 10% year over year improvement.
Craig: Our U S operations contributed $30 million of revenues in the first quarter, reflecting a 17% sequential and 56% year over year decline.
Craig: The year over year and sequential declines are primarily driven by a combination of the continued softening of the U S market activity and lower market share as well as a notable decline in the average revenue contribution from the rig service.
Gregg S. Piontek: With the effects of the U.S. market softness, we are maintaining our focus on pricing and expense discipline, along with balance sheet efficiency. Fluid segment adjusted EBITDA margin improved 120 basis points year-over-year to 7.2% in the first quarter, benefiting from higher revenue from our international business and continued cost efforts in the U.S. SG&A expenses were $24.3 million in the first quarter, including $7.9 million of corporate office expenses. The first quarter of 2024 includes $2.3 million related to the fluid sale process.
Craig: With the effects of the U S market softness we are maintaining our focus on pricing and expense discipline, along with balance sheet efficiency.
Craig: Fluid segment, adjusted EBITDA margin improved 120 basis points year over year to seven 2% in the first quarter benefiting from the higher revenue from our international business and continued cost efforts in the U S.
Craig: SG&A expenses were $24 3 million in the first quarter, including $7 9 million of corporate office expense.
Craig: Yeah.
Craig: The first quarter of 2024 includes $2 $3 million related to the fluid sale process.
Gregg S. Piontek: Well, the first quarter of 2023 included nearly $1 million for strategic planning activity. Despite the elevated project expenses in 2024, total SG&A is down $1.1 million year over year, primarily reflecting the effects of cost rationalization efforts in the U.S. fluids and corporate office. Interest expense was $1.8 million in the first quarter, down modestly on both a sequential and year-over-year basis, primarily reflecting the effect of a lower overall debt balance. Tax expense was $2.8 million in the first quarter, reflecting an effective tax rate of 28%, which includes a favorable impact from previously unbenefited U.S. NOL carry forward.
Craig: While first quarter of 2023 included nearly $1 million for strategic planning activities.
Craig: Despite the elevated project expenses in 2024 total SG&A is down $1 $1 million year over year, primarily reflecting the effects of cost rationalization efforts in the U S fluids and corporate office.
Craig: Interest expense was $1 $8 million in the first quarter down modestly on both a sequential and year over year basis, primarily reflecting the effect of lower overall debt balances.
Craig: Tax expense was $2 8 million in the first quarter, reflecting an effective tax rate of 28%, which includes a favorable impact from previously and benefited U S. NOL carryforwards.
Gregg S. Piontek: Adjusted EPS was $0.10 per diluted share in the first quarter, compared to $0.04 in the fourth quarter and $0.09 in the first quarter of last year. Operating cash flow was $12 million for the first quarter, including the effects of our Annual Employee Incentive Program payouts. While $13 million was used to fund our net capex, substantially all of which was directed toward the industrial solutions matting fleet expansion as we seek to capitalize on growth opportunities and strengthening demand conditions. We ended the first quarter with total debt of $77 million and cash of $38 million, resulting in net debt of $40 million, a 0.5 times net leverage ratio.
Craig: Adjusted EPS was <unk> 10 per diluted share in the first quarter compared to <unk> in the fourth quarter and nine in the first quarter of last year.
Craig: Operating cash flow was $12 million for the first quarter, including the effects of our annual employee incentive program payouts.
Craig: While $13 million was used to fund our net capex substantially all of which was directed towards the industrial solutions Matting fleet expansion as we seek to capitalize on the growth opportunities and strengthening demand conditions.
We ended the first quarter with total debt of $77 million in cash and $38 million.
Craig: Resulting in net debt of $40 million, a five times net leverage ratio.
Gregg S. Piontek: Let's now turn to our business outlook. As before, we remain highly constructive on the multi-year demand outlook for both businesses. Within industrial solutions, we continue to see strong fundamentals for utilities and critical infrastructure spending, which remains our largest customer market. Our full year 2024 expectation for the industrial solutions segment remains unchanged. We continue to forecast 2024 industrial solutions revenues in the $230 to $240 million range, with segment-adjusted EBITDA in a range of $80 to $85 million and segment CAPEX of $30 to $35 million.
Craig: Let's now turn to our business outlook as before we remain highly constructive on the multi year demand outlook for both businesses.
Craig: Within industrial solutions, we continue to see strong fundamentals for utilities and critical infrastructure spending which remains our largest customer market.
Craig: Our full year 2020 for expectation for the industrial solutions segment remains unchanged.
Craig: We continue to forecast 2020 for industrial solutions revenues in the $230 million to $240 million range.
Craig: With segment adjusted EBITDA in a range of $80 million to $85 million and segment capex of $30 million to $35 million.
Gregg S. Piontek: In terms of the near-term outlook, we've seen a strong start to the second quarter, both in rental project and product sales activity, and combined with our current pipeline and quoting levels, we anticipate industrial solutions to deliver total year-over-year revenue growth of 15-20% in Q2. In fluid systems, while the U.S. market outlook remains somewhat challenged, our eastern hemisphere and Canada business units, which contributed 75% of the segment's revenue in Q1, continue to perform at a high level.
Craig: In terms of near term outlook, we've seen a strong start to the second quarter, both in rental projects and product sales activity and combined with our current pipeline and quoting levels.
Craig: We anticipate industrial solutions to deliver total year over year revenue growth of 15% to 20% in Q2.
Craig: In fluid systems, while the U S market outlook remains somewhat challenged our eastern hemisphere in Canada business units, which contributed 75% of the segment's revenue in Q1 continue to perform at a high level.
Gregg S. Piontek: Overall, we expect Q2 fluid systems revenues to be 15-20% lower on a year-over-year basis, primarily reflecting lower activity in the U.S. At this lower level, we expect segment-adjusted EBITDA margins in the low to mid-single digits, as the effects of the lower volume are largely offset by improved pricing and the effects of overhead reductions in the U.S. In terms of capital allocation priorities, our view remains relatively unchanged as we continue to prioritize investments in the organic growth of our rental business.
Craig: Overall, we expect Q2 fluid systems revenues to be 15% to 20% lower on a year over year basis, primarily reflecting lower activity in the U S.
Craig: At the lower level, we expect segment adjusted EBITDA margins in the low to mid single digits as the effects of the lower volume are largely offset by improved pricing and the effects of overhead reductions in the U S.
Craig: In terms of capital allocation priorities, our view remains relatively unchanged as we continue to prioritize investments into the organic growth of our rental fleet.
Craig: We expect our 2024 net capital investments will remain dependent upon our projected rental revenue growth rate.
Gregg S. Piontek: We expect our 2024 net capital investments will remain dependent upon our projected rental revenue growth rate. Beyond our continued organic investments in industrial solutions, we expect our free cash flow generation this year will be primarily used to build liquidity for inorganic growth opportunities or through a return of capital to shareholders through our programmatic share repurchase program following the completion of our Fluid Strategic Review process. And with that, I'd like to turn the call back over to Matthew for his concluding remarks.
Craig: Beyond our continued organic investments in industrial solutions, we expect our free cash flow generation. This year will be primarily used to build liquidity for inorganic growth opportunities or through a return of capital to shareholders through our programmatic share repurchase program. Following the completion of our fluid the strategic review process and.
Craig: With that I'd like to turn the call back over to Matthew for some concluding remarks.
Matthew S. Lanigan: Thanks, Greg.
Matthew S. Lanigan: As we look at the remainder of 2024, our priorities are clear. First, we will continue to execute our plans to become a leading, pure play, specialty rental business serving the global worksite access market as we build upon our leading position with the DuraBase composite matting system. At an organic level, we intend to continue prioritizing capital investment in the growth of our rental fleet, which historically has generated cash returns in excess of 25%. During the first quarter, 95% of our total CAPEX was directed toward the industrial solutions segment.
Matthew S. Lanigan: As we look at the remainder of 2024, our priorities are clear.
Matthew S. Lanigan: First we will continue to execute our plans to become a leading pure play specialty rental business, serving the global web site access market as we build upon our leading position with the gyro based composite matting system.
Matthew S. Lanigan: At an organic level, we intend to continue prioritizing capital investment in the growth of our rental fleet, which historically has generated cash returns in excess of 25%.
Matthew S. Lanigan: During the first quarter, 95% of our total Capex was directed towards the industrial solutions segment.
Matthew S. Lanigan: Second, we will continue to drive further efficiency improvements across all corners of the organization, positioning us to realize improved operating leverage. During the first quarter of 2024, we continued to take actions to streamline our overhead structure across both segments and the corporate office, generating approximately $3 million in annual cost savings. Finally, we remain committed to a returns-focused capital allocation strategy that includes a combination of internal investment, inorganic growth, and return of capital to shareholders.
Matthew S. Lanigan: Second we will continue to drive further efficiency improvements across all corners of the organization.
Matthew S. Lanigan: <unk> asked to realize improved operating leverage.
Matthew S. Lanigan: During the first quarter of 2024, we continued to take actions to streamline our overhead structure across both segments and the corporate office generating approximately $3 million in annual cost savings.
Matthew S. Lanigan: Finally, we remain committed to returns focused capital allocation strategy that includes a combination of internal investment inorganic growth and return of capital to shareholders.
Matthew S. Lanigan: In February, we increased our remaining share repurchase authorization to $50 million to support our return of capital program. While the first quarter included annual employee incentive program payouts and investments in rental fleets that reduced free cash flow generation, we expect to be free cash flow positive for the duration of 2024, positioning us to advance our capital allocation priorities. Turning briefly to our Fluids Business Strategic Review, we continue to work diligently to evaluate alternatives, and we remain focused on having the process substantially completed by mid-year 2024.
Matthew S. Lanigan: In February we increased our remaining share repurchase authorization to $50 million to support our return of capital program.
Matthew S. Lanigan: While the first quarter included annual employee incentive program payouts and investments in our rental fleet the reduced free cash flow generation, we expect to be free cash flow positive for the duration of 2020 full positioning us to advance our capital allocation priorities.
Matthew S. Lanigan: Turning briefly to our fluids business strategic review, we continue to work diligently to evaluate alternatives and we remain focused on having the process substantially completed by mid year 2024.
Matthew S. Lanigan: In closing, I want to thank our shareholders for their ongoing support, our employees for their dedication to the business, including their commitment to safety and compliance, and our customers for their ongoing partnership. And with that, we'll open the floor to questions.
Matthew S. Lanigan: In closing I want to thank our shareholders for their ongoing support and our employees for their dedication to the business, including their commitment to safety and compliance and our customers for their ongoing partnership.
Speaker Change: And with that we'll open the call for questions.
Operator: Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad now. You may remove yourself from the queue at any time by pressing star two, and once again that is star and one if you'd like to ask a question. We'll pause for just a moment to allow questions to queue. And we do have our first question from Aaron Spychalla with Craig Hallam.
Speaker Change: Thank you at.
Speaker Change: At this time, if you would like to ask a question. Please press star and one on your telephone keypad now.
Speaker Change: You may remove yourself from the queue at any time by pressing star two and once again that is star one if you'd like to ask a question.
Speaker Change: Pause for just a moment to allow questions to queue.
Speaker Change: Yes.
Speaker Change: And we do have our first question from Eric <unk> with Craig Hallum.
Aaron Michael Spychalla: Yeah, good morning, Matthew and Gregg. Thanks for taking the questions. You know, first for me, you've kind of talked about the pipeline growth mid to high teens, last quarter in industrial, can you just give us an update there, especially considering the additions to the fleet in the first quarter, and then just any changes you're seeing in the market competitively, you know, within composites or wood, just given lumber prices, or really seems like we're starting to see this transition away from wood towards towards composites, you kind of talked about 75-80% of the market being wood today.
Eric: Yes, good morning, Mathew and Greg Thanks for taking the questions.
First for me, you've kind of talked about the pipeline growth mid to high teens last quarter in industrial can you just give us an update there, especially considering the additions to the fleet in the first quarter and then just any changes youre seeing in the market competitively.
Eric: Within composites or would just given lumber prices are are really seems like we're starting to see this transition away from wood towards towards composites, you kind of talked about 70, 580% of the market being would today.
Matthew S. Lanigan: Hey, thanks Aaron. It's Matthew. I'll take that one.
Eric: Hey, Thanks, Sharon, it's Matthew I'll take that one look in terms of pipeline.
Matthew S. Lanigan: Look, in terms of pipeline, we still see robust growth in the pipeline. There hasn't been any material change quarter-on-quarter in terms of the growth we've seen there. What we are seeing is that pipeline representing a more forward-looking view of project start duration. If you look back historically, roughly 50% plus of our pipeline was starting, and the projects were within the quarter that they were quoted, we're seeing that now push out a quarter or so into the future, which is positive for us. It gives us a better line of sight to the future quarter.
Matthew S. Lanigan: Still see robust growth in the pipeline that hasnt been material change quarter on quarter in terms of the growth we have seen there what we are seeing.
Matthew S. Lanigan: Is that pipeline, representing a more forward looking view of project stopped duration. If you look back historically, roughly 50% plus of our pipeline was starting in the projects within the quarter that they were quoted we're seeing that now pushed out a quarter a quarter or so into the future.
Matthew S. Lanigan: <unk>, which is positive for us it gives us a better line of sight to the future quarter, but other than that.
Matthew S. Lanigan: But other than that, quoting activity remains robust, which I think is supported by the views in the market of a stronger second half of the year and continued reinforcement of CapEx plans from utilities. All looking positive there. On the competitive side, not a lot to report that's different there. I think there's still a tightening, I believe, in supply and demand as we look forward. It is interesting to note that some of the participants in the market who have large positions in timber fleets are now calling out that they're looking to build composite fleets. I think your inference there is accurate, that people are seeing the value advantage of the composite match in terms of unit economics and lifetime advantages. We're encouraged by those signals as well.
Matthew S. Lanigan: Quoting activity remains robust, which I think is supported by the views in the market of a stronger second half to the year and continued that kind.
Reinforcement of Capex plans from utilities.
Matthew S. Lanigan: All looking positive there on the competitive side.
Matthew S. Lanigan: Not a lot to report that's different there I think I think there's still.
Tightening I believe in supply and demand as we look forward.
Matthew S. Lanigan: Interesting to note that some of the some of the participants in the market who have large positions in timber fleets and now calling out that they are looking to build composite fleets. So I think.
Matthew S. Lanigan: Your your inference there is accurate that that people are saying the value advantage of the composite mats in terms of unit economics and lifetime advantages. So we're encouraged by those signals as well.
Aaron Michael Spychalla: Great. Thanks for the color there.
Speaker Change: Great. Thanks for the color there and then maybe second you have had good progress on the cost reduction and efficiency efforts I think you called out $3 million of annual savings. So it looks like we're around kind of mid twenties for those corporate costs adjusting for some things.
Aaron Michael Spychalla: And then maybe second, you know, you've had good progress on the cost reduction and efficiency efforts. I think you called out 3 million in annual savings. So, looks like we're around kind of the mid 20s for those corporate costs, adjusting for some things. Can you just kind of talk about the progress towards that kind of high teens target and kind of timeline to get there?
Speaker Change: Can you just kind of talk about the progress towards that that kind of high teens target and kind of timeline to get there.
Gregg S. Piontek: Yeah, if you, this is Gregg, if you carve out, you know, the transaction related, you know, the sale process related costs that we had mentioned. Here you're, you're really running now in a call it a 22-23 range in terms of cash expense at the corporate level, you know, and as we had talked about, you know, in the past, well, while we're continuing to look, you're always looking for ways to continue to streamline your organization, I think the more meaningful shift is really post, Completing the strategic review of fluids, that's really when you have the greater ability to adjust your cost structure.
Gregg S. Piontek: Yeah, this is Gregg.
Speaker Change: Yes, it's Greg if you carve out.
The transaction related the sale process related.
Speaker Change: Costs that we had mentioned.
Greg: You're really running now in that call. It at 22 23 range in terms of cash expense at the corporate level.
Greg: And as we had talked about.
Greg: The past well, while we're continuing to look.
Greg: Always looking for ways to continue to streamline your organization I think the more meaningful shift is really post.
Completing the strategic review of fluids Thats really when you have the greater ability to to adjust your cost structure.
Aaron Michael Spychalla: All right, understood. Thanks for the color. I'll turn it over.
Greg: Alright.
Speaker Change: Thanks for the color I'll turn it over.
Speaker Change: Thanks Sarah.
Amit Dayal: And our next question comes from Amit Dayal, with H.C. Wainwright.
Speaker Change: And our next question comes from Amit Dayal with H C Wainwright.
Speaker Change: Yeah.
Amit Dayal: Thank you guys. So with respect to the cadence for the rest of the year, you indicated year-over-year improvements in 2Q. So from that point onwards, again, sort of sequential improvements or maybe any lumpiness in the next three quarters.
Amit Dayal: Thank you guys.
Amit Dayal: So with respect to the cadence for the rest of the year you indicated year over year improvements in Q.
Amit Dayal: So from that point onwards, again sort of sequential improvements or maybe any lumpiness in the next two quarters.
Matthew S. Lanigan: You know, as far as visibility goes, we're continuing to see good growth in the pipeline, which would suggest continued growth throughout the year. We do call out every year that depending on how dry the summer months are and the loads on the grid, during the summer months, that can slow activity on the rental and service side, and then typically, we've seen a stronger Q4 on the direct sale side.
Amit Dayal: Yes.
Speaker Change: I'll attempt that one.
Speaker Change: As far as the visibility goes we're continuing to say.
Good growth in the pipeline, which would suggest continued growth throughout the year, we do call out every year that depending on how to drive the summer months.
Speaker Change: And the large on the grid.
Speaker Change: During the summer months that can slow activity on the rental and service side.
Speaker Change: And then typically we have seen a stronger Q4 falling on the direct sales side, we're not seeing anything that causes us to think that that is longer term trends have changed.
Matthew S. Lanigan: We're not seeing anything that causes us to think that those longer-term trends have changed, and just based on the strength of our pipeline build here, we feel comfortable that the rest of the year is building quite nicely.
Speaker Change: And just based on the strength of our pipeline build here, we feel comfortable with the rest of the year is building quite nicely.
Amit Dayal: Okay, thank you. And then you highlighted, you know, maybe pursuing longer-term rental contracts, and those could come with slightly lower margins. How much lower would those margins be relative to your, you know, legacy rental business?
Speaker Change: Okay. Thank you.
Speaker Change: And then you highlighted you know.
Speaker Change: Maybe pursuing longer term rental contracts and those could come with slightly lower margins.
Speaker Change: How much.
Speaker Change: Lower would those margins be relative to yours.
Speaker Change: Legacy rental business.
Gregg S. Piontek: Yeah, this is Gregg. You know, I guess the way I would frame that is, I wouldn't think it would be a large driver in terms of bringing your overall pricing down. Again, you got to look at these projects in terms of their overall profitability. The longer term gives you greater visibility, gives you more stability, and allows you to manage your fleet to higher utilization. So net net, you're generating a solid return on investment as the shorter-term projects. But you know, the pricing profile is just, you know, can be lower, and it's really a function of the size and length of the project that drives that difference.
Speaker Change: Yes. This is Greg I guess, the way I'd frame that as is.
Greg: I didn't think it would be a large driver in terms of bringing your overall pricing down again, you got to look at these projects in terms of their overall profitability.
Greg: Longer term. It gives you greater visibility gives you more stability allows you to manage your fleet you have higher utilization. So net net you are generating.
Greg: As solid of a return on investments as the shorter term projects, but the pricing profile is just.
Greg: It can be lower and it's really a function of size and length of project is what drives that difference.
Amit Dayal: Okay, understood. Then I guess just the last one, you know, maybe you touched on it a little bit already, these corporate overheads, savings on that side. Is there any further room, or are we done with, you know, those types of cuts for now?
Speaker Change: Okay understood.
Speaker Change: And then I guess just.
Speaker Change: Last one.
Speaker Change: You touched on a little bit already this corporate overheads.
Speaker Change: Savings on that side.
Speaker Change: <unk>.
Speaker Change: Is there any further room or I'll be done.
Speaker Change: Those types of cuts.
Speaker Change: For now.
Gregg S. Piontek: I would generally say I would not expect meaningful movement in the cost structure in the near term. Like I said, we're always looking for opportunities to streamline. But again, the more meaningful change in our overall structure really comes following completion of our strategic review of fluids.
Speaker Change: I would generally say I would not expect meaningful movement in the cost structure in the near term like I said, you know, we're always looking to do it.
Speaker Change: For for opportunities to streamline.
Speaker Change: But again the more meaningful change in our overall structure really comes following completion of our strategic review of fluids.
Amit Dayal: Okay, understood. That's all I have. Thank you so much.
Speaker Change: Okay.
That's all angles. Thank you so much.
Speaker Change: Thanks, Ed.
Gerard J. Sweeney: And our next question comes from Jerry Sweeney with Roth Capital.
Speaker Change: And our next question comes from Gerry Sweeney with Roth capital.
Gerard J. Sweeney: Hey, Matthew and Gregg, thanks for taking my call this morning. Thanks, Jared. Um, question on the Midwest West, uh, you've discussed building out your sales in those areas. Just curious how big of an opportunity it is versus, I know you think you're a little bit bigger, especially in the southeast, how does that zone compare to the southeast, and then? How long would it take to get a big enough presence there that we start to see some dollars coming through?
Gerry Sweeney: Hey, Matthew and Greg Thanks for taking my call. This morning.
Gerry Sweeney: Jack.
Gerry Sweeney: Question on the Midwest West you've discussed.
Gerry Sweeney: Building out your sales.
Gerry Sweeney: And those areas just curious a.
Gerry Sweeney: A couple of little questions here, how big of an opportunity is it.
Gerry Sweeney: Since I know you can't give you a little bit bigger, especially in the southeast how does sort of that.
Gerry Sweeney: Don't compare to the southeast and then.
Gerry Sweeney: How long would it take to get you know AAV.
Gerry Sweeney: A big enough presence there that we start to see some some dollars coming through in a meaningful way.
Matthew S. Lanigan: Yeah, Jerry, I think the way we look at that market is, there's no reason it couldn't be as substantial as, say, you know, our Texas market or something like that based on the infrastructure requirements there, so a reasonably meaningful piece. You know, the sales cycle really depends on project timing and our ability to get in there and penetrate some customers that we haven't traditionally serviced, but our anticipation would be that within 12 months, we should see that operating at a fairly efficient level.
Speaker Change: Yes, Jerry I think the way we look at that market is theres no reason it couldnt be.
As substantial as say, Texas market or something like that based on the infrastructure requirements. There. So.
Speaker Change: A reasonably meaningful pace the sale cycle really depends on project timing and our ability to to getting there and penetrate some customers that we haven't traditionally serviced but our anticipation would be that within within 12 months, we should see that operating at a fairly efficient level side.
Matthew S. Lanigan: So, you know, the great thing about this business is we get in there with sales first, we start to build relationships, then we start to move assets into those markets, so we're not committing a large amount of capital here and waiting for it to be productive. We can flex that in as the activity levels dictate.
Speaker Change: Great thing about this business is we're getting there with styles fast we start to build the relationships then we start to move the assets into those markets. So we're not committing a large amount of capital here and waiting for it to be productive. We can we can flex that in as the activity levels dictate.
Speaker Change: Thank you.
Speaker Change: Okay, Great. Yeah, I was just going to add I think you can look at the examples of what we're all of our previous expansion. When we went into the east coast, the southeast and the mid Atlantic regions and as we built that out that was kind of a 12.
Gregg S. Piontek: Thank you. Yeah, I was just gonna add, you know, I think you can look at the examples of our previous expansion, when we went into the east coast, the southeast, and the mid Atlantic regions. And as we built that out, that was kind of a, you know, 12 to 18 month sort of process to ramp those up.
Speaker Change: 12 months to 18 months sort of process to ramp those up got.
Gerard J. Sweeney: I was going to say, would acquisitions be an opportunity in that area, especially to speed up the process or gain a little bit more scale?
Speaker Change: Got you.
Speaker Change: And I was going to say would acquisitions be an opportunity in that area, especially the speed up the process or gain a little bit more scale.
Matthew S. Lanigan: Yeah, Gerry, we've always kind of said that we would evaluate those markets on an acceleration basis if having somebody in there that already has the relationships and has the appropriate safety culture and operational efficiency that we look for, we'd obviously consider that as well as doing it organically ourselves.
Speaker Change: Yes, Jerry we have we've always kind of said that we would evaluate those markets.
Speaker Change: On an acceleration basis.
Speaker Change: Having somebody somebody in there that already has the relationships.
Speaker Change: And has.
Jerry: The appropriate safety culture, and operational efficiency that we look forward wed obviously consider that as well as doing it organically ourselves.
Gerard J. Sweeney: Got it. One more question. This is government spending, i.e. stimulus. We're working with a bunch of companies that are seeing a lot of stimulus spending, but a lot of the commentary from them is, hey, you know, we're at the back end.
Jerry: Got it one.
Speaker Change: One more question. This is government spending I E stimulus.
Speaker Change: We're working with a bunch of companies that <unk> seen a lot of stimulus spending.
Speaker Change: But a lot of the commentary.
Speaker Change: From them is hey, we're at the backend.
Gerard J. Sweeney: You know, the dollars have to flow through, projects approved, etc. Some of them, most of them are just seeing a little bit of money today, and expectations are it's going to speed up 25-26. Are you guys in the same boat, or are you seeing a little bit more spending earlier?
Speaker Change: At the flow through.
<unk> proved et cetera, some of them most of them are just seeing some a little bit of dollars coming through today and expectations are always going to speed up $25 26 are you guys in the same boat or or are you seeing a little bit more spending earlier.
Matthew S. Lanigan: Yeah, look, we're in the same boat, Gerry. I think from the outset we were sort of seeing 2025 as a year where those funds would start to flow through in a way that would be impactful to us, and I still think that is our view at this point. That's what I think...
Speaker Change: Yes look we're in the same by Jerry I think from the outset, we were sort of saying 25 of the year with those funds would start to flow through in a way that would be impactful to us and I still think that is our view at this point.
Gerard J. Sweeney: Okay, that's what I assumed. All right. I appreciate it. I'll jump back in line.
Speaker Change: Okay. That's what I assumed I just wanted to double check I have.
Speaker Change: Appreciate it I'll jump back in line.
Speaker Change: Thanks Jerry.
Min Cho: And our next question comes from Min Cho with B Reilly Securities.
Speaker Change: And our next question comes from Min Cho with B Riley Securities.
Min Cho: Good morning. I'm on for Alex Regal this morning. Great quarter. Hi there. Most of my questions have been answered, but I have a quick one regarding your rental revenue breakout in the U.S. versus the U.K. I know that you have a strong business in the U.K., but can you talk a little bit about any difference in the demand dynamics there?
Min Cho: Hey, there good morning, I'm on for Alex Regal This morning, great quarter.
Min Cho: Hey, there just wondering my questions have been answered, but I have a quick one regarding your.
Min Cho: The rental revenue maybe break out in the U S versus the U K I know that you have a strong business in the U K can you talk a little bit about any difference and.
Min Cho: Demand dynamics there.
Gregg S. Piontek: Well, let me start with the mix, you know, first of all, when you look at our rental and service split, it's roughly 90% US and 10% UK in terms of demand dynamics. Yeah, like it said,
Speaker Change: Well, let me I'll start with the mix first of all overall when you look at our our rental and service split its roughly 90% U S. 10% U K in terms of the demand dynamics, Yeah look in terms of the demand I think primarily the market in the U S is the electrical utility spend in the <unk>.
Gregg S. Piontek: I think the primary market in the U.S. is the electrical utility spend. In the U.K., we tend to also get more rail. If you look at High Speed 2 and some other large infrastructure projects going on there, they are consumers of access, so the only real difference we see there is the industry service, but both here and in the U.K., the theme of infrastructure investment and improvement is both strong, and we're looking forward to that sort of support for years to come. In terms of the CapEx that we mentioned, I just wanted to point out that it is supporting both growth in the U.S. and also the U.K.
Speaker Change: We tend to also get.
Speaker Change: More rail if you looked at high speed, two and some other large infrastructure projects going on there that consumers of all.
All access.
The only real difference we see there is the industry service, but both here and in the UK that thematic of infrastructure investment.
Speaker Change: And an improvement of both is strong and we're looking forward to that sort of supporting the business for years to come in terms of the.
Speaker Change: The capex that we mentioned.
Speaker Change: Just wanted to point out that that is supporting both growth in the U S and also the U K.
Speaker Change: Excellent also.
Min Cho: Also, Gregg, SG&A was a little bit higher than we had expected. Do you expect this to be a pretty good run rate on a quarterly basis for the rest of the year?
Speaker Change: I'm glad you asked.
Speaker Change: G&A was a little bit higher than we had expected do you expect this to be a pretty good run rate on a quarterly basis for the rest of the year.
Gregg S. Piontek: I think when you look at the quarter again, I think it's important that you do, you know, look at the transaction, the sale process, and related items that we had called out, as well as the severance. But, you know, adjusting for that, yeah, I think that that underlying growth or run rate is a fairly accurate rate going forward.
Speaker Change: I think when you look at the quarter again, I think it's important that you.
Speaker Change: Do you know.
Speaker Change: Look at the transaction the sale process and related items that we had called out as.
Speaker Change: As well as the severance but.
Speaker Change: Adjusting for that yes, I think that underlying growth or run rate is a fairly accurate range going forward.
Min Cho: And then finally, you mentioned targeting larger projects. Do you have anything in the backlog yet? Or would you just talk about the progress that you're making on those types of projects? Yeah, thanks, man.
Speaker Change: Excellent and then finally, you had mentioned.
Speaker Change: Targeting larger projects do you have anything in backlog, yet or if you could just talk about the progress that you're making on those types of projects so far.
Matthew S. Lanigan: As we look at our forward pipeline, we are seeing a distribution shift towards larger projects, so we are seeing that start to flow through, and if we would describe that as a backlog, then we are seeing a build in that backlog in those larger projects, so we feel like that focus is working for us.
Yes, Thanks, Matt.
Speaker Change: We.
Speaker Change: We look at our forward pipeline, we are seeing a distribution shift towards larger projects that we are seeing that start to flow through.
Speaker Change: And if we would if we would describe that as backlog than we are seeing a build in that backlog.
Speaker Change: <unk>.
Speaker Change: Larger projects.
Speaker Change: We feel like that focus is working for us.
Min Cho: All right, great. Thank you.
Speaker Change: Perfect.
Speaker Change: Alright, great. Thank you.
Speaker Change: Thanks, Dan.
William J. Dezellem: And our next question comes from Bill Dezellem with Teton Capital.
Speaker Change: And our next question comes from Bill <unk> with <unk> capital.
William J. Dezellem: Thank you. I'd actually like to follow up on that last question, the pipeline... of new projects becoming larger, and ask why. What has led to that? Is that a function of what's happening in the market, or is that your own emphasis on those projects?
Bill: Thank you I'd actually like to follow up on that last question in the pipeline.
Bill: New projects are becoming larger and ask why what has what has led to that is that a function of what's happening in the market or is that.
Speaker Change: Your own.
Your own emphasis on those projects.
Matthew S. Lanigan: Yeah, Bill, I think it's a little bit of both. One of the things that we were coming into the T&D space, you know, traditionally from our oil and gas markets, there was some concern that we would have the fleet capacity to service some of these larger projects. But over time, as we've invested in our fleet, and we've demonstrated our ability to service and meet the varying needs of those project types. I think we have won more confidence with the project owners that we can execute and meet their needs.
Speaker Change: Yes, Bill I think it's a little bit of both.
Speaker Change: One of the one of the things that way, we're coming into the T&D space traditionally from our oil and gas markets. There was some concern that we would have the fleet capacity to service. Some of these larger projects over time as we have invested in slate and we've demonstrated our ability to service and meet the varying needs of those project types.
I think we have one more confidence with the with the project down is that we can execute and meet their needs moving forward as we continue to invest in our fleet. We are we see that being even more so.
Matthew S. Lanigan: Moving forward, as we continue to invest in our fleet, we see that being even more so. So I think there's a little bit of, A, the projects are out there, and B, we continue to demonstrate that we can service them safely and efficiently and meet all of the requirements of our customers, which is helping pull through more volume in that space.
Speaker Change: I think theres, a little bit of I. The projects are out there and B. We continue to demonstrate that we can service them safely and efficiently and made all of the requirements of our customers, which is which is helping pull through more volume in that space and obviously the more you penetrate this it just improves your visibility improves your stability in your overall rental and service.
Matthew S. Lanigan: And obviously, the more you penetrate this, it just improves your visibility, and improves your stability in your overall rental and service operations.
Speaker Change: <unk>.
William J. Dezellem: Great, that is helpful. And then, continuing on the industrial solutions segment, what led to the strength exiting the first quarter? Is it as simple as project timing, or is there something bigger that's taking place there?
Speaker Change: Great that is that that is helpful and then continuing on.
The industrial solutions segment.
Speaker Change: What's led to the strength exiting the first quarter is it as simple as project timing or is there something bigger.
Speaker Change: Bigger that's a that's taking place there.
Matthew S. Lanigan: I think you nailed it in the first bit there, Bill. It's really just the projects getting underway. I'd like to say there was more magic than that, but it really is just the way these things have gone.
Speaker Change: I think in out in the first bid there bill it's really just the projects getting underway. So.
Speaker Change: I'd like to say there was more magic than that but it really is just the way these things are torn down.
Gregg S. Piontek: Matt, I've given you the opportunity to take credit for magic, and you're just going to shove that aside. You know, I think this goes back to why we continually emphasize the focus on full year and TTM. Again, you do have these project timings that result in quarter to quarter sort of swings, but they do balance out over the years.
I'm, giving you the opportunity to take credit for magic and you're just.
Speaker Change: Hi.
Speaker Change: I think I think it goes back to why we continually emphasize the focus on the full year and TTM again, you do have these project timings.
And quarter to quarter sort of swings, but they do balance out over the.
Over the year so.
William J. Dezellem: Great, thank you. And then a couple of questions related to the fluids business, please. Are books still going out on the fluids business, or are those out, and now we're in the next phase of the process?
Speaker Change: Oh, great. Thank you and then a couple of questions relative to the fluids business. Please.
Speaker Change: <unk> still going out on the fluids business or those out and now we're in the next phases.
Speaker Change: The process.
Speaker Change: Yeah, Bill I think it's probably safer for us to kind of leave that one and just kind of revert to the script that we put forward, which is where we're moving forward in the processing and optimistic about our conclusion in that first half.
Matthew S. Lanigan: Yeah, Bill, I think it's probably safer for us to kind of leave that one and just kind of revert to the script that we put forward, which is that we're moving forward in the process and optimistic about a conclusion in that first half.
William J. Dezellem: Okay, and then would you please discuss the swing factors with the fluids operating income that led to it being up what I think is three plus million on a 24 million revenue decline?
Speaker Change: Okay, and then would you. Please discuss the swing factors are with the fluids operating income that led to it being up what I think are three plus million on a $24 million revenue decline.
Gregg S. Piontek: Yeah, you know, overall, it is more than anything, you've got the mixed shift. And we've always talked about the profitability of the business here, international versus the US, which is historically, international has been a stronger performer. So you have that mixed shift as well.
Speaker Change: Yeah.
Speaker Change: Overall, it is more than anything it's you've got the mix shift and we've always talked about the profitability of the business here.
Speaker Change: International versus the U S, which is historically the international has been a stronger performer. So you have that mix shift as well as well. We also had the benefit of the pricing we had talked over the past year of the impact that we've had with some of the inflation, which we are unable to push through contracts, we had to wait for contract renewals, that's continuing to come through to drive.
Gregg S. Piontek: We also had the benefit of the pricing, you know, we talked over the past year of the impact that we've had with some of the inflation, which we're unable to push through contracts, a way to wait for contract renewals, that's continuing to come through to drive strength in overall pricing. And then the last factor there is also on the US side, with the US being a much tougher market landscape, continuing to take costs out to offset some of the deterioration. So you put all those things together. And ultimately, it's leading to a more profitable business than it was a year ago. [inaudible]
Speaker Change: Strengthening in the overall pricing and then the last factor. There is is also on the U S side with the U S being a much tougher market landscape continuing to take cost out to offset.
Speaker Change: Some of the deterioration so you put all those things together and ultimately, it's leading to a more profitable business than what it was a year ago.
William J. Dezellem: Great. Thank you both for the time and congratulations on a really solid quarter.
Speaker Change: Great. Thank you both for the time and congratulations on a real solid quarter.
Speaker Change: Thanks Bill.
Operator: And we have reached our allotted time for our question and answer session today. I will now turn the call back over to the management team for closing remarks.
And we have reached our allotted time for a question and answer session. Today I will now turn the call back over to the management team for closing remarks.
Matthew S. Lanigan: Sure, that concludes our call today. Should you have any questions or requests, please reach out to us using our email address investors at newpark.com, and we look forward to talking to you again next quarter.
Speaker Change: Sure that concludes our call today should you have any questions or requests please reach out to us using our email at investors at New Park Dot Com and we look forward to talking to you again next quarter. Thank you.
Operator: This does conclude today's program. Thank you for your participation. You may now disconnect.
Operator: Thank you. This does conclude today's program. Thank you for your participation. You may now dis-
Speaker Change: This does conclude today's program. Thank you for your participation you may now disconnect.
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