Q3 2024 Newpark Resources Inc Earnings Call

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Jamie: Good morning, my name is Jamie and I will be your conference operator today. At this time, I would like to welcome everyone to the New Park Resources 3rd Quarter 2024 Earnings Conference Call.

Jamie: Today's call is being recorded and will be available for replay beginning at 12 30 p.m. Eastern Standard Time

710-5302 for domestic or 402-220-1605 for international.

Jamie: All lines are currently muted and after the prepared remarks, there will be a live question and answer session. If you would like to ask a question during the Q&A segment, please press star 1 on your phone.

Jamie: If your question has been answered, you may remove yourself from the queue at any time by pressing star 2.

Jamie: We do ask that you please pick up your handset for optimal sound quality.

Speaker Change: It is now my pleasure to turn the floor over to Gregg Piontek, Chief Finance Officer for New Park Resources. Please go ahead.

Gregg Piontek: Thank you, Operator. I'd like to welcome everyone to the New Park Resources third quarter 2024 conference call. Joining me today is Matthew Lanigan, our President and Chief Executive Officer.

Gregg Piontek: Before handing over to Matthew, I'd like to highlight that today's discussion contains forward-looking statements regarding future business and financial expectations.

Gregg Piontek: Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC.

Gregg Piontek: Except as required by law, we undertake no obligation to update our forward-looking statements.

Our comments on today's call may include...

certain non-GAAP financial measures.

Gregg Piontek: Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our quarterly earnings release, which can be found on our corporate website.

Gregg Piontek: There will be a replay of today's call and it will be available by webcast within the Investor Relations section of our website at NewPark.com.

Gregg Piontek: Please note that the information disclosed on today's call is current as of November 8, 2024.

Gregg Piontek: At the conclusion of our prepared remarks, we will open the line for questions.

Speaker Change: And with that, I'd like to turn the call over to our President and CEO, Matthew Lanigan.

Matthew Lanigan: Thanks, Gregg, and welcome to everyone joining us on today's call.

Matthew Lanigan: The third quarter came in below our expectations as two notable factors combined to impact our results after a very strong second quarter.

Matthew Lanigan: While third quarter generally tends to be a seasonally slower period of the year for our business, this year was more pronounced as a few key customers shifted their priorities during the quarter from scheduled transmission projects to renewable generation related projects.

Matthew Lanigan: This, combined with unusually dry weather conditions in the southern region, limited the need for matting on individual projects.

Matthew Lanigan: As a result, lower rental project activity, which was particularly acute across the southern markets, together with the softer oil and gas customer activity, negatively impacted rental revenues in the quarter.

Matthew Lanigan: The quarter was also impacted by an unplanned maintenance event at our Louisiana manufacturing facility that resulted in one of our production lines being offline for approximately six weeks during the period.

Matthew Lanigan: This timeline included approximately 2 weeks of delays due to logistical challenges for our third party technicians caused by Hurricane Francine.

Matthew Lanigan: The facility has been operating at normal production levels since the start of the fourth quarter.

Matthew Lanigan: In total, the seasonal pullback in rental revenues and six weeks of facility maintenance impacted third quarter adjusted EBITDA by nearly $5 million.

Matthew Lanigan: The impact of the facility maintenance included both unabsorbed fixed costs and incremental maintenance expenditures during the six-week shutdown period.

Matthew Lanigan: Including the effects of the pronounced seasonal softness and facility maintenance, our adjusted EBITDA decreased to $7.5 million, a decline of $4.5 million versus the year-ago period.

Matthew Lanigan: While our third quarter was below expectations, it's worth highlighting that we experienced a sharp rebound in late September and October, reflecting a strong resumption of activity, combined with a modest lift from emergency response customers supporting hurricane recovery efforts primarily in Florida, Georgia and North Carolina.

Matthew Lanigan: We achieved a record level of rental volume in October, positioning us for a strong finish to 2024.

Now let's turn to our outlook for 2025.

Matthew Lanigan: In the week since completing the fluid sale, we have worked diligently on aligning the final pieces of our transformation from an oilfield services business to a vertically integrated specialty rental and services business servicing critical infrastructure markets.

Matthew Lanigan: By narrowing our strategic focus exclusively to site access solutions, we're migrating towards a simpler, higher margin, more profitable business profile, one that we believe will benefit both our customers and shareholders alike.

Matthew Lanigan: To that end, immediately following the sale, we've worked with the New York Stock Exchange to provide the necessary documentation to request the appropriate industry reclassification of the company.

Matthew Lanigan: Based on the indicated timeline, we are hopeful to have that process concluded during the fourth quarter.

Matthew Lanigan: At the same time, we have moved through the preparations to rebrand the company, a process that we anticipate will align with the timing of our industry reclassification.

Matthew Lanigan: We are also taking steps to optimise our overhead structure, removing duplication and costs that are no longer required post-affluence divestiture.

Matthew Lanigan: A key piece of our optimization effort is the retirement of our heavy cost legacy IT systems and while we were very pleased with the team's progress in moving through the planning and design phases, we recognize that these projects take time and will likely be substantially completed with benefits being realized in early 2026.

Matthew Lanigan: And finally, we are also pursuing options to enhance the value of our Cady office facility.

Matthew Lanigan: Over the past few years, we have been working to transform this facility to a multi-tenant model which has reduced our net facility costs and also helps provide optionality through a potential sale of the asset, recognising that proceeds from a sale can be better deployed to fund our growth plan.

Matthew Lanigan: We are firmly committed to reviewing all aspects of our structure and associated costs to ensure we are aligning the future business for growth and operational efficiency.

Matthew Lanigan: As we continue to navigate the final stages of separation and solidify our go-forward operating structure, we anticipate achieving a $5 million cost saving by early 2026.

Matthew Lanigan: with SG&A as a percentage of revenue reaching a mid-teens range with further improvement possible as we grow and leverage our streamlined cost structure.

Matthew Lanigan: In summary, with the sale of fluids behind us, our entire organisation is now solely focused on the significant market opportunity we see in site access solutions.

Matthew Lanigan: We are building a leaner, more efficient stand-alone platform, one well equipped for both organic and inorganic growth.

Matthew Lanigan: The secular megatrends underpinning demand for our solutions remain significant, from multi-billion dollar investment programs focused on improving the nation's aging electricity infrastructure to the exponential growth in advanced computing data centers to the combined onshoring of entire industry segments.

Gregg Piontek: It's an exciting time for our business and our industry, one we intend to capitalise on and with that I'll turn the call over to Gregg for his prepared remarks.

Thanks, Matthew.

Gregg Piontek: Building on Matthew's commentary, I'll begin with a discussion of our third-quarter results, followed by an update on our outlook for the remainder of 2024 and capital allocation priorities.

Gregg Piontek: As highlighted in yesterday's press release, with the sale of fluid systems completed, our historical financial statements have been restated to reflect the reclassification of fluid systems to discontinued operations, and all of my commentary will relate to our continuing operations only.

Gregg Piontek: As Matthew touched on, our third quarter revenues came in softer than expected, as a pronounced seasonal slowdown in the utility sector activity in the southern regions and a pullback in oil and gas led to a decline in rental revenues.

Gregg Piontek: Total rental and service revenues declined 11% sequentially and 15% year-over-year to $32 million in the third quarter.

Gregg Piontek: Revenues from product sales also pulled back from the record Q2 results, coming in at $12 million for the third quarter.

Gregg Piontek: On a year-to-date basis, as a result of the headwind of the more pronounced seasonality in Q3, rental revenues are up 1% over prior year, reflecting increased rental volume offset by a modest reduction in pricing.

Gregg Piontek: Service revenues were down 21% while revenues from product sales are up 20% over the prior year.

Gregg Piontek: As discussed last quarter, the lower service revenues are attributable to lower service intensity on rental projects in 2024 as compared to last year.

Gregg Piontek: By industry, the utility sector contributed 60% of our year-to-date revenues, including nearly 55% of rental and service revenues and roughly two-thirds of our product sales.

Gregg Piontek: In terms of Industrial Solutions operating income, our third quarter was unfavorably impacted by the unplanned downtime event at our manufacturing facility, which provided an estimated $1.3 million unfavorable impact on operating income in the quarter.

Gregg Piontek: reflecting a combination of unabsorbed fixed costs and incremental maintenance expenditures.

Gregg Piontek: Consequently, our 3rd quarter adjusted EBITDA margin declined to 28.3% in the 3rd quarter.

Gregg Piontek: SG&A expenses were $11 million in the third quarter, reflecting a 14% sequential reduction and a 21% year-over-year reduction.

Gregg Piontek: The sequential and year-over-year improvements in SG&A are primarily attributable to the effects of lower performance-based incentives and other personnel costs.

Gregg Piontek: Interest expense was $900,000 for the third quarter, relatively in line with prior quarter and prior year.

Gregg Piontek: Income taxes provided a $14 million benefit in the third quarter, which included a $14.6 million benefit from the release of valuation allowances on U.S. net operating losses and other tax credit carry-forwards following the sale of fluid systems.

Gregg Piontek: Adjusted EPS from continuing operations was break-even in the third quarter, compared to $0.10 in the second quarter and $0.03 in the third quarter of last year.

Gregg Piontek: Operating cash flow was $2 million in the third quarter, unfavorably impacted by growth in fluids working capital prior to the divestiture, which we expect to recover through the post-closing true-up process.

Gregg Piontek: NetCapEx used $8 million in the quarter, primarily reflecting investments in matting fleet expansion in response to the recent surge in rental demand.

Gregg Piontek: With the completion of the fluids divestiture, we ended the third quarter with total cash of $43 million and total debt of $14 million for a net cash position of $29 million.

Gregg Piontek: Additionally, we have $56 million of availability under our U.S. AVL facility, which currently has no outstanding borrowings.

Gregg Piontek: Further, it's worth noting that as of the end of the third quarter, we have more than $15 million of net assets related to the fluid sale, including the net working capital true up and a $5 million interest bearing note receivable.

Gregg Piontek: We also have approximately $28 million in U.S. federal net operating loss and other credit carry-forwards that are available to offset future U.S. federal cash tax obligations.

Gregg Piontek: And as Matthew touched on, our corporate office asset base includes our Katy, Texas administration building, which is now largely occupied by third-party tenants and carries a net book value of approximately $23 million.

Now turning to our business outlook.

Gregg Piontek: Despite the pronounced seasonal slowdown in Q3, we remain highly constructive on the near-term and longer-term outlook for utilities and critical infrastructure spending.

Gregg Piontek: As a result, our U.S. rental volume set a new monthly record in October.

Gregg Piontek: With the strong start to Q4 and current backlog of projects, we expect very strong fourth quarter rental revenues.

Gregg Piontek: We are also encouraged by the level of quoting activity for product sales, as certain customers seek to exhaust remaining capital budgets for the year.

Gregg Piontek: While we are still fairly early in the quarter, we are confident that we will see a sequential increase in product sales in Q4.

Gregg Piontek: As referenced earlier, our Q3 performance was impacted by a combination of customer resource allocation changes, unfavorable weather, and the extended downtime at our Louisiana plant.

Gregg Piontek: Given the combined impact of the Q3 headwinds, as well as the lower service intensity throughout the year, we're reducing our full year revenue guidance from a range of $230 to $240 million

to a range of 217 to 223 million.

Gregg Piontek: while Full Year Industrial Solutions Adjusted EBITDA is revised from a range of $80 to $85 million to a range of $77 to $81 million.

to the divested business through our shared service infrastructure.

Gregg Piontek: Beyond Q4, we expect our SG&A costs will steadily decline throughout 2025 as we seek to optimize all facets of our overhead structure.

Gregg Piontek: In terms of capital allocation priorities, we continue to prioritize investments into the organic growth of our rental fleet.

Gregg Piontek: We expect to continue to pace our rental fleet capital investments based upon our longer-term view of the rental market penetration and growth opportunities.

Gregg Piontek: Beyond our organic investments in the rental fleet, we expect our free cash generation in the near term will be primarily used to build liquidity or through a return of capital to shareholders through our programmatic share repurchase program.

Gregg Piontek: It's also worth noting that in the coming months, we expect to evaluate alternative revolving credit facilities that can provide us with greater liquidity to support our strategic growth plan.

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

Thanks, Gregg.

Matthew Lanigan: As previously highlighted, we have continued to invest in our commercial sales force with a targeted focus on key growth regions, markets and accounts that best position us to accelerate our organic growth strategy.

Matthew Lanigan: We've seen early success with our expanded sales coverage model while making solid inroads with previously underserved opportunities.

Matthew Lanigan: During the third quarter, we conducted an in-depth customer survey that collected both qualitative and quantitative feedback on their business outlook. Encouragingly, respondents highlighted an improving outlook and an expectation for increases in investment and activity moving into 2025.

As we move ahead, our priorities remain unchanged.

Matthew Lanigan: 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 to deliver more value and increased revenue density with our growing customer base.

Matthew Lanigan: Second, we'll drive further efficiency improvements across all corners of the organisation, positioning us to realise improved operating leverage.

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

Matthew Lanigan: With total liquidity approaching $100 million, we are well positioned to advance our capital allocation priorities.

Matthew Lanigan: We have $50 million of share repurchase authorization to support our return of capital program, which we are looking to resume now that the fluid sale process has been completed.

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

Speaker Change: Thank you at this time if you would like to ask a question please press star 1 on your telephone keypad

Speaker Change: If at any point your question has been answered, you may remove yourself from the queue by pressing star 2.

Speaker Change: Once again, that is Star 1 to signal for a question and Star 2 to remove yourself.

Speaker Change: We'll go first, Aaron Spajalo with Craig Hallam. Please go ahead.

Aaron Spajalo: Yeah, good morning, Matthew and Gregg. Thanks for taking the questions. Maybe first for me on the project shifts, can you just maybe quantify the impact of those and then, you know, how long does that last until those projects?

Aaron Spajalo: Come back and then kind of secondarily just you know, can you talk about the the guidance kind of for the fourth quarter? Just some of the puts and takes there and then just you know overall confidence in in that outlook sounds sounds like you're pretty confident

Speaker Change: Yeah, thanks Aaron. Hey, on the projects, yeah I guess the best way to put them into context is they were shifted. For the most part those projects were shifted from

Speaker Change: third quarter to a future quarter. So I think, you know, impact on the quarter, you know, in the vicinity of a million dollars or so within the quarter, thereabouts.

Speaker Change: you know, hopefully that answers the first question for you. On fourth quarter year, I think as Gregg and I both touched on...

Speaker Change: You know, the spring back at the end of Q3 was strong, and so we are very optimistic that that will continue through the quarter and support our confidence there. You know, product sales is always a bit of a swing, but what we've seen here is encouraging to date.

Speaker Change: That's really underpinning why we think Q3 was an anomaly for the year and that we'll be back on track for Q4. If I break it down and look at it, the things we've been focusing on, we've been focusing on rental growth, we feel good that at the end of the year we'll demonstrate that by the end of the year. We feel good that our product sales...

will also demonstrate.

and I think that's where you'll see...

a time limit.

Speaker Change: Right, okay, yeah, thanks for the color there. And then, yeah, on the plant, you know, can you just talk about, you know, what work ended up being done there? Is there any other, you know, planned maintenance to be aware of? And then just on kind of CapEx and capacity, can you just kind of remind us what capacity looks like and how you might be thinking about 2025 CapEx given the growth outlook?

Speaker Change: and had planned that in future years, and so unfortunately that came.

Speaker Change: As it stands now, that was in the future year, maintenance upgrade there, that's now off the table. We're taking care of that this year.

Speaker Change: Feeling good about that side of the plant and as we touched on in the call when we got it back up and running It's been running well and running smoothly ever since so it seems like that worked Yeah We did we did take the opportunity with that that q3 downtime to pull forward some some other things that were in there for q4 so that

does help with the Q4 production schedule somewhat.

Production level is something below full capacity.

Speaker Change: Understood. Yeah, and just, you know, any kind of early read on, you know, CapEx for 2025?

Speaker Change: I would say an expectation as I look out a year is not much different than what we had in 2024. So obviously, as we get into our next year planning and finalize, I would expect we'd have a more concise estimate for 2025 in next quarter's call.

Speaker Change: Understood. And then just maybe last for me, you know, you've talked about kind of the pipeline growth in the past, mid to high teens. Can you just maybe give us an update there, just considering the, you know, fleet expansions and what the outlook sounds like as well?

Speaker Change: Yeah, Aaron, I think encouragingly we're still seeing the same trends. I think, you know, quoting activity is strong.

Speaker Change: I think we've touched on it before, we are seeing some slight elongation in that pipeline between quote and actual project start date, which I think is consistent with what we've been seeing and discussing in prior quarters, but in terms of net volume, it's still encouraging the level of growth that we're seeing quarter over quarter, year over year.

Speaker Change: All right. Thanks for taking the questions. I'll turn it over. Thanks, Aaron.

Speaker Change: We'll hear next from Samir Joshi with H.C. Wainwright. Please go ahead.

Hey, good morning, Matthew. Good morning, Gregg.

Speaker Change: Yes, Samir, when we went into the quarter, we were on the understanding that the Yen customer is going to be prioritising some transmission work, which is what we put in our forecast during the quarter. During the quarter, they looked at their resourcing and capital allocation and made an election to prioritise the completion, or substantial completion, of some solar renewal projects that they were working on, which shifted that capital and labour from the transmission project.

Speaker Change: That's obviously the decision they chose to make during the quarter, but again, I would just reiterate that

Speaker Change: These projects were mutually exclusive, and the transmission work is still expected to go ahead, and as I touched on in responding to Aaron's question, at this point they haven't given us a definitive start date on that, but we know that's the project work that needs to be done.

Speaker Change: So they were just, your customers were just reallocating priorities at this point. They will come back to this work later.

Thank you very much.

Speaker Change: Is there a certain cadence for this repayment or is this like a bullet repayment at some future point?

Speaker Change: And the majority of it actually relates to the the working capital the final working capital conveyed

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Speaker Change: Beyond that, there is the $5 million note receivable, interest-bearing note receivable that's in there. It is a longer term, but they have the ability to pay it off sooner than that.

Speaker Change: and I think you laid out your capital allocation or including organic growth and green purchase. You did also that chance for the growth. Are you?

the lay of the land there would help.

Speaker Change: Yeah, Samir, I'm not probably going to jump into a lot of detail here. Yeah, there's a pipeline, you know, of things that we're working on. I will say nothing that I would describe as imminent, so I think it's important to clarify that as we build out our thesis.

Speaker Change: geographic growth priorities, if you will. And again, we're really focused on consolidating ourselves as an access provider here so you should expect that if and when anything happens there it'll be within that kind of swim lane.

Speaker Change: I understood. And just one sort of accounting balance sheet question. The PP&E number has not changed much. Is this after the divestiture? Just wanted to understand will this be updated or like how what was included in the PP&E?

Speaker Change: No, I think that's more so of a reflection that the PP&E really resides on the industrial solutions business. I mean, when you look at the large components of it, I think that's a good thing.

Speaker Change: We have our manufacturing facility, we have our rental fleet, you know, I talked about the KD facility, and then you have your field equipment. You know, the fluids business did not have a large PP&E component.

Speaker Change: on this. Thanks for that clarification. I'll turn it over. Thanks.

Speaker Change: We'll hear next from Jerry Sweeney with Rock Capital. Please go ahead.

Good morning Matt and Gregg. Thanks for taking my call.

Speaker Change: Hey Jerry. I'm going to start with the easiest, shortest question first. Client downtime for repair work.

Speaker Change: It sounds as though that didn't impact revenue, but it was just unabsorbed overhead. Is that...

Speaker Change: Getting into some media questions, so obviously political landscape has changed this week on a bigger level than maybe some people anticipated. Just curious as to what...

Speaker Change: if you have any thoughts on what this does to the business right because we have traditional T&D repair replacement but I think there's even a portion of your business connecting some you know solar related projects and

Speaker Change: Some of those may be in crosshairs with funding etc. That's what we're hearing but I'm just curious if...

You had some puts, takes, positives, negatives on

Speaker Change: Yes, I mean, we probably know the same as you on that one, Gerry. I think, you know, the macro trend, I think, is bipartisan in terms of needing to upgrade the reliability and expand the electrical grid.

Speaker Change: You know, renewables have always been, on the economic spectrum, a little more touchy there. I think what's interesting is most of those projects are in red states. And so, to the extent that politics is going to play a role, they'll obviously be.

Speaker Change: You know, some sort of adjudication going on there. Look, we see this as a net neutral to positive on a political side at this point.

Speaker Change: That's what I was leaning towards, but I was just curious.

So on the front and then

Speaker Change: Here, I apologize. It's been a long week. Also, maybe just roadmap, you kind of touched upon it.

the fluids business, the divestiture, that was a huge undertaking.

You know, as we go forward, it's reinvestment, organic growth.

Keep an eye out for that.

That's really a 25 effort that that will span.

Speaker Change: Great. All my other questions have been answered and I appreciate it. Thanks, guys.

Thank you.

Speaker Change: We'll hear next from Alex Riegel with Bea Riley. Please go ahead.

Alex Riegel: Thanks, good morning Jim, I'm Ice Quarter. A couple questions here. First, what is the market value of the Cady facility?

Speaker Change: That's a great question. We don't have a clear market value on it, so the best reference point I can give you is the book value.

Speaker Change: So does that mean that it's not, you know, an option for sale at some point?

Speaker Change: making that the multi-tenant facility, you know, finding a tenant that values some of the more technical aspects of that building in the laboratory and then optimizing the office component of it, really just setting that up as a

Speaker Change: as a better looking rental asset for somebody that values that space, if you will.

Fair enough.

Speaker Change: The working capital true up with the flu is divested here. How much was that again? And when might that play out?

Speaker Change: So again that process is something that should play out here over the next couple of months and that is call it the low teens of that number is is you know made up there it represents the working capital trip.

Thank you for watching!

When you talk about the...

Speaker Change: pro forma the election being neutral to positive. Is that sort of negative on renewables, neutral on transmission, and positive in oil and gas? Is that how you think about that?

Speaker Change: Yeah, I mean, I think that's the case. I just don't know yet, you know, how negative it would be on renewables. You would hope that that's going to be based on economics rather than politics. And as most of those renewable projects are in red states, I think hopefully that's the result we would see. But yeah, we think generally on traditional fuels.

Speaker Change: This would be a net positive. The transmission, we don't see any change in that. I think that's a bipartisan effort, so we would expect that to continue. And then on some of the technologies that have more marginal economics, we would expect kind of market forces to dictate that.

Perfect. Thank you very much.

Thanks for watching!

Speaker Change: We'll turn now to Bill D'Azelem with Titan Capital. Please go ahead.

Speaker Change: Just to be clear on one of your answers to the last questions, working capital true up, so that is a check that you would anticipate or cash that you would anticipate receiving from the buyer, is that correct? Correct.

Speaker Change: and so sometime in the next couple quarters we should expect low teens millions showing up in your in your bank account.

Speaker Change: That's correct. Okay, great. Thank you. And then a couple of additional questions. First of all, would you dial in a little deeper into the surge in activity here in October?

Yeah, um...

Speaker Change: I think what we've seen, you know, the most of the pullback in Q3 bill was in the South.

Speaker Change: And I think what we're seeing, you know, literally almost at the end of the quarter was a resumption of activity in that region, so a lot of projects kicking off there that required matting. Also, you know, it seems more modestly, the hurricane impacts that we're seeing in those affected areas.

Speaker Change: have also played a part, so I think it's just broad-based that Q3 was a pretty unusual seasonal pullback in the south and then you know late September early October we've seen a reversion to what we see as

Speaker Change: as more normal, but with some strong projects in there that I have confidence in Q4.

that was not originally planned for Q3.

Speaker Change: Yeah, I mean, overall, that's a tough one to answer because the big piece within our CapEx, in the same case this quarter, was the map additions to the fleet. And there, again, you're flexing it based upon what you see, the demand, the near-term demand in the project. So that's the piece that I didn't expect to spend at that level.

Speaker Change: In terms of the plan, Bill, I'd say it's kind of less than a million that I would say was sort of unforecast, if you will, if that was the question.

Speaker Change: Right, that's what I was getting at but I think it's something more interesting than the question which was that you see demand picking up enough that that led to you spending extra capex on building new mats.

Speaker Change: Yeah, yeah, deploying mats into the fleet. And again, as you as you came through September, as we talked about with the SWIFT rebound and the level of project activity in October, we deployed the additional mats to support that October and that's...

Speaker Change: You know as we had touched on you know October was a record volume one for us

Okay, great. And then.

Speaker Change: You gave guidance for the year, which essentially just allows us to do a little math for revenue and EBITDA for the quarter. And if I'm doing that math correctly, your EBITDA margin in the Q4 is going to be greater than the Q2, and the Q2 was a very strong quarter for you.

Speaker Change: Yes, I think that makes sense, and the reason why is you've got a mix issue. The very strong mix in Q4, as we've mentioned, with rental being your highest incremental margin stream, that's what drives.

that higher margin expectation.

Speaker Change: Great, thank you. And if you look back historically, I'll just point to one reference point, Q4 of 2022 was a quarter where similarly we had very strong rental in that period, and you had very strong...

Margin as well.

Speaker Change: Great, thank you. And then one additional question if I may.

Speaker Change: you talked about one of your priorities being organic regional expansion and I don't think I don't think I fully understand

Speaker Change: and send them off to, you know, the hinterland wherever the new customer is at while they rent them. But I suspect there's something more to it than that. Would you talk through the practical activities of expanding regionally?

Speaker Change: Absolutely and I think we kind of have, Bill, when you look at we're focused on our Salesforce expansion first. Now when you when you move into these regions it's important that you have trust and confidence in your counterpart so you tend to we tend to go in there first with our regional sales footprint.

Speaker Change: Start to build the relationships, then start slowly in terms of developing confidence with our counterparties there in terms of our ability to safely and efficiently fulfill on their project requirements and then once you've proved that out.

Speaker Change: Typically, those projects will increase in scale and complexity, and that's when we will move more assets more permanently into those markets or that project location. So just moving the mats there, you know, maybe helps with your transportation logistics when you get the work, but you need to do the pre-work there to prove yourself out.

Speaker Change: And where are you at with the regional salespeople? Is that part of the...

the work that you're in progress on now.

Speaker Change: Yeah, I think last quarter we touched on that we'd fully built out our national sales footprint there.

Speaker Change: You know, people in market last quarter, now we're just ramping up on the calling efforts, the calling planning, you know, the various pieces of the execution of that bill. So we feel good about our footprint, now it's just kind of starting to see the results of that play through.

Great. Thank you both for taking all the questions.

You bet, Bill. Thank you.

Speaker Change: And ladies and gentlemen, is there no further questions standing by at this time? I'd like to turn the floor back over to the management team for any additional or closing comments.

Speaker Change: Thanks for joining us on a call today and should you have any questions or requests please contact us at investors at newpark.com

We look forward to hosting you again next quarter. Thanks.

Speaker Change: Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time and have a wonderful rest of your day.

Speaker Change: This video is a derivative work of the New York Times. Any resemblance to persons, living or dead, is coincidental and unintentional. Thank you for watching!

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