Q2 2024 Newpark Resources Inc Earnings Call

Unnamed Speaker: Free cash flow was also solid in the second quarter with contributions from both segments. The industrial solution segment revenues was $67 million in the second quarter, reflecting a 36% sequential and 39% year-over-year improvement. Product sales contributed $30 million of revenues in the second quarter, with the majority of those sales to traditional timber mat fleet operators, reflecting a continued shift from wood to composite matting and robust demand for our dura-based products on utility infrastructure projects.

Operator: Free cash flow was also solid in the second quarter, with contributions from both segments.

Free cash flow was also solid in the second quarter with contributions from both segments.

Gregg Piontek: The industrial solution segment revenues was $67 million in the second quarter, reflecting a 36% sequential and 39% year-over-year improvement. Product sales contributed $30 million of revenues in the second quarter, with the majority of those sales to traditional timber-mat fleet operators, reflecting a continued shift from wood to composite matting and robust demand for our durable products on utility infrastructure projects. Total rental and service revenues were $36 million for the second quarter, while rental revenue improved 12% sequentially and 9% year-over-year. Lower service intensity on rental projects served to offset the rental gains, resulting in a 3% sequential growth and 9% year-over-year decline in rental and service revenues.

The industrial solutions segment revenues was $67 million in the second quarter, reflecting a 36% sequential and 39% year over year improvement.

Product sales contributed $30 million of revenues in the second quarter with the majority of those sales to traditional timber mat fleet operators, reflecting a continued shift from wood to composite matting and robust demand for.

Our dura base product and utility infrastructure projects.

Unnamed Speaker: Total rental and service revenues were $36 million for the second quarter. While rental revenue improved 12% sequentially and 9% year-over-year, lower service intensity on rental projects served to offset the rental gains, resulting in a 3% sequential growth and 9% year-over-year decline in rental and service revenue. Benefiting from a strong start to Q2, the second quarter rental fleet utilization improved modestly on a sequential basis but trailed off as we progressed through the quarter, reflecting the earlier-than-expected release of multiple large-scale projects, while expected start dates for other planned projects have been delayed for the first half of 2024.

Total rental and service revenues were $36 million for the second quarter.

While rental revenue improved 12% sequentially and 9% year over year lower service intended intensity on rental projects served to offset the rental gains, resulting in a 3% sequential growth and 9% year over year decline in rental and service revenues.

Gregg Piontek: Benefiting from a strong start to Q2, the second quarter rental fleet utilization improved modestly on a sequential basis, but trailed off as we progressed through the quarter, reflecting the earlier than expected release from multiple large-scale projects, while expected start dates for other planned projects have been delayed. For the first half of 2024, industrial solutions revenues are up 11% versus prior year, including a 60% increase from product sales and a 5% increase in rental revenues, while service revenues have declined 20%. By industry, the utility sector contributed nearly 2 thirds of our segment revenues, including roughly 55% of rental and service revenues, and the substantial majority of product sales in the first half of 2024.

Benefiting from our strong start to Q2 second quarter rental fleet utilization improved modestly on a sequential basis, but trailed off as we progressed through the quarter, reflecting the earlier than expected release from multiple large scale projects.

While expected start dates for other planned projects have been delayed.

For the first half of 2024.

Unnamed Speaker: Industrial solutions revenues are up 11% versus prior year, including a 60% increase from product sales and 5% increase in rental revenues, while service revenues have declined 20%. By industry, the utility sector contributed nearly two-thirds of our segment revenues, including roughly 55 percent of rental and service revenues and the substantial majority of product sales in the first half of 2020. Comparing to the first half of 2023, rental and service revenues from the utility sector is relatively flat, reflecting the effects of higher rental offset by lower services, while oil and gas, pipeline, and other industries decline.

Industrial solutions revenues are up 11% versus prior year, including a 60% increase from product sales and 5% increase in rental revenues while service revenues have declined 20%.

By industry the utility sector contributed nearly two thirds of our segment revenues, including roughly 55% of rental and service revenues and the substantial majority of product sales in the first half of 2024.

Gregg Piontek: Comparing to the first half of 2023, rental and service revenues from the utility sector is relatively flat, reflecting the effects of higher rental offset by lower services, while oil and gas, pipeline, and other industries declined. Industrial solutions profitability was strong in the second quarter, with the segment delivering a 37% adjusted EBITDA margin, fairly in line with both prior quarter and the second quarter of 2023.

Comparing to the first half of 2023 rental and service revenues from the utility sector is relatively flat, reflecting the effects of higher rent until offset by lower services, well oil and gas pipeline and other industries declined.

Unnamed Speaker: Industrial Solutions profitability was strong in the second quarter, with the segment delivering a 37% adjusted EBITDA margin, fairly in line with both the prior quarter and the second quarter of 2023. The Fluid Systems segment generated revenue of $112 million in the second quarter. Our Eastern Hemisphere region delivered another near-record quarter, contributing $66 million, or 59% of our total fluid systems revenues in Q2. The second quarter demonstrates a sustained trend of near-record performance with revenues fairly in line with both the prior quarter and the second quarter of last year. Revenues from Canada decreased 37% sequentially to $13 million in the second quarter, reflecting the seasonality of spring break-up.

Industrial solutions profitability was strong in the second quarter with the segment delivering a 37% adjusted EBITDA margin fairly in line with both prior quarter and the second quarter of 2023.

Gregg Piontek: The fluid system segment generated revenue of $112 million in the second quarter. Our Eastern Hemisphere region delivered another near-record quarter, contributing $66 million for 59% of our total fluid systems revenues in Q2. The second quarter demonstrates a sustained trend of near-record performance, with revenues fairly in line with both the prior quarter and the second quarter of last year. Revenues from Canada decreased 37% sequentially to $13 million in the second quarter, reflecting the seasonality of spring break-up. Notably, this was the highest Q2 revenue posted by our Canada business, reflecting a 28% improvement from the second quarter of last year.

The fluids systems segment generated revenue of $112 million in the second quarter.

Our eastern Hemisphere region delivered another near record quarter, contributing $66 million or 59% of our total fluid systems revenues in Q2.

The second quarter demonstrate a sustained trend of near record performance with revenue is fairly in line with both prior quarter and the second quarter of last year.

Revenues from Canada decreased 37% sequentially to $13 million in the second quarter, reflecting the seasonality of spring breakup.

Unnamed Speaker: Notably, this was the highest Q2 revenue posted by our Canada business, reflecting a 28% improvement from the second quarter of last year. Our U.S. operations contributed $33 million of revenues in the second quarter, reflecting a 7% sequential improvement and a 46% year-over-year decline. The year-over-year decline is primarily driven by a combination of continued softness in U.S. market activity, lower market share, and a decline in average revenue contribution from the RIGS service.

Notably this was the highest Q2 revenue posted by our Canada business, reflecting a 28% improvement from the second quarter of last year.

Gregg Piontek: Our U.S. operations contributed $33 million of revenues in the second quarter, reflecting a 7% sequential improvement and 46% year-to-year decline. The year-over-year decline is primarily driven by a combination of the continued softness and the U.S. market activity, lower market share, and a decline in average revenue contribution from the Riggs service. Fluid segment adjusted EBITDA margin was 4.6 percent in the second quarter, with the sequential and year-over-year declines driven by the lower revenue levels somewhat offset by the benefits of the year-over-year margin improvements from our international business and continued cost efforts within the U.S. business and division overhead.

Our U S operations contributed $33 million of revenues in the second quarter, reflecting a 7% sequential improvement.

46% year over year decline.

The year over year decline is primarily driven by a combination of the continued softness in the U S market activity lower market share and a decline in average revenue contribution from the rigs serviced.

Unnamed Speaker: Fluid segment adjusted EBITDA margin was 4.6% in the second quarter with the sequential and year-over-year declines driven by the lower revenue levels somewhat offset by the benefits of the year-over-year margin improvements from our international business, and continued cost efforts within the U.S. business and division overhead. SG&A expenses were $26.4 million in the second quarter, including $8.4 million of corporate office expense. The second quarter 2024 SG&A includes $1.9 million related to the fluid sale, elevated costs associated with long-term performance-based incentive programs linked to the company's share price, and an elevated credit loss charge in the International Fluid Systems, The sequential and year-over-year increase in SG&A is substantially driven by these second-quarter expenses, with the year-over-year comparison somewhat offset by the effects of cost rationalization efforts in the U.S. fluids and corporate offshore.

Fluids segment adjusted EBITDA margin was four 6% in the second quarter with the sequential and year over year declines driven by the lower revenue levels somewhat offset by the benefit of year over year margin improvements from our international business.

And continued cost efforts within the U S business and division overhead.

Gregg Piontek: Sweeney expenses were $26.4 million in the second quarter, including $8.4 million of corporate office expense. The second quarter, 2024 Sweeney includes $1.9 million related to the fluid sale, elevated costs associated with long-term performance-based incentive programs linked to the company's share price, and an elevated credit loss charge in the international fluid systems business. The sequential and year-over-year increase in Sweeney is substantially driven by these second quarter expenses, with the year-over-year comparison somewhat offset by the effects of cost rationalization efforts in the U.S. Fluid and corporate office. Interest expense was $1.28 million for the second quarter, in line with the prior quarter, but down modestly on a year-over-year basis, primarily reflecting the effect of lower overall debt balances.

SG&A expenses were $26 $4 million in the second quarter.

Including $8 $4 million of corporate office expense. The second quarter 2020 for SG&A includes $1 $9 million related to the fluid sale elevated costs associated with long term performance based incentive programs linked to the company's share price.

And an elevated credit loss charge in the international fluid systems business.

The sequential and year over year increase in SG&A is substantially driven by these second quarter expenses with the year over year comparisons somewhat offset by the effects of cost rationalization efforts in the U S fluids and corporate office.

Unnamed Speaker: Interest expense was $1.8 million for the second quarter, in line with prior quarter, but down modestly on a year-over-year basis, primarily reflecting the effect of lower overall debt balance. Tax expense was $3.3 million in the second quarter, reflecting an effective tax rate of 29%, which includes a favorable impact from previously unbenefited U.S. NOL carryover.

Interest expense was $1 8 million for the second quarter in line with prior quarter, but down modestly on a year over year basis, primarily reflecting the effect of lower overall debt balances.

Gregg Piontek: Tax expense with $3.3 million in the second quarter, reflecting an effective tax rate of 29 percent, which includes a favorable impact from previously un-benefitted U.S. NOL carry forward. Adjusted EPS was 12 cents per diluted share in the second quarter, compared to 10 cents in the first quarter and 8 cents in the second quarter of last year. Operating cash flow was $28 million in the second quarter, including more than $10 million derived from reductions in fluid networking capital, while $6 million was used to fund our net cap acts, substantially all of which was directed toward industrial solutions mounting fluid expansion, as we seek to capitalize on our long-term growth opportunities that Matthew mentioned.

Tax expense was $3 $3 million in the second quarter, reflecting an effective tax rate of 29%, which.

Which includes a favorable impact from previously UN benefited U S NOL carryforwards.

Unnamed Speaker: Adjusted EPS was $0.12 per diluted share in the second quarter, compared to $0.10 in the first quarter and $0.08 in the second quarter of last year. Operating cash flow was $28 million in the second quarter, including more than $10 million derived from reductions in Fluids Net Working Capital, while $6 million was used to fund our Net Cap Act. Substantially all of which was directed toward industrial solutions and matting fleet expansion, as we seek to capitalize on our long-term growth opportunities that Matthew mentioned. We ended the second quarter with total debt of $58 million and cash of $35 million, resulting in net debt of $23 million, a 0.3 times net leverage ratio.

Adjusted EPS was <unk> 12 per diluted share in the second quarter.

Compared to <unk> 10 in the first quarter and eight in the second quarter of last year.

Operating cash flow was $28 million in the second quarter, including more than $10 million derived from reductions in fluids net working capital while $6 million was used to fund our net capex substantially all of which was directed toward industrial solutions Matting fleet expansion.

As we seek to capitalize on our longer term growth opportunities that Matthew mentioned.

Gregg Piontek: We ended the second quarter with total debt of $58 million, in cash of $35 million, resulting in net debt of $23 million, a 0.3 times net leverage ratio.

We ended the second quarter with total debt of $58 million in cash of $35 million, resulting in net debt of $23 million.

A.

Three times net leverage ratio.

Yeah.

Gregg Piontek: Let's now turn to the business outlook. As before, we remain highly constructive on the multi-year demand outlook for both businesses. Within industrial solutions, we continue to see strong long-term fundamentals for utilities and critical infrastructure spending, which remains our largest customer market. Our full-year 2024 expectations for the industrial solution segment remain unchanged. We continue to forecast 2024 industrial solutions revenues in a range of $230 to $204 million. With segment adjusted EBITDA in a range of $80 to $85 million, and segment cap acts of $30 to $35 million.

Unnamed Speaker: Let's now turn to the business outlook. As before, we remain highly constructive on the multi-year demand outlook for both businesses. Within industrial solutions, we continue to see strong long-term fundamentals for utilities and critical infrastructure spending, which remains our largest customer market. Our full year 2024 expectations for the industrial solutions segment remain unchanged.

Speaker Change: Let's now turn to the business outlook.

As before we remain highly constructive on the multi year demand outlook for both businesses.

Within industrial solutions, we continue to see strong long term fundamentals, where utilities and critical infrastructure spending which remains our largest customer market.

Our full year 2020 for expectations for the industrial solutions segment remains unchanged.

Unnamed Speaker: We continue to forecast 2024 industrial solutions revenues in a range of $230 to $240 million, with segment Adjusted EBITDA in a range of $80 million to $85 million and segment CAPEX of $30 million to $35 million. While we continue to see robust project bidding activity, the third quarter is typically our softest revenue quarter from a rental and service perspective, as the extreme heat and associated power demand on the grid typically reduce utility transmission maintenance projects.

We continue to forecast 2020 for industrial solutions revenues in a range of $230 million to $240 million.

With segment adjusted EBITDA in a range of $80 million to $85 million.

Segment, capex of $30 million to $35 million.

Gregg Piontek: College. While we continue to see robust project bidding activity, the third quarter is typically our softest revenue quarter from a rental and service perspective, as the extreme heat and associated power demand on the grid typically reduce utility transmission maintenance projects. Further, as Matthew touched on, we are continuing to see delays on certain projects associated with permitting and other issues, which provides some uncertainty on our near-term project timing. We expect Q3 total rental and service revenues to reflect modest year-over-year growth, including a stronger rental contribution somewhat offset by a lower service intensity. In fluid systems, we expect Q2 to reflect in an election point, with Q3 total segment revenues and profitability more in line with Q1 results.

Speaker Change: While we continue to see robust project bidding activity.

Third quarter is typically our softest revenue quarter from our rental and service perspective, as the extreme heat and associated power demand on the grid typically reduced utility transmission maintenance projects.

Unnamed Speaker: Furthermore, as Matthew touched on, we are continuing to see delays on certain projects associated with permitting and other issues, which provides some uncertainty on our near-term project timing. We expect Q3 total rental and service revenues to reflect modest year-over-year growth, including a stronger rental contribution somewhat offset by a lower service income. In fluid systems, we expect Q2 to reflect an inflection point, with Q3 total segment revenues and profitability more in line with Q1 results.

Further as Matthew touched on we are continuing to see delays on certain projects associated with permitting and other issues, which provides some uncertainty on a near term project timing.

Matthew: We expect Q3 total rental and service revenues to reflect modest year over year growth, including a stronger rental contribution somewhat offset by a lower service intensity.

In fluid systems, we expect Q2 to reflect an inflection point with Q3 total segment revenues and profitability more in line with Q1 results.

Gregg Piontek: So, eventually, we expect Canada to benefit from the seasonal rebound, along with modest improvement in market share within the U.S. In terms of capital allocation priorities, our view remains relatively unchanged, as we continue to prioritize investments into the organic growth of our rental fleet. We expect our second half, 2024, net capital investments will remain dependent upon the longer-term view on rental revenue growth opportunities. Beyond our continued organic growth investments in the rental fleet, we expect our free cash flow generation this year will be primarily used to build liquidity for inorganic growth opportunities, or through a return of capital to shareholders through our programmatic share-reported program, upon completion of fluid sales process.

Speaker Change: Sequentially, we expect Canada to benefit from the seasonal rebound along with modest improvement in market share within the U S.

In terms of capital allocation priorities, our view remains relatively unchanged.

As we continue to prioritize investments into the organic growth of our rental fleet.

Speaker Change: We expect our second half 2024, net capital investments will remain dependent upon a longer term view on rental revenue growth opportunities.

Speaker Change: Beyond our continued organic growth investments in the rental fleet, we expect our free cash flow generation. This year will be primarily used to build liquidity for inorganic growth opportunities.

Speaker Change: Or to a return of capital to shareholders through our programmatic share repurchase program upon completion fluids sales process.

Matthew Lanigan: And with that, I'd like to turn the call back over to Matthew for his concluding remarks. Thanks, Greg. How far are these the 2024 and my non-change? First, is the execution of our plans to grow our leading, purified, specialty rental business through organic expansion of our presence while exploring organic opportunities that help us deliver more value and increase revenue density without growing custom-based. Second, we will continue to work diligently to bring closer to the fluids process in the third quarter, while also driving further efficiency improvements across all corners of the organization, positioning us to realize improved operating leverage.

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

Matthew: Thanks, Greg.

Unnamed Speaker: Our priorities for 2024 remain unchanged. First, is the execution of our plans to grow our leading pure play specialty rental business through organic expansion of our presence while exploring inorganic opportunities that help us deliver more value and increase revenue density with our growing customer base. And with that, we'll open the call to questions.

Matthew: Our priorities for 2024 remain unchanged.

Matthew: First is the execution of our plans to grow our leading pure play specialty rental business through organic expansion of our presence while exploring inorganic opportunities that help us deliver more value and increased revenue density without growing customer base.

We will continue to work diligently to bring closure to the fluids process in the third quarter. While also driving further efficiency improvements across all corners of the organization positioning us to realize improved operating leverage.

Matthew Lanigan: Finally, we remain committed to a return-focused capital allocation strategy that includes a combination of internal investment in organic growth and return of capital to our shareholders. With a modest 0.3 times net leverage and anticipated additional liquidity upon the completion of the fluid's process, we are well positioned to advance our capital allocation priorities. We have $50 million remaining on our share-reported authorization to support our return of capital program, which we expect to resume following the completion of the fluid sales process.

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

Matthew: With a modest <unk> three times net leverage and anticipated additional liquidity upon the completion of the fluids process, we are well positioned to advance our capital allocation priorities.

Matthew: We have $50 million remaining on our share repurchase authorization to support our incentive capital program, which we expect to resume following the completion of the fluid sales process.

Matthew Lanigan: In closing, I want to thank our shareholders for their ongoing support, our employees for their dedication to the business, including their commitment to safety and compliance, and our customers for their ongoing partnership. And with that, we'll open the call for questions.

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

Speaker Change: And with that we'll open the call for questions.

Operator: Gentlemen, thank you, and to our phone audience joining today. If you would like to ask a question, please press star and one on your telephone keypad. Pressing star and one will place your line to a queue, and we'll take your questions one at a time.

Speaker Change: Gentlemen, thank you and to our phone audience joining today, if you would like to ask a question. Please press star and one on your telephone keypad pressing star one replace your line into the queue and we will take your questions one at a time.

Operator: Also a reminder that if you're joining us today on a speaker phone, please return to your handset to provide the best audio quality. Also, to be certain that your signal does reach Arc Whitman. Once again, ladies and gentlemen, that is Star N1.

Speaker Change: Also a reminder, that if you're joining us today on a speaker phone. Please return to your handset to provide the best audio quality also there'll be certain that your signal does reach our equipment. Once again, ladies and gentlemen that is star and one we will hear first from Aaron's for Kala at Craig Hallum.

Aaron Spychalla: We'll hear first from Aaron Spychalla at Craig Allem. Yeah, good morning, Matthew and Gregg. Thanks for taking the questions. You know, first for me, you obviously had an all-time record in product sales. Can you just talk about that? Was that, you know, one or two large projects or a little more balanced? And, you know, I know quarters can be kind of lumpy on the product side, but just talk a little bit about how sustainable, you know, this dynamic could be moving forward.

Aaron Sforka: Yes, good morning, Mathew and Greg Thanks for taking the questions.

Speaker Change: First for me you, obviously had an all time record in product sales can you just talk about that was that one or two large projects are a little more balanced than I know quarters can be kind of lumpy on the product side, but just talk a little bit about how sustainable this dynamic could be moving forward.

Matthew Lanigan: Yeah, thanks, Aaron. I'll give you a couple of likes to answer that question. The actual style itself was, was concentrated in a large customer during the quota, which is very positive. It's gone in terms of that customer's great touch zone as traditionally operated purely timber-mathletes, so encouraged by the moves to compensate there, which I think speaks more to the sustainability than just the individual customer order itself.

Sean: Yes, Thanks, Sean.

Speaker Change: A couple of ways to answer that question. The actual style itself was concentrated in a large customer during the quarter, which is.

Speaker Change: Very positive sign in terms of that customer's Greg touched on has traditionally operated purely timber mats late so encouraged by the move to composite there which.

Speaker Change: I think speaks more to the sustainability than just the individual customer order itself.

Aaron Spychalla: All right, and then, you know, maybe second, you kind of talked about, you know, permitting supply chain. Are you seeing any improvement there? Is it still pretty steady state? I know Congress is, you know, looking to implement some permitting reform.

Sean: Alright, and then.

Speaker Change: Maybe second you kind of talked about permitting supply chain are you seeing any improvement there or is it still pretty pretty steady state I know Congress is looking to implement some permitting.

Matthew Lanigan: And then maybe just talk a little bit about, you know, any change in the political landscape, how that might impact things. Yeah, look, I think with the projects we're calling out that a delight has been delayed for the last few quarters, Aaron, so we're just, you know, continuing with that commentary. There's really only, you know, one or two projects that a, you know, out portfolio at this point that are falling into specific delays related to permitting. What we have seen, really, if we go back, almost post-COVID, is the time from close to commencement is, is the elongating slightly, sort of, year over year.

Speaker Change: Reform and then maybe just talk a little bit about any change in the political landscape, how that how that might impact things.

Speaker Change: Look I think I think with the projects, we are calling out that a delight athene delight for the last few quarters and so we're just continuing with that commentary is really only.

One or two projects that are in our portfolio at this point that are falling into specific delays related to permitting what we have seen really if we go back almost post COVID-19 is the time from quote to commencement is elan guiding slightly sort of year over year. So that trend continues I think what we.

Matthew Lanigan: So that trend continues. I think what we were positive with at this point in time is our pipeline continues to build. We touched on our build out of our commercial resources. I think the more we're putting them in the market, the more activity we're seeing, the more quoting our activity we're seeing, which is helping kind of continue to build that pipeline while some of the timelines look to be elongating slightly. As far as the political situation goes, we're not seeing any impacts from that at this point in time, but still early at a time. And so I think we'll just continue to watch that and see how it's helped play that.

Speaker Change: We had positive with at this point in time as our pipeline continues to build we touched on our build out of our commercial resources I think the more where we're putting them in the market. The more activity. We are seeing a more quoting activity, we're seeing which is helping kind of continue to build that pipeline, while some of the timelines.

Sean: Look to be a long guiding slightly.

Speaker Change: Buyers the political.

Speaker Change: Situation guys.

Speaker Change: We're not seeing any impact from that at this point in time, it's still early to tell.

Sean: And so I think we'll just continue to watch that and see how it plays out.

Aaron Spychalla: All right, so understood. Thanks for taking the questions. I'll turn it over.

Speaker Change: Alright understood. Thanks for taking the questions I'll turn it over.

Matthew Lanigan: Thanks, Aaron.

Eric: Thanks, Eric.

Hammett Dial: Our next question will come from Hammett Dial at H.C. Wayne Wright. Your line is open.

Speaker Change: Our next question will come from Amit Dayal at H C. Wainwright Your line is open.

Operator: Thank you.

Amit Dayal: Thank you good morning, everyone.

Hammett Dial: Good morning, everyone. Erad, so the services component within the rental segment looks like a little bit under pressure. Could you clarify this dynamic for us, please? I am not clear; you know, the year would decline in the rental segment.

Sean: So.

Amit Dayal: The services component within the rental segment it looks like a little bit under pressure could you clarify this dynamic for us because I am not clear.

Sean: <unk>.

Amit Dayal: The year with year decline in the rental segment. Yeah, yeah. Thanks, Amit. Understood. Thank you for that clarification.

Speaker Change: The year over year decline in the rentals again soon.

Matthew Lanigan: Yeah, you know. I wouldn't say it's under pressure. I think what's playing out here is if you go back to last year, there were a handful of projects that we undertook that were very heavy in the service element, with the thesis of we could get them to pull through incremental rental revenue. That didn't necessarily work out the way we had hoped it would, so they were quite high in their service component or ratio of the revenue contribution there. As we've looked at that market moving forward, we find that the margins on that kind of work aren't really what we want, so we've started to deprioritize chasing that.

Sean: Yes, thanks, Jonathan Thanks, Amit.

Speaker Change: Well I wouldn't say, it's under pressure I think I think what's playing out here is if you go back to.

Speaker Change: Last year they were up.

Speaker Change: The handful of projects that we undertook that were very very heavy in the service element with the thesis.

Get them to pull through incremental rental revenue.

Sean: That didn't necessarily work out the way we had hoped it would say that were quite high in that service component at a ratio of the revenue contribution there.

Sean: We have looked at that market moving forward, we find that the margins on that kind of work out really what we want so we have started to de prioritize chasing that so youre, saying kind of what we call one off large service revenue projects not being followed up year over year, which is looking like.

Matthew Lanigan: So you're seeing kind of what we call one-off large service revenue projects, not being followed up year over year, which is looking like a drop-off in service revenue intensity. Part of that is actually deliberate. The other thing we're seeing is we grow our rental fleet here. It is where we're utilizing partners to help expand the rental revenue there, and in those cases, our contribution of service is not as high, where they're picking up some of that service revenue. So we're really focused on growing our rental footprint conversion of the market from timber to composite. And I think you're just seeing that play out there on the service revenues rather than being under pressure.

Sean: A drop off in service revenue intensity part of that is actually deliberate.

Sean: The other thing we're seeing as we go out and grow our rental fleet here, Amit is where we're utilizing partners to help expand our rental revenue there in those cases, our contribution of service is not as high where they are picking up some of that service revenue. So we're really focused on growing our rental footprint and conversion of the market from timber too.

Speaker Change: Composite and I think you're just seeing that play out there on the service revenues rather than being under pressure I think when you look at our traditional service rental mix, where we're where we're performing the service it's pretty much as it has been historically.

Matthew Lanigan: I think when you look at our traditional service rental mix, where we're performing the service, it's pretty much as it has been historic.

Hammett Dial: Thank you for the presentation.

Speaker Change: Understood. Thank you for that guys.

Matthew Lanigan: With respect to the 1.6 million inexpensive related to the fluid systems transaction you are working on, is that sort of a one-time thing, or is this going to be recurring quarterly until this deal is completed? Yeah, I think the way to characterize that is obviously there's a lot of consultants and support that you have in place when you're going through a process like this; you know, various lawyers, tax advisors, you know, bankers, etc. And so I think it is fair to say that we would have a continuation of the cost until we get the resolution of the process.

Speaker Change: Thus.

Speaker Change: With respect to the $1 6 million in expenses related to the fluid systems.

Speaker Change: Action Youre working on.

Speaker Change: Is that sort of a one time thing or is this going to be recurring quarterly I'm doing this.

Speaker Change: <unk> completed.

Speaker Change: Yes, I think the way to characterize that is obviously there is a lot of.

Speaker Change: A lot of consultants and the support that you have in place when youre going through a process like this various lawyers tax advisers bankers et cetera, and so I think it is fair to say that we would have a continuation of the cost until we get to a resolution of the process.

Hammett Dial: Okay, thank you for that. Of the 30 to 35 CapEx, you know, allocating towards rental business, how much of that has been spent and, you know, are you potentially even looking to up that number given sort of the positive, you know, visibility you have with respect to the drivers, you know, for this business? Yeah, I think so. First of all, in terms of what's been spent of the first half CapEx, you got, you know, close to 19 of it is within the industrial solutions business. Of that, you know, almost 17, I think, is going into the maxly.

Speaker Change: Okay understood. Thank you for that.

Speaker Change: After 32 to 35 Capex.

Speaker Change: We're getting towards rental.

Speaker Change: Business.

Speaker Change: Much of that has been spent and you know are you.

Speaker Change: Potentially even looking to up that number given sort of the positive.

Unnamed Speaker: you know, the visibility you have with respect to the macro drivers, you know, for this business. Yeah, I

Speaker Change: Visibility you have with respect to the macro drivers for this business.

Unnamed Speaker: Yeah, I'll stop here, guys. I have other follow-ups, but I will, you know, bring those...

Speaker Change: Yes, I think so first of all in terms of what's been spent.

Speaker Change: The first.

Speaker Change: Half Capex you get close to 19, if it is within the industrial solutions business of that over 17, I think it is going into the Max fleet. So.

Matthew Lanigan: So, we did have some elevated, more front-loaded CapEx that we had in Q1, and that was really supporting some of these strong, you know, the strong utilization and volumes that we had entering Q2. Also talked about adding to our fleet in the UK. In terms of the spend, you know, we're holding with the 30 to 35 range. Obviously, we will continue to evaluate the longer-term mid and longer-term view on this and adjust our CapEx accordingly as we see it.

Speaker Change: We did have some elevated more frontloaded capex that we had in Q1 and that was really supporting some of these strong strong utilization and volumes that we had entering Q2, you also talked about adding to our fleet in the UK in terms of the spend we're holding with the 30% to 35 range obviously we.

Speaker Change: We'll continue to evaluate.

Speaker Change: The longer term mid and longer term view on this and adjust our capex accordingly, as we see it.

Hammett Dial: Okay.

Speaker Change: Okay.

Hammett Dial: Yeah, I'll stop here, guys. I have a few questions. Thank you so much.

Speaker Change: I'll stop here guys I have a follow ups, but I wouldn't.

Speaker Change: English.

Speaker Change: And a follow up thank you so much.

Operator: Thank you.

Scott: Thanks Scott.

Alexander Rygiel: Star and one for questions, ladies and gentlemen, Alex Rijl with B. Riley, your line is open.

Scott: Star and one for questions, ladies and gentlemen, Alex Rygiel with B Riley Your line is open.

Matthew Lanigan: Thanks, gentlemen. A very nice quarter. A couple of questions here. First, as it relates to sales growth and math, how do you think about over the next 12 months, sort of market growth versus math, share gain, versus, you know, wood-to-Mac conversion, versus general market share gains? Wow.

Unnamed Speaker: Thanks, gentlemen, a very nice quarter. A couple of questions here. First, as it relates to sales growth and MADS, how do you compare MAT share gain versus, you know, what's a MAT conversion versus just general market share gain.

Alex Rygiel: Thanks, gentlemen, very nice quarter.

Alex Rygiel: Couple of questions here first as it relates to sales growth and match.

Speaker Change: How are you.

Speaker Change: How do you think about.

Speaker Change: Over the next 12 months sort of market growth.

Matt: As Matt share gain versus wood tabak conversion versus gen.

Speaker Change: General market share gains.

Unnamed Speaker: Wow. All right. All right.

Speaker Change: Wow.

Speaker Change: Yeah.

Matthew Lanigan: Yeah, look, I mean, we look at the market as growing at sort of, you know, between 18-10 percent from a CapEx spend perspective, you know, on a long-term trend. So we look at that kind of number as being, if we keep pace with that on our sales, we're, you know, we're keeping pace with market growth, and anything out of that, we're taking share. Obviously, our primary focus is trying to take share from the traditional timber product.

Speaker Change: Yes look I mean.

Speaker Change: We look at the market is growing at sort of <unk>.

Speaker Change: Eight and 10% from a capex spending perspective.

Speaker Change: On a long term trend. So we look at that kind of numbers being if we keep pace with that on our styles, where we're keeping pace with market growth and anything over that we're taking share. Obviously, our primary focus is trying to take share from the traditional timber products and so hard for us to parse out exactly.

Matthew Lanigan: And so hard for us to pass out exactly those pieces, but at a macro level, that's though we look at it. Eight or nine percent; you keep us with industry, and anything beyond that is taking share from, you know, the competitive timber set. And I know we've talked a lot about that, the expectation on the mix, and do we see a shift between rental and service versus the product sales. I don't think, you know, obviously this quarter is a data point that bucks that trend a little bit here with the product sales being about 45 percent of the revenues.

Speaker Change: Those pieces, but at a macro level <unk>, we looked at it I don't 9% keeps us with industry and anything beyond that is taking share from the competitive timber.

Speaker Change: And I know, we've talked a lot about that the expectation on the mix and do we see a shift between rental and service versus the product sales.

Speaker Change: I don't think obviously this quarter is a data point that buck that trend a little bit here.

Speaker Change: With the product sales being about 45% of the revenues, but I wouldn't say that we're seeing a real shift here that changes our longer term expectations. I would think you would kind of go back to that norm.

Matthew Lanigan: But I wouldn't say that we're seeing a real shift here that changes our longer-term expectation. So I would think it would kind of go back to that norm.

Operator: that couple.

Unnamed Speaker: That's helpful. And then, can you quantify for us what the working capital within the fluids business is today?

Speaker Change: That's helpful. And then can you quantify for us what the working capital within the fluids businesses today.

Alexander Rygiel: And then can you quantify for us what the working capital within the fluids businesses today? So working capital is about $160 million at the end of the second quarter. And then, although you're seeing, you know, some projects get delayed.

Speaker Change: So working capital is about $160 million at the end of the.

Speaker Change: Second quarter.

Unnamed Speaker: Perfect. And then, although you're seeing, you know, some projects get delayed, how has your view on 2025 across the utility space?

Speaker Change: Perfect and then although you are seeing some projects get delayed.

Matthew Lanigan: How has your view on 2025 across the utility space sort of changed over the last three months at all? Has it improved a little bit or not based upon Kennedy's delays to your scene? Yeah, we so again the delays we're seeing are the projects that are delayed. I do want to call out that we've got a number of projects that are starting on time as predicted, but because I feel like there is a heavy focus on delays across that industry commentary right now. When we look at 25, it looks like it's going to be a solid year.

Speaker Change: How has your view on 2025 across the utility space.

Speaker Change: Sort of changed over the last three months if at all has it improved a little bit.

Kennedy: Or not based upon Kennedy.

Speaker Change: Delays that youre seeing.

Speaker Change: Yes.

Speaker Change: So again the delays we're seeing at the projects that are delight I do want to call out that we've got a number of projects that are starting on time as predicted.

Speaker Change: Because I think as I see it.

Speaker Change: There is a heavy focus on delays across that industry commentary right now.

Speaker Change: When we look at 25 and it looks like it's going to be a solid year in terms of a.

Matthew Lanigan: In terms of either you know dialogue we're having with customers around their expectations or some forward quoting activity we're being asked to participate in. So our view on 25 remains robust.

Speaker Change: Dialogue, we're having with customers around their expectations or some forward quoting activity, we are being asked to participate and so that will be around 25 remains robust.

Alexander Rygiel: Excellent.

Speaker Change: Excellent. Thank you very much.

Operator: Thank you very much. Again Starron 1 for questions.

Speaker Change: Thank you.

Bill Dezellem: Again, a star and one for questions. We'll hear from Bill Dezellem at Tyaton Capital.

Bill <unk>: Again star one for questions, we'll hear from Bill <unk> at Titan capital.

Bill DeZellum: We'll hear from Bill DeZellum at Tieten Capital. Thank you. Did we understand correctly that the Matt sale or sales of roughly 30 million was primarily to one customer that has historically used woodmats?

Unnamed Speaker: Thank you. Did we understand correctly that the mat sale or sales of roughly $30 million was primarily to one customer that has historically used wood mats?

Speaker Change: Thank you did we understand correctly that the mat sale.

Speaker Change: Our sales of roughly 30 million waste.

Speaker Change: <unk>, primarily to one customer that has historically used would match.

Matthew Lanigan: That's correct, Bill. Thank you.

Speaker Change: That's correct.

Speaker Change: Thank you and.

Matthew Lanigan: And then let me shift, if I may, to the fluid operate margins. How was it that you increased those margins on the revenue drop? That's generally very counterintuitive, and congratulations.

Speaker Change: And then let me shift if I, if I may to the fluid.

Speaker Change: <unk> margins.

Speaker Change: How was it as you increase those margins on on the revenue drop.

Speaker Change: Generally very counterintuitive and congratulations.

Unnamed Speaker: So, which comparison when you say we increase the margins, because the margins are often both sequential and year-over-year. Now, what you do have, I guess, on the sequential comparison, it's more of the Canada effect than anything. Canada seasonality is your biggest driver there, and that's flowing through at typical margins. Year-over-year, I will say that you do have some offsets overall here on your overall margin because of the fact that you do have the international pricing kicking in that we had talked about in the past that has improved. And also, you had the continued cost actions that were ongoing on the U.S. side of things that helped offset the decline in volume.

Matthew Lanigan: So which comparison when you say we increase the margins because the margins are often, you know, both the sequential and year of year. Now what you do have I guess on the on the sequential person it's it's more of the the Canada facts than anything the candidacies and out in your biggest driver there and that's flowing through a typical margin year over year. I will say that you do have some offsets overall here on your on your overall margin because of the fact that you do have the international pricing kicking in that we had talked about in the past that had improved and also you had the continued cost actions that were ongoing on the US side of things that had helped offset the decline in volume.

Speaker Change: So.

Speaker Change: Which comparison when you say, we increased the margins because the margins are often.

Speaker Change: Both both the sequential and year over year now what you do have I guess on the.

The sequential comparison is it's more of the Canada effect than anything the canvas seasonality in your biggest driver there and thats flowing through our typical margins year over year I will say that you do have some offsets overall here on your on your.

Speaker Change: Overall margin.

Speaker Change: Because of the fact that you do have the international pricing kicking in that we had talked about in the past that had improved.

Speaker Change: And also you had the continued cost actions that were ongoing in the U S side of things.

Speaker Change: That had helped offset the decline in volume.

Bill DeZellum: Okay, so is there additional pricing action that you would anticipate?

Speaker Change: Okay. So is there additional pricing action that you would anticipate.

Matthew Lanigan: I think I mean I don't know the specific actions obviously at any point in time. Bill, you're re-procating some of your work to the market. I think what we're seeing now is some of the contracts that we had been calling that would roll on to better pricing. We're seeing more and more contribution from them as more regs are rolling onto those new contracts. So we, I'm not going to suggest that that's going to be you know a significant shift up, but we should see that continue to bolster the Eastern Hemisphere margin prideful and moving forward.

Speaker Change: I think I mean, I don't know the specific actions obviously at any point in time Bill you're repricing some of your work to the to the.

Bill <unk>: The market I think what we're seeing now is some of the contracts that we had been calling that would roll onto better pricing, we're seeing more and more contribution from them as more rigs are rolling onto those new contracts.

Bill <unk>: I'm not going to suggest that that's going to be a significant shift up but we should see that continue to bolster the eastern hemisphere margin profile moving forward.

Bill DeZellum: Great, thank you.

Speaker Change: Great. Thank you.

Bill DeZellum: And Gregg, the operating margin that I was looking at was the gap number of two-one versus five-year ago. And I suspect what you're going to say is that, due to the extraneous factors, we really ought to be looking at that adjusted margin.

Speaker Change: And Greg the operating margin that I was looking at was the GAAP number of Q1 versus got it.

Speaker Change: Ago.

Speaker Change: <unk> got I suspect, we're going to say is that due to the extraneous factors, we really ought to be looking at that adjusted margin.

Matthew Lanigan: Correct.

Matthew Lanigan: Yeah, the last year you had specifically some impairments from the exits of the STEM CAM and Australia, as well as the continuation of the facility exit costs in Gulf of Mexico. Okay, that's helpful.

Speaker Change: Correct, yes.

Speaker Change: Last year, you had spin.

Speaker Change: Specifically, some some impairment from the exits of the Stim Chem.

Speaker Change: And Australia as well as the continuation of the facility exit costs in Gulf of Mexico.

Speaker Change: Okay.

Bill DeZellum: Thank you, folks. Thank you, Bill.

Speaker Change: That's helpful. Thank you both.

Bill <unk>: Thanks Bill.

Operator: And we have no further questions from our audience at this time.

Speaker Change: And we have no further questions from our audience at this time I'd like to turn it back to our leadership team for any additional or closing remarks alright.

Operator: I'd like to turn it back to our leadership team for any additional or closing remarks. All right, thanks again for joining us on the call today. Should you have any questions or requests, please reach out to us via email at investors@newpark.com. And we look forward to hosting you again next floor. Thank you.

Unnamed Speaker: All right. Thanks again for joining us on the call today. Should you have any questions or requests, please reach out to us via email at investors at newpark.com, and we look forward to hosting you again next quarter.

Speaker Change: Alright, Thanks again for joining us on the call today should you have any questions or request. Please reach out to us via E mail at investors at New Park Dot Com and we look forward to hosting you again next quarter. Thank you.

Ladies and gentlemen, this does include today's teleconference, and we thank you all for your participation. You may now disconnect your line.

Speaker Change: Ladies and gentlemen, this does conclude today's teleconference and we thank you all for your participation you may now disconnect your lines.