Q2 2024 CES Energy Solutions Corp Earnings Call

August 9, 2024

Speaker Change: Good morning everyone and welcome to the CES Energy Solutions second quarter 2024 results conference call and webcast.

Operator: second quarter of 2024 results conference call and webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Tony Aulicino, Chief Financial Officer. Please go ahead. Tony Aulicino, Chief Financial Officer

Operator: 2nd Quarter 2024 Results Conference Call & Webcast As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad.

Speaker Change: As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad.

Operator: Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Tony Aulicino, Chief Financial Officer. Please go ahead.

Speaker Change: Should you need assistance during the conference call, you may signal an operator by pressing star, then zero.

Tony Aulicino: Thank you, operator. Good morning, everyone, and thank you for joining us on today's call.

Speaker Change: I would now like to turn the conference over to Tony Aulicino, Chief Financial Officer. Please go ahead.

Tony Aulicino: I'd like to note that in our commentary today, there will be forward-looking financial information and that our actual results may differ materially from the expected results due to various risk factors and assumptions. These risk factors and assumptions are summarized in our second quarter MD&A and press release dated August 8th, 2024, and in our AIF, dated February 29th, 2024. In addition, certain financial measures that we will refer to today are not recognized under current generally accepted accounting policies, and for a description and definition of these, please see our second quarter MD&A. At this time, I'd like to turn the call over to Ken Zinger, our President and CEO.

Tony Aulicino: Thank you, operator. Good morning, everyone, and thank you for attending today's call. I'd like to note that in our commentary today, there will be forward-looking financial information and that our actual results may differ materially from the expected results due to various risk factors and assumptions. These risk factors and assumptions are summarized in our second quarter MDNA and press release dated August 8th, 2024, and in our AIF, dated February 29th, 20

Speaker Change: Thank you, operator. Good morning, everyone, and thank you for attending today's call.

Speaker Change: I'd like to note that in our commentary today there will be forward-looking financial information and that our actual results may differ materially from the expected results due to various risk factors and assumptions.

Speaker Change: These risk factors and assumptions are summarized in our second quarter MD&A and press release dated August.

Speaker Change: 8th, 2024, and in our AIF.

Speaker Change: dated February 29th, 2024. In addition, certain financial measures that we will refer to today are not recognized under current general accepted accounting policies, and for a description and definition of these, please see our second quarter MD&A.

Speaker Change: At this time, I'd like to turn the call over to Ken Zinger, our President and CEO.

Ken Zinger: Thank you, Tony. Welcome, everyone, and thank you for joining us for our second quarter 2024 earnings call. On today's call, I will provide a brief summary of our impressive financial results released yesterday, followed by an update on capital allocation, and then our divisional updates for Canada and the U.S., followed by a summary of our recent tuck-in acquisition in Texas. I will then pass the call over to Tony to provide a detailed financial update. We will take questions, and then we will wrap up the call.

Ken Zinger: Welcome, everyone, and thank you for joining us for our second quarter, 2024 earnings call on today's call. I will provide a brief summary of our impressive financial results released yesterday, followed by an update on capital allocation and then our divisional updates for Canada in the US, followed by a summary of our recent tucking acquisition and text. I will then pass the call over to Tony to provide a detailed financial update. We will take questions, and then we will wrap up the call.

Ken Zinger: Thank you, Tony. Welcome, everyone, and thank you for joining us for our second quarter 2024 earnings call.

Ken Zinger: On today's call, I will provide a brief summary of our impressive financial results released yesterday, followed by an update on capital allocation, and then our divisional updates for Canada and the U.S., followed by a summary of our recent tuck-in acquisition in Texas.

Ken Zinger: I will then pass the call over to Tony to provide a detailed financial update. We will take questions and then we will wrap up the call.

Ken Zinger: I'll start my comments today by highlighting some of the major financial accomplishments we were able to achieve in Q2 2024. These highlights include all-time record revenue for a quarter of $553.2 million, beating the prior record set in Q2 of last year by 7%. Our second highest quarterly EBITDA ever of $95.4 million, our highest Q2 EBITDA ever, beating our prior Q2 record level set last year of $73.9 million by 29%. EBITDA margin of 17.3% versus 14.3% in Q2 of 2023 and 17.3% in the prior quarter.

Ken Zinger: I'll start my comments today by highlighting some of the major financial accomplishments we were able to achieve in Q2 2024. These highlights include all-time record revenue for our Q2 of $553.2 million, beating the prior Q2 record set in Q2 of last year by 7%. Our second highest quarterly EBITDA ever of $95.4 million, our highest Q2 EBITDA ever, beating our prior Q2 record level set last year of $73.9 million by 29%. EBITDA margin of 17.3% versus 14.3% in Q2 of 2023 and 17.3% in the prior quarter.

Tony Aulicino: I'll start my comments today by highlighting some of the major financial accomplishments we were able to achieve in Q2 2024. These highlights include all-time record revenue for our Q2 of $553.2 million, beating the prior Q2 record set in Q2 of last year by 7%.

Tony Aulicino: Our second highest quarterly EBITDA ever of $95.4 million, our highest Q2 EBITDA ever, beating our prior Q2 record level set last year of $73.9 million by 29%.

Ken Zinger: This result tied last quarter for the highest quarterly EBITDA margin achieved by CES in nine years as we continue to focus on returns. We renewed the NCIB plan effective July 22, 2024, and this allows us to repurchase up to 19.2 million shares during the next 12 months, of which we have already purchased 1.5 million shares at an average of $7.90 per share. Free cash flow of $54.8 million during the quarter was driven by the strong financial metrics noted previously. Total debt to trailing 12 months EBITDA dropped to a new low of 1.12 times from 1.49 times at the beginning of 2024 and 1.28 times at the end of Q1.

Ken Zinger: This result tied last quarter for the highest quarterly EBITDA margin achieved by CES in nine years, as we continue to focus on returns. We renewed the NCID plan, effective July 22, 2024, and this allows us to repurchase up to 19.2 million shares during the next 12 months, of which we have already purchased 1.5 million shares at an average of $7.90 per share, generating free cash flow of $54.8 million during the quarter driven by the strong financial metrics noted prior. Total debt to trailing 12 months' EBITDA dropped to a new low of 1.12 times from 1.49 times at the beginning of 2024 and 1.28 times at the end of Q1.

Tony Aulicino: EBITDA margin of 17.3% versus 14.3% in Q2 of 2023 and 17.3% in the prior quarter. This result tied last quarter for the highest quarterly EBITDA margin achieved by CES in nine years as we continue to focus on returns.

Tony Aulicino: We renewed the NCIB plan effective July 22, 2024, and this allows us to repurchase up to 19.2 million shares during the next 12 months, of which we have already purchased 1.5 million shares at an average of $7.90 per share.

Tony Aulicino: Free cash flow of $54.8 million during the quarter, driven by the strong financial metrics noted prior.

Tony Aulicino: Total debt to trailing 12-months EBITDA dropped to a new low of 1.12 times from 1.49 times at the beginning of 2024 and 1.28 times at the end of Q1.

Ken Zinger: I now want to confirm that our capital allocation plans for 2024 remain the same as stated on the last call. We will continue to pay our quarterly dividend of $0.03 per share, or approximately $28 million per year. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. We will continue to look for strategic tuck-in acquisition opportunities into related business lines or geographies, where we believe we can add value and grow returns.

Ken Zinger: I now want to confirm that our capital allocation plans for 2024 remain the same as stated on the last call. We will continue to pay our quarterly dividend of $0.03 per share, or approximately $28 million per year. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. We will continue to look for strategic tuck-in acquisition opportunities into related business lines or geographies where we believe we can add value and grow returns.

Tony Aulicino: I now want to confirm that our capital allocation plans for 2024 remain the same as stated on the last call. We will continue to pay our quarterly dividend of $0.03 per share or approximately $28 million per year.

Tony Aulicino: We will continue to support the business with the necessary investments required to provide acceptable growth and returns. We will continue to look for strategic tuck-in acquisitions opportunities into related business lines or geographies where we believe we can add value and grow returns.

Ken Zinger: We have renewed our NCIB as of July 22nd, and based on our current outlook, we intend to once again purchase the maximum number of shares possible under the NCIB. We will continue to exercise the NCIB to its maximum threshold until we see a share valuation more aligned to our financial performance. We will use the balance of our remaining free cash flow to continue paying down debt to maintain leverage towards the lower end of the one to one and a half times debt to trailing 12 months EBITDA rate.

Tony Aulicino: We have renewed our NCIB as of July 22nd and based on our current outlook we intend to once again purchase the maximum number of shares possible under the NCIB.

Speaker Change: We will continue to exercise the NCIB to its maximum threshold until we see a share valuation more aligned to our financial performance.

Speaker Change: We will use the balance of our remaining free cash flow to continue paying down debt to maintain leverage towards the lower end of the 1 to 1.5 times debt trailing 12 months EBITDAC range.

Ken Zinger: I will now move on to summarize Q4 performance by division. Today, our count in North America stands at 203 rigs out of the 786 listed as running on land in North America, representing a market share of 27 percent, up from 23.6 percent at the time of the last call.

Ken Zinger: I will now move on to summarize Q4 performance by division. Today, our rig count in North America stands at 203 rigs out of the 786 listed as running on land in North America, representing a market share of 27%, up from 23.6% at the time of the last call. In Canada, the Canadian Drilling Fluids Division continues to lead the WCSB in market share. Today, we are providing service to 76 of the 220 jobs listed as underway in Canada, a 34.5% market share.

Speaker Change: I will now move on to summarize Q4 performance by division.

Speaker Change: Today, our rig count in North America stands at 203 rigs out of the 786 listed as running on land in North America, representing a market share of 27%, up from 23.6% at the time of the last call.

Ken Zinger: In Canada, the Canadian Drilling Fluids Division continues to lead the WCSB in market share. Today, we are providing service to 76 of the 220 jobs listed as underway in Canada, a 34.5% market share. The active drilling rate count in Canada so far in Q3 2024 is higher by approximately 15% year-over-year. We remain excited about the prospects for 2024 and 2025 and continue to anticipate that activity will be a little stronger during these years than was experienced in 2023 due to the completion and start-up of infrastructure projects and their associated take-away capacity. PureChem, our Canadian production chemical business, had very strong results once again in Q2. After a slow start to the quarter in the frat chemical space within PureChem, June came in stronger.

Speaker Change: In Canada, the Canadian Drilling Fluids Division continues to lead the WCSB in market share. Today, we are providing service to 76 of the 220 jobs listed as underway in Canada, over a 34.5% market share.

Speaker Change: The active drilling rate count in Canada so far in Q3 2024, sorry Q2 2024, yes Q3 2024 is higher by approximately 15% year over year.

Ken Zinger: The active drilling rate count in Canada so far in Q3 2024, sorry, Q2, or yes, Q3 2024, is higher by approximately 15% year-over-year. We remain excited about the prospects for 2024 and 2025 and continue to anticipate that activity will be a little stronger during these years than was experienced in 2023 due to the completion and startup of infrastructure projects and their associated takeaway capacity. PureChem, our Canadian production chemical business, had very strong results once again in Q2. After a slow start to the quarter in the frack chemical space within PureChem, June came in stronger.

Speaker Change: We remain excited about the prospects for 2024 and 2025 and continue to anticipate that activity will be a little stronger during these years than was experienced in 2023 due to the completion and start-up of infrastructure projects and their associated take-away capacity.

Ken Zinger: All of the business lines within PureChem continue to grow as we have continued to take market share, win bids, optimize formulations, and fine-tune our supply chain. The revenue and earnings from our primary business, production treating, continue to accelerate in Canada as we consistently strive to deliver superior products and services combined with competitive market prices. In the United States, AES, our US drilling fluids group, is providing chemistry and service to 127 of the 566 rigs listed as active in the USA land market today for a continued number one market share of US land rigs at 22.4%.

Speaker Change: Pure Chem, our Canadian production chemical business, had very strong results once again in Q2.

Speaker Change: After a slow start to the quarter on the frack chemical space within Pure Chem, June came in stronger. All of the business lines within Pure Chem continue to grow as we have continued to take market share, win bids, optimize formulations, and fine-tune our supply chain.

Speaker Change: The revenue and earnings from our primary business, production treating, continue to accelerate in Canada as we consistently strive to deliver superior products and service combined with competitive market pricing.

Speaker Change: In the United States, AES, our U.S. Drilling Fluids Group, is providing chemistry and service to 127 of the 566 rigs listed as active in the USA land market today, for a continued number one market share of U.S. land rigs at 22.4%.

Ken Zinger: The number of rigs drilling in the U.S.A. was slightly down again quarter over quarter by about three percent, but we continue to view this level as being at or near the bottom of the trough. We continue to enjoy a basin-leading 98 rigs out of the 303 listed as working in the Permian Basin, equating to our market share in this basin of 32.3%. The Permian industry rig count is down 4% from the time of our last call.

Speaker Change: The number of rigs drilling in the U.S.A. was slightly down again quarter over quarter by about 3 percent. But we continue to view this level as being at or near the bottom of the trough.

Ken Zinger: We continue to enjoy a basin-leading 98 rigs out of the 303 listed as working in the Permian Basin, equating to our market share in this basin of 32.3%. The Permian industry rig count is down 4% from the time of our last call.

Speaker Change: We continue to enjoy a basin leading 98 rigs out of the 303 listed as working in the Permian Basin, equating to our market share in this basin of 32.3%.

Speaker Change: The Permian industry rig count is down 4% from the time of our last call.

Ken Zinger: That said, service intensity continues to demonstrate its presence in our numbers for AES as our revenue per day per rig continues to rise with more footage being drilled each day along with more complicated chemical solutions and services being provided due to the complexity and length of the horizontal section. We see this trend continuing for the foreseeable future on both sides of the border.

Speaker Change: That said, service intensity continues to demonstrate its presence in our numbers for AES as our revenue per day per rig continues to rise with more footage being drilled each day along with more complicated chemical solutions and service being provided due to the complexity and length of the horizontal sections.

Speaker Change: We see this trend continuing for the foreseeable future on both sides of the border.

Ken Zinger: Finally, J-Chem Catalyst continued its revenue growth in Q2. We have continued to win more business throughout this division, and we remain confident that we have comfortably achieved the largest market share in the Permian Basin. As with Pure Chem, J-Chem Catalyst continues to gain market share and grow revenue throughout the areas in which they operate, all while providing competitive market-based pricing. We also are achieving this through a focus on service and problem solving, while providing streamlined processes designed to minimize response times for solutions to our customers' needs.

Ken Zinger: We have continued to win more business throughout this division, and we remain confident that we have comfortably achieved the largest market share in the Permian Basin. As with Pure Cam, J-Can Catalyst continues to gain market share and grow revenue throughout the areas in which they operate, all while providing competitive market-based pricing. We are also achieving this through a focus on service and problem-solving while providing streamlined processes designed to minimize response times for solutions to our customers' needs.

Speaker Change: Finally, J-CAM Catalyst continued its revenue growth in Q2.

Speaker Change: We have continued to win more business throughout this division and we remain confident that we have comfortably achieved the largest market share in the Permian Basin. As with Pure Chem, J-Chem Catalyst continues to take market share and grow revenue throughout the areas in which they operate, all while providing competitive market-based pricing.

Speaker Change: We also are achieving this through a focus on service and problem-solving, while providing streamlined processes designed to minimize response times for solutions to our customers' needs.

Ken Zinger: Now for a quick summary of our announced tuck-in acquisition of HydroLite LLC in Midland, Texas. I would like to publicly welcome the founders of the business to the CES team. President Blake Linrood and his partners Kyle Duncan and Mike Robinette were majority owners of HydroLite and were the backbones of both the management as well as the day-to-day operations of the business. All three will continue to run the business on behalf of CES Energy Solutions.

Ken Zinger: Now for a quick summary of our announced tuck-in acquisition of Hydralite LLC in Midland, Texas. I would like to publicly welcome the founders of the business to the CES team. President Blake Linrude and his partners Kyle Duncan and Mike Robinette were majority owners of Hydralite and were the backbones of both the management as well as the day-to-day operations of the business. All three will continue to run this business on behalf of CES Energy Solutions. HydroLite has been renamed AES Completion Services and will now operate as a division within the AES Drilling Fluids Group.

Speaker Change: Now for our quick summary of our announced tuck-in acquisition of HydroLite LLC in Midland, Texas.

CES representative: I would like to publicly welcome the founders of the business to the CES team. President Blake Linrood and his partners Kyle Duncan and Mike Robinette were majority owners of HydroLite and were the backbone of both the management as well as the day-to-day operations of the business.

Speaker Change: All three will continue to run this business on behalf of CES Energy Solutions.

Ken Zinger: HydroLite has been renamed as AES Completion Services and will now operate as a division within the AES Drilling Fluids Group. We are proud to have these three ambitious, hardworking men on our team, and we believe their DNA fits like a glove within our culture.

Speaker Change: HydroLite has been renamed as AES Completion Services and will now operate as a division within the AES Drilling Fluids Group. We are proud to have these three ambitious, hard-working men on our team and we believe their DNA fits like a glove within our culture.

Ken Zinger: We are proud to have these three ambitious, hardworking men on our team, and we believe their DNA fits like a glove within our culture. Unknown Attendee The service line in which HydroLite LLC operates resides in the space between drilling fluids and production chemicals. The companies in this unconsolidated space are all independents providing specialized service and chemistry to operators, primarily when they drill out frack plugs after fracking and when they do well bore clean outs to optimize and maintain existing wells.

Unknown Attendee: Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, The companies in this unconsolidated space are all independents, providing specialized service and chemistry to operators, primarily when they drill out frack plugs after fracking and when they do well bore cleanouts to optimize and maintain existing wells. We estimate that there are approximately 20 to 25 companies in Texas that participate in this market. Most are smaller, owner-operated companies with one or two customers.

Speaker Change: The service line in which HydroLite LLC operates resides in the space between drilling fluids and production chemicals.

Speaker Change: The companies in this unconsolidated space are all independents, providing specialized service and chemistry to operators primarily when they drill out frack plugs after fracking and when they do wellbore cleanouts to optimize and maintain existing wells.

Ken Zinger: We estimate that there are approximately 20 to 25 companies in Texas that participate in this market. Most are smaller, owner-operated companies with one or two customers. We estimate that HydroLake currently has a sub-10% market share in this space in Texas. AES Completion Services will continue to offer specialized chemistry, equipment, and service to the market. In addition to more basic systems, some operations require a specialized high-relogy, low-density system to clean these wallboards or frock plugs due to under-pressured reservoirs.

Speaker Change: We estimate that there are approximately 20 to 25 companies in Texas that participate in this market. Most are smaller owner-operated companies with one or two customers. We estimate that Hydro Lake currently has a sub 10% market share in this space in Texas.

Unknown Attendee: We estimate that HydroLake currently has a sub-10% market share in this space in Texas. AES Completion Services will continue to offer this specialized chemistry, equipment, and service to the market. In addition to more basic systems, some operations require a specialized high-reliability, low-density system to clean these wallboards or frog plugs due to under-pressured reservoirs.

Speaker Change: AAS Completion Services will continue to offer this specialized chemistry, equipment, and service to the market. In addition to more basic systems, some operations require a specialized, high-relology, low-density system to clean these wall boards or frack plugs.

Ken Zinger: This chemistry is specialized and requires knowledge and expertise to make it work effectively, and AES Completion Services now welcomes this proprietary chemistry to its portfolio. When applied correctly, this chemistry can significantly reduce costs and improve performance as compared to the historical solution of utilizing N2 to lighten the fluid. We believe that AES completion services will benefit from CES's infrastructure, manufacturing, and supply chain advantages. As well, the chemistry being used in most circumstances is the same or similar to what we commonly utilize in drilling fluid applications.

Ken Zinger: This chemistry is specialized and requires knowledge and expertise to make it work effectively, and AES Completion Services now welcomes this proprietary chemistry to its portfolio. When applied correctly, this chemistry can significantly reduce costs and improve performance as compared to the historical solution of utilizing N2 to lighten the fluid. We believe that AES completion services will benefit from CES's infrastructure, manufacturing, and supply chain advantages, as well as the chemistry being used in most circumstances is the same or similar to what we commonly utilize in drilling fluid applications.

Speaker Change: due to under-pressured reservoirs. This chemistry is specialized and requires knowledge and expertise to make work effectively, and AES Completion Services now welcomes this proprietary chemistry to its portfolio.

Speaker Change: When applied correctly, this chemistry can significantly reduce costs and improve performance as compared to the historical solution of utilizing N2 to lighten the fluid.

Speaker Change: We believe that AES completion services will benefit from CES's infrastructure, manufacturing and supply chain advantages. As well, the chemistry being used in most circumstances is the same or similar to what we commonly utilize in drilling fluids applications.

Ken Zinger: Our field personnel will be able to cross over between the groups with some minor training, and our facilities are perfectly located with the capacity to provide the necessary support to this business. As well, we will now have the ability to share our relationships and MSAs with the vast majority of USA operators. Finally, I will note that there is an opportunity to grow this division outside its current footprint, which exists almost entirely in Texas today.

Speaker Change: Our field personnel will be able to cross over between the groups with some minor training and our facilities are perfectly located with the capacity to provide the necessary support to this business.

Speaker Change: As well, we will now have the ability to share our relationships and MSAs with the vast majority of USA operators.

Speaker Change: Finally, I will note that there is an opportunity to grow this division outside its current footprint which exists almost entirely in Texas today.

Ken Zinger: As always, I want to extend my appreciation to each and every one of our employees for their commitment to the business culture and success of CES. It is rewarding to note that, due to the growth that we are experiencing, we have increased our total number of employees at CES from 2236 on January 1st to 24 to 2369 at the end of Q2. This represents an increase of 133 employees so far this year, or approximately 6%.

Tony Aulicino: As always, I want to extend my appreciation to each and every one of our employees for their commitment to the business culture and success of CES. It's rewarding to note that, due to the growth that we are experiencing, we have increased our total number of employees at CES from 2,236 on January 1st, 24 to 2,369 at the end of Q2. This represents an increase of 133 employees so far this year, or approximately 6%.

Speaker Change: As always, I want to extend my appreciation to each and every one of our employees for their commitment to the business culture and success of CES.

Speaker Change: It is rewarding to note that due to the growth that we are experiencing, we have increased our total number of employees at CES from 2,236 on January 1st of 2024 to 2,369 at the end of Q2. This represents an increase of 133 employees so far this year, or approximately 6%.

Tony Aulicino: In conclusion, I would like to thank all of our employees in every division for their commitment to the success of the company. It speaks once again to the quality of the people employed everywhere in every division here at CES Energy Solutions. With that, I'll pass the call over to Tony for the financial update. Thank you, Ken.

Speaker Change: In conclusion, I would like to thank all of our employees in every division for their commitment to the success of the company. It speaks once again to the quality of the people employed everywhere in every division here at CES Energy Solutions. With that, I'll pass the call over to Tony for the financial update. Thank you, Ken.

Tony Aulicino: Thank you, Ken. CES's financial results set second-quarter records for both revenue and adjusted EBIT DAC, underscored by the continuation of strong free cash flow despite declining rate counts in the U.S., highlighting the unique resilience of our consumable chemicals business model. During the quarter, CES continued to provide critical chemical solutions, enabling our customers to succeed in an era of high service intensity levels and increasingly complex drilling fluids and production chemicals technology requirements.

Tony Aulicino: CES's financial results set second-quarter records for both revenue and adjusted EBIT DAC, underscored by the continuation of strong free cash flow despite declining rate counts in the U.S., highlighting the unique resilience of our consumable chemicals business model. During the quarter, CES continued to provide critical chemical solutions, enabling our customers to succeed in an era of high service intensity levels and increasingly complex drilling fluids and production chemicals technology requirements. These record results benefited from strong financial contributions from all parts of the business and were bolstered by a favorable product mix, continued high levels of service intensity, and the adoption of innovative technologically advanced products.

Tony Aulicino: CS's financial results that second quarter...

Tony Aulicino: records for both revenue and adjusted EBITDAC, underscored by the continuation of strong free cash flow despite declining rate counts in the U.S., highlighting the unique resilience of our consumable chemicals business model.

Tony Aulicino: During the quarter, CS continued to provide critical chemical solutions, enabling our customers to succeed in an era of high service intensity levels and increasingly complex drilling fluids and production chemicals technology requirements.

Tony Aulicino: These record results benefited from strong financial contributions from all parts of the business and were bolstered by a favorable product mix, continued high levels of service intensity, and the adoption of innovative technologically advanced products. We continue to serve the evolving needs of our customers and realize attractive economics due to our vertically integrated business model and effective supply chain management.

Speaker Change: These record results benefited from strong financial contributions from all parts of the business and were bolstered by a favorable product mix, continued high levels of service intensity and the adoption of innovative, technologically advanced products.

Tony Aulicino: We continue to serve the evolving needs of our customers and realize attractive economics due to our vertically integrated business model and effective supply chain management. In Q2, CES generated revenue and adjusted EBITDAQ of 553 million and 95.4 million, respectively, representing a 17.3% margin. Q2 revenue of $553 million represents an annualized run rate of approximately $2.2 billion and a 7% increase over a prior year of $516 million. Revenue generated in the U.S. achieved an all-time record at $391 million and represented 71 percent of total revenue.

Speaker Change: We continue to serve the evolving needs of our customers and realize attractive economics due to our vertically integrated business model and effective supply chain management.

Tony Aulicino: In Q2, CES generated revenue and adjusted EBITDA of $553 million and $95.4 million, respectively, representing a 17.3% margin. Q2 revenue of $553 million represents an annualized run rate of approximately $2.2 billion and a 7% increase over a prior year of $516 million. Revenue generated in the US achieved an all-time record of 391 million and represented 71% of total revenue. This revenue figure exceeded 388 million in Q1 and 375 million a year ago.

Speaker Change: In Q2, CS generated revenue and adjusted EBITDAC of $553 million and $95.4 million respectively, representing a 17.3% margin.

Speaker Change: Q2 revenue of $553 million represents an annualized run rate of approximately $2.2 billion and a 7% increase over a prior year of $516 million.

Speaker Change: Revenue generated in the U.S. achieved an all-time record at $391 million and represented 71% of total revenue.

Speaker Change: This revenue figure exceeded the $388 million in Q1 and $375 million a year ago.

Tony Aulicino: Revenue generated in Canada set a second quarter record at $162 million, up from $140 million in the prior year and compared to $201 million in Q1, as expected, on seasonally lower activity levels. The company continued to see high levels of service intensity and production chemical volumes driven by complex drilling programs. Customer emphasis on optimizing production through effective chemical treatments benefited both countries and countered declines in US industry rate counts, showcasing the resilience of our business model.

Speaker Change: Revenue generated in Canada set a second quarter record at $162 million, up from $140 million in the prior year, and compared to $201 million in Q1, as expected, on seasonally lower activity levels.

Tony Aulicino: The company continued to see high levels of service intensity and production chemical volumes driven by complex drilling programs. Customer emphasis on optimizing production through effective chemical treatments benefited both countries and countered declines in US industry rate counts, showcasing the resilience of our business model. Adjusted EBITDAC of $95.4 million set a second quarter record and represented a 29% increase from $73.9 million in Q2 2023 and compared to $102 million in Q1. Adjusted EBITDAC margin in the quarter of 17.3% came in 3% ahead of prior year margins of 14.3% and in line with Q1 2024.

Speaker Change: The company continued to see high levels of service intensity and production chemical volumes, driven by complex drilling progress.

Speaker Change: Customer emphasis on optimizing production through effective chemical treatments benefited both countries and counter declines in U.S. industry rate counts showcasing the resilience of our business model.

Tony Aulicino: Adjusted EBITDAC of $95.4 million set a second quarter record and represented a 29% increase from $73.9 million in Q2 2023 and compared to $102 million in Q1. Adjusted EBITDAC margin in the quarter of 17.3% came in 3% ahead of prior year margins of 14.3% and in line with Q1 2024. These margins were reflective of continued high service intensity levels and an attractive product mix and continued adoption of innovative technologically advanced products supported by a prudent cost structure and vertically integrated business.

Speaker Change: Majestic EBITDAC of $95.4 million set a second quarter record and represented a 29% increase from $73.9 million in Q2 2023 and compared to $102 million in Q1.

Speaker Change: Adjusted EBITDAC margin in the quarter of 17.3%, came in 3% ahead of prior year margins of 14.3%, and in line with Q1 2024.

Tony Aulicino: These margins were reflective of continued high service intensity levels and an attractive product mix and continued adoption of innovative technologically advanced products supported by a prudent cost structure and vertically integrated business model. During the quarter, CES generated $83 million in cash flow from operations, compared to $86 million in Q1 and $89 million in Q2 2023.

Speaker Change: These margins were reflective of continued high service intensity levels and attractive product mix and continued adoption of innovative technologically advanced products supported by a prudent cost structure and vertically integrated business model.

Tony Aulicino: During the quarter, CES generated $83 million in cash flow from operations compared to $86 million in Q1 and $89 million in Q2 2023. Strong cash flow from operations was the result of lower incremental investments in working capital as optimizations have stabilized over the previous quarters, partially offset by continued strong revenue levels and attractive margins, and free cash flow of $55 million for Q2, which compared to $57 million in Q1 and $67 million in Q2 2023.

Speaker Change: During the quarter, CS generated $83 million in cash flow from operations, compared to $86 million in Q1 and $89 million in Q2 2023.

Tony Aulicino: Strong cash flow from operations was the result of lower incremental investments in working capital as optimizations have stabilized over the previous quarters, partially offset by continued strong revenue levels and attractive margins. Free Cash Flow of $55 million for Q2, which compared to $57 million in Q1 and $67 million in Q2 2023. Free cash flow continued to demonstrate CS as a high quality of earnings as measured by a free cash flow to EBITDAQ conversion rate of approximately 60%. CES continued to maintain a prudent approach to capital spending through the quarter with CapEx spend net of disposal proceeds of $22 million.

Speaker Change: Strong cash flow from operations was the result of lower incremental investments in working capital as optimizations have stabilized over the previous quarters partially offset by continued strong revenue levels and attractive margins.

Speaker Change: Free cash flow of $55 million for Q2, which compared to $57 million in Q1 and $67 million in Q2 2023.

Tony Aulicino: Free cash flow continued to demonstrate CES's high quality of earnings as measured by a free cash flow to EBITDAC conversion rate of approximately 60%. CES continued to maintain a prudent approach to capital spending through the quarter with CapEx spend net of disposal proceeds of $22 million. We will continue to adjust plans as required to support existing business and attractive growth opportunities throughout our division.

Speaker Change: Free cash flow continued to demonstrate CS's high quality of earnings as measured by a free cash flow to EBITDAC conversion rate of approximately 60%.

Speaker Change: CS continued to maintain a prudent approach to capital spending through the quarter with CAPEX spend net of disposal proceeds of 22 million dollars.

Tony Aulicino: We will continue to adjust plans as required to support existing business and attractive growth opportunities throughout our division. And for the full year 2024, we expect cash capex to be approximately $75 to $80 million, split evenly between maintenance and expansion capital to support these higher levels of sustained revenue and incremental creative business development opportunities. During the quarter, there was no activity under the company's 2023-2024 NCIB program, as the maximum purchase of 18.7 million shares was achieved in Q1 at an average price of $3.66 per share for a total of $69 million.

Speaker Change: We will continue to adjust plans as required to support existing business and attractive growth opportunities through our divisions.

Tony Aulicino: And for the full year 2024, we expect cash capex to be approximately $75 to $80 million, split evenly between maintenance and expansion capital to support these higher levels of sustained revenue and incremental creative business development opportunities. During the quarter, there was no activity under the company's 2023-2024 NCIB program as the maximum purchase of 18.7 million shares was achieved in Q1 at an average price of $3.66 per share for a total of $69 million. Subsequent to June 30th, CES announced the renewal of its previous NCIB.

Speaker Change: and for the full year 2024 we expect cash capex to be approximately 75 to 80 million dollars.

Speaker Change: split evenly between maintenance and expansion capital to support these higher levels of sustained revenue and incremental creative business development opportunities.

Speaker Change: During the quarter, there was no activity under the company's 2023-2024 NCIB program as the maximum purchase of 18.7 million shares

Speaker Change: was achieved in Q1 at an average price of $3.66 per share for a total of $69 million.

Tony Aulicino: Subsequent to June 30th, CES announced the renewal of its previous NCIB. Under the company's renewed NCIB, which became effective on July 22nd, the company may purchase up to 19.2 million common shares, representing 10% of the public float at the time of renewal. To date, the company has already purchased 1.5 million common shares at an average price of $7.90 per share for a total of $11.8 million. With the current strength in the business and at current share price levels, as Ken mentioned, we intend to repurchase up to the maximum number of shares allowed under the renewed NCIB over the coming year and will implement opportunistic purchases if the shares remain trading at a discounted level.

Speaker Change: Subsequent to June 30th, CES announced the renewal of its previous NCIB.

Tony Aulicino: Under the company's renewed NCIB, which became effective on July 22nd, the company may purchase up to 19.2 million common shares, representing 10% of the public float at the time of renewal. To date, the company has already purchased 1.5 million common shares at an average price of $7.90 per share for a total of $11.8 million. With the current strength in the business and at current share price levels, as Ken mentioned, we intend to repurchase up to the maximum number of shares allowed under the renewed NCIB over the coming year and will implement opportunistic purchases if the shares remain trading at a discounted level.

Speaker Change: Under the company's renewed NCIB, which became effective on July 22nd, the company made purchase up to 19.2 million common shares, representing 10% of the public float at the time of renewal.

Speaker Change: To date, the company has already purchased 1.5 million common shares at an average price of $7.90 per share for a total of $11.8 million.

Speaker Change: With the current strength in the business and at current share price levels, as Ken mentioned, we intend to repurchase up to the maximum shares allowed under the renewed NCIB over the coming year and will implement opportunistic purchases if the shares remain trading at discounted levels.

Tony Aulicino: We ended the quarter with $405 million in total debt, representing a decrease of $29 million from the prior quarter. Total debt is comprised primarily of the 200 million senior notes, a net draw on the senior facility of 110 million, and 85 million in lease obligations.

Tony Aulicino: We ended the quarter with $405 million in total debt, representing a decrease of $29 million from the prior quarter. Total debt is comprised primarily of $200 million in senior notes, a net draw on the senior facility of $110 million, and $85 million in lease obligations.

Ken Zinger: We ended the quarter with $405 million in total debt, representing a decrease of $29 million from the prior quarter.

Ken Zinger: Total debt is comprised primarily of the $200 million in senior notes, a net draw on the senior facility of $110 million, and $85 million in lease obligations.

Tony Aulicino: Total debt to adjusted EBITDA can improve to 1.12 times at the end of the quarter, compared to 1.28 times at March 31st and 1.49 times at December 31st, 2023, demonstrating our continued deleveraging trend. On May 24th, CES closed the private placement of our $200 million senior unsecured notes offering with a 6-7-8 coupon in maturity of May 24th, 2029. The net proceeds from the issuance of the senior notes, together with draws on the company's senior facility, were used to repay our $250 million term loan facility on more attractive terms and provide a maturity extension to 2029 to further strengthen our capital structure and meet the needs of the company while also reducing the cost of capital.

Ken Zinger: Total debt to adjusted EBITDAC improved to 1.12 times at the end of the quarter compared to 1.28 times at March 31st and 1.49 times at December 31st, 2023 demonstrating our continued deleveraging trend.

Tony Aulicino: Total debt to adjusted EBITDA can improve to 1.12 times at the end of the quarter, compared to 1.28 times at March 31, and 1.49 times at December 31, 2023, demonstrating our continued deleveraging. On May 24th, CES closed the private placement of our $200 million senior unsecured notes offering with a six and seven-eighths coupon in maturity on May 24th, 2029. The net proceeds from the issuance of the senior notes, together with draws on the company's senior facility, were used to repay our $250 million term loan facility on more attractive terms and provide a maturity extension to 2029 to further strengthen our capital structure and meet the needs of the company while also reducing the cost of capital.

Speaker Change: On May 24th, CS closed the private placement of our $200 million senior unsecured notes offering.

Speaker Change: with a 6-7-8 coupon in maturity of May 24th, 2029.

Speaker Change: The net proceeds from the issuance of the senior notes, together with draws on the company's senior facility.

Speaker Change: We're used to repay our $250 million term loan facility on more attractive terms and provide a maturity extension to 2029 to further strengthen our capital structure and meet the needs of the company while also reducing the cost of capital.

Tony Aulicino: We are very comfortable with our current debt level, maturity schedule, and leverage in the lower end of the 1 to 1.5 times range, thereby enabling a strong return of capital to shareholders and prioritizing a sustainable dividend and share buyback. I would also note that our working capital surplus of $640 million exceeded total debt of $405 million by $235 million and demonstrated continued quarterly improvement. Continued focus on working capital optimization has led to year-over-year improvements in cash conversion cycle to 111 days from 121 days at June 30, 2023 and compares to 106 days in Q1. This also translates to a reduction in operating working capital as a percentage of annualized quarterly revenue to 28% from 31% a year ago and compares to 27% in Q1.

Tony Aulicino: We are very comfortable with our current debt level, maturity schedule, and leverage in the lower end of the 1 to 1.5 times range, thereby enabling a strong return of capital to shareholders and prioritizing a sustainable dividend and share buyback. I would also note that our working capital surplus of $640 million exceeded total debt of $405 million by $235 million and demonstrated continued quarterly improvement. Continued focus on working capital optimization has led to year over year improvements in the cash conversion cycle to 111 days from 121 days at June 30, 2023, and this compares to 106 days at Q1.

Speaker Change: We are very comfortable with our current debt level, maturity schedule and leverage in the lower end of the 1 to 1.5 times range, thereby enabling strong return of capital to shareholders and prioritizing the sustainable dividend and share buybacks.

Speaker Change: I would also note that our working capital surplus of $640 million exceeded total debt of $405 million by $235 million and demonstrated continued quarterly improvement.

Tony Aulicino: This also translates to a reduction in operating working capital as a percentage of annualized quarterly revenue to 28% from 31% a year ago and compares to 27% in Q1. Each percentage improvement at these revenue levels represents approximately $22 million on our balance sheet. Internally, we have continued to focus on return on average capital employed metrics at the divisional level. This approach has led to a cultural adoption of key ROCE maximizing factors, such as profitable growth, strong margins, working capital optimization, and prudent capital expenditures. I am proud to report that the resulting consolidated last 12-month ROCE is now sitting at a record level of 24.7%. As Ken mentioned, CES closed the acquisition of HydroLite on July 1st.

Speaker Change: Continued focus on working capital optimization has led to year-over-year improvements in cash conversion cycle to 111 days.

Speaker Change: from 121 days at June 30, 2023 and compares to 106 days at Q1.

Speaker Change: This also translates to a reduction in operating working capital as a percentage of annualized quarterly revenue to 28% from 31% a year ago and compares to 27% in Q1.

Tony Aulicino: Each percentage improvement at these revenue levels represents approximately $22 million on our balance sheet. Internally, we have continued to focus on return on average capital employed metrics at the divisional level. This approach has led to a cultural adoption of key ROCE maximizing factors such as profitable growth, strong margins, working capital optimization, and prudent capital expenditures. I am proud to report that the resulting consolidated last 12 month ROCE is now sitting at a record level of 24.7%. As Ken mentioned, CES closed the acquisition of HydroLite on July 1.

Speaker Change: Each percentage improvement at these revenue levels represents approximately 22 million dollars on our balance sheet.

Speaker Change: Internally, we have continued to focus on return on average capital employed metrics at the divisional levels.

Speaker Change: This approach has led to a cultural adoption of key ROCE maximizing factors such as profitable growth, strong margins, working capital optimization, and prudent capital expenditures.

Speaker Change: I am proud to report that the resulting consolidated last 12-month ROCE is now sitting at a record level of 24.7%.

Tony Aulicino: The aggregate purchase price was approximately $15 million, and employees in the urnaut structure with $8.1 million of cash consideration settled on close. We look forward to working with the team to maximize value from the secretive tuck-in acquisition. The company's Q2 results demonstrate very strong revenue levels and surplus free cash flow generation trends in the current environment, and are indicative of the cash flow generating characteristics of CES. This is further illustrated by our current net draw of $120.5 million, which has increased by $9.9 million from the end of the quarter, primarily as a result of the recent acquisition and NCIB spends, representing $8.1 million and $11.8 million, respectively.

Speaker Change: As Ken mentioned, CES closed the acquisition of Hydrolite on July 1st.

Tony Aulicino: The aggregate purchase price was approximately $15 million and employed an earn-out structure with $8.1 million of cash consideration settled on close. We look forward to working with the team to maximize value from this accretive tuck-in acquisition. The company's Q2 results demonstrate very strong revenue levels and surplus free cash flow generation trends in the current environment and are indicative of the cash flow generating characteristics of CES. This is further illustrated by our current net draw of $120.5 million, which has increased by $9.9 million from the end of the quarter, primarily as a result of the recent acquisition and NCIB spends, representing $8.1 million and $11.8 million, respectively.

Speaker Change: The aggregate purchase price was approximately $15 million and employs an earn-out structure with $8.1 million of cash consideration settled on close.

Speaker Change: We look forward to working with the team to maximize value from the secretive tucking acquisition.

Speaker Change: The company's Q2 results demonstrate very strong revenue levels and surplus free cash flow generation trends in the current environment and is indicative of the cash flow generating characteristics of CS.

Speaker Change: This is further illustrated by our current Netra of 120.5 million dollars, which has increased by 9.9 million.

Speaker Change: from the end of the quarter.

Speaker Change: primarily as a result of the recent acquisition and NCIB spends representing $8.1 million and $11.8 million respectively.

Tony Aulicino: CES' continued strong performance puts us in a position of strength and flexibility, which are key to informing our capital allocation considerations. In particular, we continue to view share buybacks as an extremely attractive use of capital, given the context of our very strong EBITDA margin progression, consistent attractive free cash for generation, ROCE, and ROIC levels, and the 24 to 25% range and a very prudent balance. Thank you very much.

Tony Aulicino: CES's continued strong performance puts us in a position of strength and flexibility, which are key to informing our capital allocation considerations. In particular, we continue to view share buybacks as an extremely attractive use of capital in the context of our very strong EBITDA margin progression, consistent attractive free cash flow generation, ROCE and ROIC levels in the 24 to 25% range, and a very prudent balance sheet. At this time, I'd like to turn the call back to the operator to allow for questions.

Speaker Change: CS's continued strong performance puts us in a position of strength and flexibility which are key to informing our capital allocation considerations.

Speaker Change: In particular, we continue to view share buybacks as an extremely attractive use of capital.

Speaker Change: in the context of our very strong EBITDA margin progression, consistent to track the free cash for generation, ROCE and ROIC levels in the 24 to 25% range and a very prudent balance sheet.

Operator: At this time, I'd like to turn the call back to the operator to allow for questions. Thank you. We'll now begin the question and answer session. To join the question queue, you may press star and one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up the handset before pressing any keys.

Speaker Change: At this time, I'd like to turn the call back to the operator to allow for questions.

Operator: We'll now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up the handset before pressing any keys. To withdraw your question, please press star then two. The first question is from Aaron MacNeil with TD Collins. Please go ahead.

Aaron MacNeil: To withdraw your question, please press star then two [inaudible] The first question is from Aaron MacNeil with 2D Collin. Please go ahead. Tony, you said previously that you'd provide guidance going forward on the Q2 conference call. Maybe I missed it in the prepared remarks, but is that still something that you're playing to the audience? Yeah, absolutely.

Speaker Change: Thank you.

Speaker Change: We'll now begin the question-and-answer session. To join the question queue, you may press star then 1 on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up the handset before pressing any keys. To withdraw your question, please press star then 2.

Speaker Change: The first question is from Erin McNeil with TD Collins. Please go ahead.

Aaron MacNeil: Good morning. Thanks for taking my question. Tony, you said previously that you'd provide go forward margin guidance on the Q2 conference call. Maybe I missed it in the prepared remarks, but is that still something that you're planning to provide?

Erin McNeil: Good morning. Thanks for taking my question. Tony, you said previously that you'd provide go-forward margin guidance.

Speaker Change: on the Q2 conference call. Maybe I'm just sitting at prepared remarks, but is that still something that you're applying to provide?

Tony Aulicino: We focus on a lot of financial aspects of the company, as you know, and that all gets distilled by the most important element, which is cash flow generation, but a lot of that is driven by the impressive margin progression. So yeah, happy to speak to that. I'll start off. We, our previous ranges were 13 and a half to 14 and a half about a year ago. That moved up to 14 to 14 and a half percent. And then over the last four quarters, we delivered 15.0%, followed by 15.3%, followed by 17.3% last quarter. And again, this quarter to the same level.

Tony Aulicino: Yeah, absolutely. We focus on a lot of financial aspects of the company, as you know, and that all gets distilled by the most important element, which is cash flow generation, but a lot of that is driven by the impressive margin progression. So yeah, happy to speak to that. I'll start off.

Speaker Change: Yeah, absolutely. We focus on a lot of financial attributes of the company, as you know, and that all gets distilled by the most important element, which is cash flow generation, but a lot of that is driven by the impressive margin progression. So yeah, happy to speak to it. I'll start off.

Tony Aulicino: We, our previous ranges were 13.5 to 14.5 about a year ago; that moved up to 14 to 14.5%. And then over the last four quarters, we delivered 15.0%, followed by 15.3%, followed by 17.3% last quarter, and again this quarter at the same level. And again, it's been driven by what Ken and I have been talking about; this environment of high service intensity plays to the company's strengths. A bigger portion of the products that our customers are buying from us are the more specialized products that command higher profit margins and EBITDA margin profiles because of our vertically integrated business model.

Speaker Change: Our previous ranges were 13.5% to 14.5% about a year ago. That moved up to 14% to 14.5%. And then over the last four quarters, we delivered...

Speaker Change: four quarters ago, 15.0%, followed by...

Speaker Change: 15.3% followed by 17.3% last quarter and again this quarter at the same level. And again, it's been driven by what Ken and I have been talking about. This environment of high service intensity plays to the company's strengths.

Speaker Change: a bigger portion of the products that our customers are buying from us.

Ken Zinger: are the more specialized products that command higher profit margin and EBITDA margin profiles because of our vertically integrated business model.

Tony Aulicino: Our procurement team has continued to be very effective, and you can see that in our gross margins. And then the last one that is a little bit more unpredictable is the adoption of our technologically advanced new products that our customers need in this new era of more complicated drilling and production requirements. And that's one of them that can fluctuate any given month, any given quarter. But in light of what we've done, we'll be responsible and answer that question by looking at the average of the last four quarters.

Ken Zinger: Our procurement team has continued to be very effective, and you can see that in our gross margins.

Speaker Change: And then the last one, that is a little bit more unpredictable.

Speaker Change: is the adoption of our technologically advanced new products that our customers need in this new era of more complicated drilling and production requirements.

Tony Aulicino: And I want to make sure that we provide a range that's responsible, and we believe that the responsible range right now, in the context of everything that's happening, is between 15 and a half and 16 and a half percent. And I want to make sure that the average of the average of the average of the average of the average of the average of the average. That makes sense. And so you sort of touched on this. I assume that because he's been given that ring.

Speaker Change: And that's...

Speaker Change: One of them that can move any given month, any given quarter, but in light of what we've done

Speaker Change: will be responsible and answer that question by looking at the average over the last four quarters.

Tony Aulicino: That is an average of just over 16%. And I want to make sure that we provide a range that's responsible. And we believe that the responsible range right now, in the context of everything that's happening, is between 15.5% and 16.5%.

Speaker Change: that is an average of just over 16%, and I wanna make sure that we provide a range that's responsible, and we believe that responsible range right now in the context of everything that's happening is 15 1⁄2 to 16 1⁄2%.

Aaron MacNeil: Oh, that makes sense. And so you sort of touched on this, but I assume that because you've given that range, it's something you think you can achieve with a pretty high confidence interval or, you know. I guess the question I'm trying to ask is, do you think you could continue to allow the margins to trend down Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Endri Len

Speaker Change: Oh, that makes sense, and so...

Speaker Change: You sort of touched on this, but I assume that because you've given that range, it's something you think you can achieve with a pretty high confidence interval or?

Aaron MacNeil: I don't think you think you're gonna cheat. Confident Interval or... [inaudible] I guess the question I'm trying to ask is, do you think you could continue? We need that, like you have with the last two quarters. [inaudible] So we don't expect them to trend down based on everything we know about our business and that we're seeing in the industry and just like we've always said every time we put out a range or talked about what we intend on doing we would love to be in a position to exceed that range and but we don't want everybody to hang their hat on on a range that's higher than that at least not at this and maybe just switching gears.

Speaker Change: I guess the question I'm trying to ask is, do you think you could continue to exceed that like you have over the last two quarters, or do you expect margins to trend down?

Tony Aulicino: So we don't expect them to trend down based on everything we know about our business and what we're seeing in the industry. And just like we've always said, every time we put out a range or talked about what we intend on doing, we would love to be in a position to exceed that range, but we don't want everybody to hang their hat on a range that's higher than that, at least not at this.

Speaker Change: So we don't expect them to trend down based on everything we know about our business and that we're seeing in the industry.

Speaker Change: and just like we've always said every time we put out a range or talked about

Speaker Change: what we intend on doing.

Speaker Change: We would love to be in a position to exceed that range, but we don't want everybody to hang their hat on a range that's higher than that, at least not at this time.

Unknown Attendee: Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Endri Leno, Keith MacKey, M&A has changed, you know, just given that you've sort of gotten the debt where you want it to be, you're generating free cash flow while in excess of the NCIB and the dividend commitments, like, is that something that we could see more of or can expect to see more of

Speaker Change: And maybe just switching gears, you know, I can appreciate that M&A is opportunity driven, but, you know, is your attitude towards

Aaron MacNeil: You know, I can appreciate that M&A is opportunity driven, but, You know, as your attitude toward... M&A has changed, you know, just given the, sort of gotten the debt where you want it to be, your generated Cash Flow, our successor, the NCIB in the dividends. Like, is that something that we could see more of?

Speaker Change: M&A changed, you know, just given that you've sort of gotten the debt where you want it to be, you're generating free cash flow while in excess of the NCIB and the dividend commitments, like is that something that we can see more of or can expect to see more of?

Tony Aulicino: [inaudible] Yeah, so to be fair, there has been a bit of a change. Like when we look at M&A, we look at a lot of opportunities. And whenever we get serious, we'll share those opportunities. We'll talk to the board about them. But there are two key elements when we look at M&A, and they're defined by the how and the why.

Tony Aulicino: Yeah, so to be fair, there has been a bit of a change. Like when we look at M&A, we look at a lot of opportunities. And whenever we get serious, we'll share those opportunities. We'll talk to them, to the board about them.

Speaker Change: Yeah, so to be fair, there has been a bit of a change. Like, when we look at M&A, we look at a lot of opportunities.

Speaker Change: and we whenever we get serious we'll share those opportunities we'll talk

Tony Aulicino: But there are two key elements when we look at M&A, and they're defined by the how and the why. So the how is, well, how do you finance something regardless of size, and that distills down to our capital structure and our valuation multiple. We have our capital structure house in order in a very effective way, I believe. We got that bond done, maturity of 2029, good cost of capital on the debt side, and a good maturity schedule. So that's one element. And the other element is the valuation multiple.

Speaker Change: to the board about them, but there's two key elements when we look at M&A and they're defined by the how and the why so

Tony Aulicino: So, the how is, well, how do you finance something regardless of size, and that distills down to our capital structure and our valuation multiple. We have our capital structure house in order in a very effective way, I believe. We got that bond done, maturity of 2029, good cost of capital on the debt side, good maturity schedule. So that's one element. And the other element is the valuation multiple.

Speaker Change: The how is, well, how do you finance something, regardless of size?

Speaker Change: that distills down to our capital structure and our valuation multiple. We have our capital structure house in order in a very effective way, I believe. We got that bond done, maturity of 2029, good cost of capital on the debt side, good maturity schedule.

Tony Aulicino: Although we've grown from sub-four times a year ago, if I look at the analyst estimates from yesterday before everybody started increasing, we're still trading under six times, probably five and a half to six times right now. And that's without the increases that I know are coming for 2025. But that multiple is a little bit better, that's checked off now, right?

Speaker Change: So that's one element, and the other element is valuation multiple. Although we've grown from the sub-four times a year ago,

Speaker Change: If I look at the analyst estimates from yesterday before everybody started increasing, we're still trading...

Speaker Change: sub six times, probably five and a half to six times right now. And that's without the increases that I know are coming for 2025. But that multiple is a little bit better. So that how

Tony Aulicino: So that how, that's checked off now, right? And the most important thing, though, is the why, the strategic merit. We're not going to do a deal just to get bigger, and anything we look at has to have very high levels of strategic merit. And as Ken has mentioned a bunch of times, we look pretty hard at small tuck-ins that are strategic, but we're not very interested in seriously pursuing any swing for the fences deal, despite the fact that our balance sheet is way better and our multiple is a bit better as well. Thanks. I'll turn it on.

Tony Aulicino: And the most important thing, though, is why strategic merit. We're not going to do a deal just to get bigger, and anything we look at has to have very high levels of strategic merit. And as Ken has mentioned a bunch of times, we look pretty hard at small tuck-ins that are strategic, but we're not very interested in seriously pursuing any swing for the fences deal despite the fact that our balance sheet is way better, and our multiple is a bit better as well.

Speaker Change: That's checked off now, right?

Speaker Change: And the most important thing though is the why, the strategic merit. We're not going to do a deal just to get bigger. And anything we look at has to have very high levels of strategic merit and as Ken has mentioned a bunch of times,

Ken Zinger: We look pretty hard at small tuck-ins that are strategic, but we're not very interested in seriously pursuing any swing-for-the-fences deal, despite the fact that our balance sheet is way better and our multiple is a bit better as well.

Unknown Attendee: You're set. Thanks. I'll turn it back on.

Ken Zinger: You're still, thanks, I'll turn it back.

Ken Zinger: Thank you very much for watching this video.

Operator: Thank you. The next question is from Keith MacKey with RBC Capital Markets. Please go ahead.

Keith Mackey: Thank you. The next question is from Keith Mackey with RBC Capital Markets. Please go ahead. Hi, good morning.

Speaker Change: Thank you. The next question is from Keith Mackey with RBC Capital Markets. Please go ahead.

Keith Mackey: Hi, good morning. I've certainly been buying back a decent amount of stock over the last few quarters, and you talked about buying 1.5 million shares under the new plan. Can you talk about what level maybe you might be more sensitive to repurchasing shares at? Tony, I think you mentioned in the prepared remarks that you're looking to exhaust the 19 million share plan over the next 12 months. How do you think about whether or not that is the best use of capital? Is there a specific number in terms of multiples? Is there an intrinsic value you look at? I'm just curious how we should be thinking about that as the stock price fluctuates.

Keith Mackey: I've certainly been buying back a decent amount of stock over the last few quarters, and talked about buying 1.5 million shares under the new plan. Can you talk about, Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, Jonathan Goldman, In terms of value, you look at just curious how we should be thinking about that as a stock price fluctuating.

Speaker Change: Hi, good morning. I've certainly been buying back a decent amount of stock over the last few quarters and we talked about

Speaker Change: buying in 1.5 million shares under the new plan. Can you talk about

Speaker Change: What level maybe you might be more sensitive to repurchasing shares at? Tony, I think you mentioned in the prepared remarks you're looking to exhaust the 19 million share plan over the next 12 months.

Speaker Change: How do you think about whether or not that is the best use of capital? Is there a specific number or in terms of multiple, is there an intrinsic value you look at? Just curious how we should be thinking about that as the stock price fluctuates.

Keith Mackey: Yeah, we'll share our philosophy, which is our version of what various investors will have as their purchase philosophies. We look at the company. You've seen the financial profile, you've seen the results. We've consistently put up ROCE and ROIC levels in the mid to mid to high range of 20 to 25 percent.

Tony Aulicino: Yeah, like we'll share our philosophy, which is our version of what various investors will have as their purchase philosophies. We look at the company, you've seen the financial profile, you've seen the results.

Speaker Change: Yeah, like we'll share our philosophy which is our version of what various investors will have as their purchase philosophies. We look at the company, you've seen the financial profile, you've seen the results.

Tony Aulicino: We've consistently put up ROCE and ROIC levels in the mid to mid to high range of 20 to 25 percent. EBITDAC margin has strengthened significantly and consistently from the 14 range to the, Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, and when you look at our current multiple, I think I calculated last night based on estimates that were available of 5.67 times. And that's going to go down based on some of the research that Ken and I have been reading last night and this morning.

Speaker Change: We've consistently put up ROCE and ROIC levels in the mid to mid to high range of 20 to 25 percent. EBITDAC margin has strengthened significantly and consistently from the 14 range to the

Tony Aulicino: EBITDAC margin has strengthened significantly and consistently from the 14 range to the 17 plus range; our cash on cash yield right now, based on if you extrapolate our free cash flow and look at our market cap, is in the double digits and that 11% plus or minus range. And when you look at our current multiple, I think I calculated last night based on estimates that were available of 5.67 times, and that's going to go down based on some of the research that Ken and I have been reading last night and this morning.

Speaker Change: 17 plus range. Our cash on cash yield right now, based if you extrapolate our free cash flow and look at our market cap, is in the the double digits in that 11% plus or minus range.

Speaker Change: And when you look at our current multiple, I think I calculated last night based on estimates.

Speaker Change: that were available of 5.67 times and that's going to go down based on some of the research that Ken and I have been reading last night and this morning.

Tony Aulicino: So, in our view, if we can pick up a company that we know very well, like ours, in the context of the current industry conditions, in anywhere near this range, as we've said before, we're not even going to talk about taking our foot off the pedal on buybacks until we're well into the sixes or the sevens in terms of the EVT baton range.

Tony Aulicino: So, in our view, if we can pick up a company that we know very well, like ours, in the context of the current industry conditions, for anywhere near this range, as we've said before, we're not even going to talk about taking our foot off the pedal on buybacks until we're well into the sixes or the sevens in terms of the EVT baton range.

Speaker Change: So, in our view, if we can pick up a company that we know very well, like ours, in the context of the current industry conditions.

Speaker Change: in the anywhere near this range, as we've said before, we're not even gonna talk about taking our foot off the pedal on buybacks until we're well into the sixes or the sevens in terms of EVT baton range.

Keith Mackey: Got it. Okay.

Keith Mackey: Okay. And, you mentioned buying stock in a company to know. As you mentioned, you also bought another company that, you know, Q3 anyways. Can you talk maybe a little bit more about the EBITDA impact, if any, of the acquisition of HydroLite, which kind of gives us a little bit more of the type of multiple that you would have paid for that company, assuming that there is a decent amount of growth opportunity?

Speaker Change: Okay, and you mentioned buying stock of a company to know

Keith Mackey: And you mentioned buying stock in a company to know As you mentioned, you also bought another company that, you know, missed in Q3 anyways. Can you talk maybe a little bit more about the EBITDA impact, if any, of the acquisition of HydroLite, which kind of gives us a little bit more of the type of multiple that you would have paid for that company, assuming that there is a decent amount of opportunity?

Speaker Change: As you mentioned, he also bought another company that, you know,

Speaker Change: in Q3 anyways. Can you talk maybe a little bit more about the...

Speaker Change: EBITDA impact, if any, of the acquisition.

Speaker Change: of HydroLite, which kind of gives us a little bit more of the type of multiple that you would have paid for that company.

Keith Mackey: But can you maybe discuss kind of what the market looks like for more of these types of acquisitions? Are there lots of other areas that you think you could add to your portfolio over the next little while, given that there's likely some more private equity and sellers in the market, potentially in the US markets at this time? Yeah, I'd say we're very, very disciplined.

Keith Mackey: But can you maybe discuss kind of what the market looks like for more of these types of acquisitions? Are there lots of other areas that you think you could add to your portfolio over the next little while, given that there's likely some more private equity sellers in the market, potentially in the US markets at this time?

Speaker Change: Assuming that there is a decent amount of growth opportunity. But can you maybe discuss kind of what the market looks like for more of these types of acquisitions? Are there lots of other areas that you think you could add into your portfolio over the next little while, given that there's likely some...

Speaker Change: some more private equity and...

Speaker Change: sellers in the market, potentially in the U.S. market at this time.

Tony Aulicino: Yeah, I'd say we're very, very disciplined. So to answer the first part of your question in terms of the EBITDA contribution, this is an excellent business that the guys brought on. And as Ken mentioned a couple of times, it's not only the business, but it's the people. Those three guys are great contributors, and we believe they have great futures at AS and CES.

Tony Aulicino: So to answer the first part of your question in terms of Martin's EBITDA contribution, this is an excellent business that the guys brought on. And as Ken mentioned a couple of times, it's not only the business, but it's the people, like those three guys are great contributors. And we believe they have great futures at AS and CS. So those are two massive reasons why we did the deal. And from an EBITDA contribution perspective, it's small, right?

Speaker Change: Yeah, I'd say we're very, very disciplined. So to answer the first part of your question in terms of the EBITDA contribution, this is an excellent business that the guys brought on. And as Ken mentioned a couple of times,

Speaker Change: It's not only the business, but it's the people, like those three guys are great contributors and we believe have great futures at AS and CS, so those are two massive reasons why we did the deal. And from an EBITDA...

Tony Aulicino: So those are two massive reasons why we did the deal. And from an EBITDA contribution perspective, it's small, right? But I would say and tell everybody that their margins are actually higher than our consolidated corporate margins, which is another big, big reason why we liked the business and the quality of the business. As Ken mentioned, we intend to expand it in a very responsible way and give the guys free reign on all of the tools that our partners at AS and the rest of the company can provide to them to allow them to really excel.

Speaker Change: contribution perspective, it's small, right? But I would say

Speaker Change: and tell everybody that their margins are actually higher than our consolidated corporate margins, which is another big reason why we liked the business and the quality of the business. As Ken mentioned, we intend to expand it in a very responsible way.

Ken Zinger: and give the guys free reign on all of the tools that our partners at AES and the rest of the company can provide to them to allow them to really excel. And then in terms of other opportunities, yeah, we see a lot of opportunities, but.

Tony Aulicino: And then in terms of other opportunities, we see a lot of opportunities, which is good. But the bad news is we have a really good business. And when we look at our margin performance, our cash flow profile, our CapEx light asset light business model, we're not going to dilute that just to get bigger or to go on an M&A run.

Speaker Change: We are

Speaker Change: which is good.

Speaker Change: But the bad news is we have a really good business, and when we look at...

Speaker Change: When we look at our margin performance, our cash flow profile, our CapEx lite asset lite business model.

Speaker Change: We're not going to dilute that just to get bigger or to go on an M&A run.

Tony Aulicino: As I mentioned, Keith, they've been primarily focused in Texas and in Midland, particularly. So obviously, the entire US has opportunity, and Canada as well. And then, as far as further M&A in the space, we currently have no intention of that. We wanted to get the guys with the experience and the business plan to grow off of, and our intention from here would be organic within that line.

Keith Mackey: We wanted to get the guys with the experience and the business plan to grow off of, and our intention from here would be to grow organically within that line. Okay, that's it for me. Thanks very much.

Speaker Change: As I mentioned Keith, they've been primarily focused in Texas and in Midland particularly.

Keith Mackey: So obviously the entire U.S. has opportunity, Canada as well.

Speaker Change: and then as far as further M&A in the space, we currently have no intention of that. We wanted to get the guys with the experience and the business plan to grow off of and our intention from here would be organic within that line.

Keith Mackey: Okay, that's it for me. Thanks very much.

Speaker Change: [inaudible]

Speaker Change: Okay, that's it for me. Thanks very much.

Keith Mackey: Thanks, Keith. Once again, if you have a question, please press star and then one. The next question is from Tim Monachello with ATB Capital Markets; please go ahead. Hey, good morning, everyone.

Operator: Once again, if you have a question, please press star then 1. The next question is from Tim Monachello with ATB Capital Markets. Please go ahead.

Keith Mackey: Thanks, Keith.

Speaker Change: Once again, if you have a question, please press star then 1.

Speaker Change: The next question is from Tim Monticello with ATB Capital Markets. Please go ahead.

Tim Monachello: Most of my questions have been answered, but I'm curious if you can just provide an update on, Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson. On the international front, first, we continue to explore opportunities. M&A is a little tougher to find internationally.

Tim Monticello: Hey good morning everyone. Most of my questions have been answered but I'm curious if you can just provide an update on

Tim Monachello: Most of my questions have been answered, but I'm curious if you can just provide an update on... Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Endri Leno, Keith MacKey

Tim Monticello: any advances that you're seeing or opportunities you're seeing internationally, and also how development of your Gulf Coast business is going.

Unknown Attendee: Sure, yeah, on the international front, first, we continue to explore opportunities. M&A is a little tougher to find internationally; that would be our preferred method of entering the country.

Speaker Change: Sure, yeah, but on the international front first as we continue to...

Speaker Change: Explore opportunities

Speaker Change: M&A is a little tougher to find internationally, that would be our preferred method of entering the country.

Ken Zinger: That would be our preferred method of entering a country, but we're going to move forward and try a few different ways, including entering some RFPs that we're working on. We continue to look for the right opportunity, but there's nothing concrete happening at this time. We also have some discussions going on about potentially entering a country with a current customer in the United States, but nothing concrete. On the pro flow side, the offshore side, that's progressing as well.

Speaker Change: We're going to move forward and try a few different ways, including entering some RFPs that we're working on. We continue to look for the right opportunity, but there's nothing concrete happening at this time.

Speaker Change: Some discussions going on about potentially entering a country with a current customer in the United States.

Unknown Attendee: But, you know, we're going to move forward and try a few different ways, including entering some RFPs that we're working on. So we continue to look for the right opportunity, but there's nothing concrete happening at this time. We also have some discussions going on about potentially entering a country with our current customer in the United States, but nothing concrete. And then on the pro flow side, the offshore side, yeah, there's that's progressing as well.

Speaker Change: but nothing concrete. And then on the ProFlow side...

Speaker Change: offshore side, that's progressing as well. We've built out the infrastructure around that acquisition. We've built out the lab capabilities and the supply chain. And we have some opportunities in front of us currently that

Ken Zinger: We've built out the infrastructure around that acquisition. We've built out the lab capabilities and the supply chain. We have some opportunities in front of us currently that we're moderately positive about, and we'll just hope to be talking about that at some point in the future.

Speaker Change: We're modestly or moderately positive about and we'll just hope to be talking about that at some point in the future here.

Unknown Attendee: We've built out the infrastructure around that acquisition. We've built out the lab capabilities and the supply chain. And we have some opportunities in front of us currently that we're modestly or moderately positive about, and we'll just hope to be talking about that at some point in the future here.

Tim Monachello: And, um, [inaudible] I'm sure you've been thinking about CapEx going forward, and you know it seems like, and the Low-Growth North American Environment Alliance over the next sort of 12 months. Yeah, I mean, the way I think that we should view CapEx this year, with the little bump that we just put on it, that would be optimism. We have to, obviously, when we're bidding on all this work; there are a lot of RFPs in place at all times, or in play at all times.

Unknown Attendee: Okay, got it. And Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Endri Leno, Keith MacKey

Speaker Change: Okay, got it. And how should we be thinking about CapEx going forward and you know it seems like kind of a low growth North American environment over the next sort of 12 months?

Unknown Attendee: Yeah, I mean, the way I think that we should view CapEx this year, with the little bump that we just put on it, that would be optimism. We have to, obviously, when we're bidding on all this work; there's a lot of RFPs in place at all times, or in play at all times. And when we're bidding on this stuff, if we're awarded it, we have to be able to supply it on very, very short notice.

Speaker Change: yes

Speaker Change: Yeah, I mean...

Speaker Change: the way I think that we should view the CapEx this year.

Tim Monachello: And when we're bidding on this stuff, if we're awarded it, we have to be able to supply it on very, very short notice. And so since we're, you know, reaching sort of capacity with a number of people and equipment trucks, delivery trucks, reactors, in a couple of cases, we're just going to invest a little bit more money in those things so that, should we win some of these opportunities, we're able to supply them in a short and professional way. Do you have opportunities to grow margin from a cost standpoint, like through vertical integration or adding capabilities? even in sort of a no growth environment.

Speaker Change: The little bump that we just put on it, that would be optimism. We have to, obviously when we're bidding on all this work, there's a lot of RFPs in place at all times.

Speaker Change: are in play at all times, and when we're bidding on this stuff, if we're awarded it, we have to be able to supply it on very, very short notice.

Unknown Attendee: And so since we're, you know, reaching sort of capacity with a number of people and equipment trucks, delivery trucks, reactors in a couple of cases, we're just going to invest a little bit more money in those things so that, should we win some of these opportunities, we're able to supply them in a short and professional way.

Speaker Change: and so since we're, you know, reaching sort of capacity.

Speaker Change: with a number of people and equipment, trucks, delivery trucks, reactors in a couple of cases.

Speaker Change: We're just going to invest a little bit more money in those things so that should we win some of these.

Speaker Change: opportunities, we're able to supply them in a short and professional way.

Unknown Attendee: Do you have opportunities to grow margin from a cost standpoint, like through vertical integration or adding capabilities? Yes, even in sort of a no growth environment.

Speaker Change: even in sort of a no-gross environment.

Unknown Attendee: Yeah, I think that's what we've been doing, Tim. We're really focused on that. Reformulations, new technologies, supply chain, where we're buying, how we're buying. Even the inner logistics; we run a hub-and-spoke model on our manufacturing, so figuring out the best products to make where and how, combined with volume. We keep winning more business, so the more you're buying, the cheaper you're spending on it. There are opportunities all over.

Ken Zinger: Yeah, I think that's what we've been doing. Tim, like we're really focused on that. Reformulations, new technologies, supply chain, where we're buying, how we're buying. Even the inter logistics, we run a hub, it's both a model on our manufacturing, so figuring out the best products to make wear and how to combine with volume, right?

Speaker Change: Yeah, I think that's what we've been doing, Tim, like we're really focused on that. Reformulations, new technologies, supply chain, where we're buying, how we're buying, even the inter-logistics, we run a hub and spoke model on our manufacturing, so figuring out best products to make where and how.

Tim Monticello: combined with volume, right? Like we keep winning more business, so the more you're buying, the cheaper you're spending on it. So there's.

Unknown Attendee: We've captured a lot of that, and that's a big part of what's driving this success. Every day, that's what we're working on, and we'll continue to do that. None of this has been accomplished by increasing prices. Everything has to make sense to the operator, and it has to make sense in the context of the market that you're working in. We didn't just go out and give 5% increases to everybody. This has been worked out from the inside out. Okay, bye.

Tim Monticello: There's opportunities all over. We've captured a lot of that and that's what's driving, a big part of what's driving this success.

Tim Monticello: Everyday that's what we're working on and we'll continue to do that I mean you it's all with none of this has been accomplished by increased pricing Everything has to make sense to the operator and it has to make sense in the context of the market that you're working in So this isn't like we couldn't just go out and give 5% increases to everybody. This has been worked from the inside out

Tim Monachello: Okay, I appreciate it. Another really impressive performance, guys. Thanks, Tim. Thank you, Tim. The next question is from John Gibson with BMO Capital Markets. Please go ahead.

Ken Zinger: This has been worked from the inside. I don't know. Okay. I appreciate it. Another really impressive performance, guys. Thanks, Tim. Thank you, Tim. The next question is from John Gibson with BMO Capital Markets; please go ahead. Morning Aulic, congrats on a great quarter here. I just had one sort of falling on James, Kaupich. I know it was a modest increase, but I'm just wondering if those RFP you talk about would be potential market share. So on the back of that champion deal that we saw a month or two ago.

Speaker Change: Okay, appreciate it. Another really impressive performance guys, thanks for that.

Speaker Change: Thanks Tim. Thank you, Tim.

John Gibson: [inaudible] Yeah, until the champion closes, appreciate the question, John, there's no, I guess the short answer is there's no one big win that we're looking at in our RFP that's going to be meaningful, but there's a whole bunch of stuff that is kind of always in play. It's more just around the fact that we keep this excess capacity available in order to be able to support them, and currently, that excess capacity is shrinking because we've been doing pretty well here for the last year or so, so this is just kind of a catch up.

Speaker Change: The next question is from John Gibson with BMO Capital Markets. Please go ahead.

John Gibson: Morning, all. Congratulations on a great quarter here. I just said one.

John Gibson: Morning all and congrats on a great quarter here. I just had one sort of following on Tim's questions about CAPEX.

John Gibson: I know it was a modest increase, but I'm just wondering if those RFPs you talk about would be potential market share gains.

Speaker Change: potentially on the back of that Champion deal that we saw a month or two ago.

Unknown Attendee: Yeah, until Champion closes. Appreciate the question, John.

Speaker Change: Until Champion closes, I appreciate the question, John. There's no, I guess the short answer is there's no one big...

Unknown Attendee: There's no, I guess the short answer is there's no one big win that we're looking at or RFP that we're looking at that's going to be meaningful. But there's a whole bunch of stuff that is kind of always in play. It's more just around the fact that we keep this excess capacity available in order to be able to support them, and currently, that excess capacity is shrinking because we've been doing pretty well here the last year or so.

Speaker Change: When that we're looking at our RFP that we're looking at that's going to be meaningful But there's a whole bunch of stuff that is kind of always in play It's more just around the fact that we keep this excess capacity available in order to be able to support those

Speaker Change: and currently that excess capacity is shrinking because we've been doing pretty well here the last year or so. So this is just kind of a catch-up.

Unknown Attendee: So this is just kind of a catch up. And then, as far as Champion X is concerned, we're very hopeful that that business deal goes through and gets done in time. And when it gets done and closed, we'll let you know what the impacts of that are. But at this point, I'd say there's a bit of talk, but not a lot of action yet.

Champion X: And then as far as Champion X, we're very hopeful that that business

Speaker Change: DL goes through and gets done in time, and when it gets done and closed, we'll let you know what the impacts of that are. But to this point, I'd say there's a bit of talk, but not a lot of action yet.

Speaker Change: Okay, that's fair and all for me. All the time.

Operator: This concludes the question and answer session. I'd like to turn the conference back over to Ken Zinger for any closing remarks. Thank you. And with that, we'll wrap up.

Ken Zinger: This concludes the question and answer session. I'd like to turn the conference back over to Ken Zinger for any closing remarks. Well, with that, we'll wrap up the call by saying thank you to everyone who took the time to join us here today. We continue to be very optimistic about the future here, and we look forward to speaking with you all again during our Q3 update from Texas in November. Thank you. This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Speaker Change: This concludes the question and answer session. I'd like to turn the conference back over to Kenneth Zinger for any closing remarks.

Ken Zinger: Well, with that, we'll wrap up the call by saying thank you to everyone who took the time to join us here today. We continue to be very optimistic about the future here, and we look forward to speaking with you all again during our Q3 update from Texas in November. Thank you.

Kenneth Zinger: Thank you. Well, with that, we'll wrap up the call by saying thank you to everyone who took the time to join us here today. We continue to be very optimistic about the future here, and we look forward to speaking with you all again during our Q3 update from Texas in November. Thank you.

Kenneth Zinger: Thank you for watching!

Operator: This brings to a close today's conference call. You may disconnect your lines.

Speaker Change: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Operator: Thank you for participating and have a pleasant day. I'm sorry. I'm sorry. I'm sorry.

Operator: [music]

Speaker Change: [music]

Speaker Change: [inaudible]

Tony Aulicino: This revenue figure exceeded the 388 million in Q1 and 375 million a year. Revenue generated in Canada set a second quarter record at 162 million, up from 140 million in the prior year and compared to 201 million in Q1, as expected on seasonally lower activity levels.

Ken Zinger: All of the business lines within PureChem continue to grow as we have continued to take market share, win bids, optimize formulations, and fine-tune our supply chain. The revenue and earnings from our primary business production treatment continue to accelerate in Canada as we consistently strive to deliver superior products and service combined with a competitive market price. In the United States, AES, our US drilling fluids group, is providing chemistry and service to 127 of the 566 rigs listed as active in the USA land market today for a continued number one market share of US land rigs at 22.4%. The number of rigs drilling in the United States was slightly down again quarter over quarter by about 3%, but we continue to view this level as being at or near the bottom of the t

Ken Zinger: Our field personnel will be able to cross over between the groups with some minor training, and our facilities are perfectly located with the capacity to provide the necessary support to this business, as well. We will now have the ability to share our relationships and MSAs with the vast majority of USA operators. Finally, I will note that there is an opportunity to grow this division outside its current footprint, which exists almost entirely in Texas today.

Tony Aulicino: In addition, certain financial measures that we will refer to today are not recognized under current generally accepted accounting policies, and for a description and definition of these, please see our second quarter MDNA. At this time, I'd like to turn the call over to Ken Zinger, our president and CEO. Thank you, Donnie.

Tony Aulicino: And again, it's been driven by what Ken and I have been talking about. This environment of high service intensity plays to the company's strengths. A bigger portion of the products that our customers are buying from us are the more specialized products that command higher profit margins and higher margin profiles because of our vertically integrated business model. Our procurement team has continued to be very effective.

John Gibson: And then as far as champion X is concerned, we're very hopeful that that business deal will go through and get done in time, and when it gets done and closed, we'll let you know what the impacts of that are. But to this point, I'd say there's a bit of talk, but not a lot of action yet. Okay, that's fair. No, for me, all the time.

Ken Zinger: Like we keep winning more business, so the more you're buying, the cheaper you're spending on it. So there are opportunities all over. We've captured a lot of that, and that's what's driving a big part of what's driving this success, but every day, if that's what we're working on, and we'll continue to do that. I mean, none of this has been accomplished by increased pricing. Everything has to make sense to the operator, and it has to make sense in the context of the market that you're working in. So this isn't like we didn't just go out and give 5% increases to everybody.

Tony Aulicino: But I would say and tell everybody that their margins are actually higher than our consolidated corporate margins, which is another big, big reason why we liked the business and the quality of the business. As Ken mentioned, we intend to expand it in a very responsible way and give the guys free reign on all of the tools that we partners at AES and the rest of the company can provide to them to allow them to really excel.

Tony Aulicino: And you can see that in our gross margins. And then the last one that is a little bit more unpredictable is the adoption of or technologically advanced new products that our customers need in this new era of more complicated drilling and production requirements. And that's one of them that can move any given month, any given quarter, but in light of what we've done, we will be responsible and answer that question by looking at the average of the last four quarters. That is an average of just over 16%.

Tony Aulicino: And then, in terms of other opportunities, we see a lot of opportunities. We have, which is good, but the bad news is we have a really good business. And when we look at our margin performance, our cashflow profile, our capex light, asset light business model, we're not going to dilute that just to get bigger or to go on and emanate. [inaudible] As I mentioned, Keith, they've been primarily focused in Texas and in Midland, particularly. So obviously, the entire US has opportunity Canada as well. And then as far as further M and A in space, we currently have no intention of that.

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