Q1 2025 CES Energy Solutions Corp Earnings Call

Operator: Welcome to the CES Energy Solutions first quarter 2025 results conference call and webcast. As a reminder, all participants are in listen-only mode as the conference is being recorded.

Welcome to the C. S that education first quarter 2025 results conference call and webcast.

As a reminder, all participants are in listen only mode and the conference is being recorded.

Operator: After the presentation, there will be an opportunity to ask questions. To join the question queue, you will press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator for pressing star, then zero.

The presentation, there will be an opportunity to ask question.

Jonathan The question Hugh Hewitt Best Star then one on your telephone keypad should you need assistance during the call.

Speaker Change: And as Carl said, no and I'll bring it up a bit I think Dr. Cynthia.

Anthony Aulicino: I would now like to turn the conference over to Tony Aulicino, Chief Financial Officer. Please go ahead. Thank you, operator. Good morning, everyone. And thank you for attending today's call.

Speaker Change: I would now like to turn the conference over to Tony Allott, Chino Chief Financial Officer.

Speaker Change: Go ahead.

Speaker Change: 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 first.

Anthony 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 first quarter MD&A and press release dated May 8, 2025, and in our annual information forum dated March 6, 2025.

Speaker Change: and Press release dated May 8th, 2025, and in our annual information form dated March 6th, 2025.

Anthony Aulicino: 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 first quarter MD&A.

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

Kenneth Zinger: At this time, I'd like to turn the call over to Ken Zinger, our President and CEO. Thank you, Tony. Welcome, everyone, and thank you for joining us for our first quarter 2025 earnings call.

Thank you, Tony.

Ken Zinger: Welcome everyone and thank you for joining us for our first quarter 2025 earnings call.

Kenneth 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 US, as well as our outlook for the remainder of 2025.

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 US.

Speaker Change: as well as our outlook for the remainder of 2025. We'll then pass the call over to Tony to provide a detailed financial update. We'll take questions and then we will wrap up the call.

Anthony Aulicino: I will then pass the call over to Tony to provide a detailed financial update.

Kenneth Zinger: We'll take questions, and then we will wrap up the call.

Kenneth Zinger: As always, I will start my comments today by highlighting some of the major financial accomplishments we achieved in Q1 of 2025. These include all-time record quarterly revenue of $632.4 million, which was 7% higher than Q1 of last year. Quarterly EBITDA of $99.9 million, EBITDA margins of 15.8%. Total debt to Trillion 12 Months EBITDA was at 1.17 times at the end of Q1 2025, which was at the lower end of our targeted range of 1 to 1.5 times. Cash conversion cycle days in Q1 of 103 days, a significant achievement and well below the lower end of our targeted range of 110 to 115 days.

Speaker Change: quarterly EBITDA of $99.9 million EBITDA margins of 15.8%

Speaker Change: Total debt to Trillium 12 Months EBITDA was at 1.17 times at the end of Q1 2025, which was at the lower end of our targeted range of 1 to 1.5 times.

Speaker Change: Cash Conversion Cycle Days in Q1 of 103 Days, a significant achievement, and well below the lower end of our targeted range of 110 to 115 days.

Kenneth Zinger: As of the end of Q1, we had repurchased 13.3 million shares of the 19.2 million shares, or approximately 70% of the amount allowed under our current NCIB program.

Speaker Change: As of the end of Q1, we had repurchased 13.3 million shares of the 19.2 million shares or approximately 70% of the amount allowed under our current NCIB program.

Kenneth Zinger: By way of update on our capital allocation plans, I am happy to report the following. Consistent with our prior messaging, we intend to address the dividend once per year in Q4 or Q1 as evidenced by our 42.5% increase announced in March. This is possible due to our confidence in the cash generating capability of CES in the current market environment. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. This includes anticipated CapEx in 2025 of $80 million.

Speaker Change: By way of updating our capital allocation plans, I am happy to report the following.

Speaker Change: Consistent with our prior messaging, we intend to address the dividend once per year in Q4 or Q1 as evidence by our 42.5% increase announced in March This is possible due to our confidence in the cash generating capability of CES in the current market environment

Speaker Change: We will continue to support the business with the necessary investments required to provide acceptable growth and returns. This includes anticipated capex in 2025 of $80 million.

Kenneth Zinger: We will continue to investigate strategic tuck-in acquisition opportunities into related business lines or geographies where we believe we can add value and grow returns. In the coming months, we intend to fully execute on our NCIB program of 19.2 million shares, of which approximately 2.9 shares remain to be purchased prior to its expiry on July 21st. At that time, we intend to once again renew the NCIB for another 10% of the float for the upcoming year. We will continue to target a debt level in the 1 to 1.5 times debt to trailing 12 months EBITDAC range.

Speaker Change: We will continue to investigate strategic tuck-in acquisition opportunities into related business lines or geographies where we believe we can add value and grow returns.

Speaker Change: In the coming months, we intend to fully execute on our NCIB program of 19.2 million shares of which approximately 2.9 shares remain to be purchased prior to its expiry on July 21st. At that time, we intend to, again, to once again renew the NCIB for another 10% of the float for the upcoming year.

Speaker Change: We will continue to target a debt level in the one to one and a half times debt to trailing 12 months EBITDAC range.

Kenneth Zinger: I'll now move on to summarize Q1 performance overall and by division. Today our rig count in North America stands at 182 rigs out of the 687 currently listed as operating, representing an industry-leading North American land market share of over 26.5%. In Q1, 64% of CES revenue was generated in the United States and 36% in Canada.

Speaker Change: I'll now move on to summarize Q1 performance overall and by division.

Speaker Change: Today, our rig count in North America stands at 182 rigs out of the 687 currently listed as operating, representing an industry leading North American land market share of over 26.5%.

Speaker Change: In Q1, 64% of CES revenue was generated in the United States and 36% in Canada. In fact, our Canadian revenue set an all-time quarterly record.

Kenneth Zinger: In fact, our Canadian revenue set an all-time quarterly record. Of the overall corporate revenue, 54% was generated by the production chemical businesses and 46 by the drilling fluid businesses.

Speaker Change: Of the overall corporate revenue, 54% was generated by the production chemical businesses and 46 by the drilling fluid businesses .

Kenneth Zinger: As referenced on our year-end 2024 update call in March of this year, margins in Q1 were adversely affected by a variety of headwinds, the most notable being an influx of rigs all starting at the same time in early January, which caused noise in the numbers during the first half of Q1, Canadian dollar devaluation versus the U.S. dollar during Q4 and Q1, which affected cost of goods on our Canadian business purchases, which are almost entirely made in U.S. dollars.

Speaker Change: As referenced on our year end, 2024 update call in March of this year, margins in Q1 were adversely affected by a variety of headwinds, the most notable being, and influx of ricks all starting at the same time in early January , which caused noise in the numbers during the first half of Q1.

Speaker Change: Canadian dollar devaluation versus the US dollar during Q4 and Q1 which affected cost of goods on our Canadian business purchases which are almost entirely made in US dollars.

Kenneth Zinger: Tariff uncertainty, which has caused massive restructuring of our supply chain as we attempt to purchase and manufacture as much as possible within the same country as it is being sold. Counter tariff uncertainty on our Canadian businesses due to approximately 60% of our inputs being purchased in the United States. In Canada, the Canadian drilling fluids business continues to lead the WCSB in market share. Today, we are providing service to 41 of the 120 jobs listed as underway in Canada, or a 34.2% market share. The active drilling rig count in Canada so far in 2025 has been trending consistently higher by approximately 5% year-over-year.

Speaker Change: Tara Funcertainty, which has caused massive restructuring of our supply chain as we attempt to purchase and manufacture as much as possible within the same country as it is being sold.

Speaker Change: Counter-terror on certainty on our Canadian businesses due to approximately 60% of our inputs being purchased in the United States.

Speaker Change: In Canada, the Canadian Drilling Fluid's business continues to lead the WCSB in market share. Today we are providing service to 41 of the 120 jobs listed as underway in Canada or a 34.2% market share.

Speaker Change: The active drilling rig counting Canada so far in 2025 has been trending consistently higher by approximately 5% year-over-year. We remain optimistic about the prospects for 2025 due to completion and full start-up of infrastructure projects and their associated take-away capacity.

Kenneth Zinger: We remain optimistic about the prospects for 2025 due to completion and full startup of infrastructure projects and their takeaway capacity. The impending startup of LNG Canada and the recent startup of Trans Mountain leave us optimistic about the market conditions in the WCSB as a whole. Although not immune from low oil prices, the WCSB is still in a great position to weather any storm should it materialize. Pure Chem, our Canadian production chemical business, had another very strong quarter in Q1. Pure Chem continued its outsized growth versus the general activity increases in the company. All of the business lines within Pure Chem continued to grow as we take market share, win bids, and optimize formulations.

Kenneth Zinger: The revenue and earnings from our primary business, production treating, continues to drive the growth in Canada as we consistently strive to deliver superior products and service combined with competitive market pricing.

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

Kenneth Zinger: Although we believe there could be a pullback in completion activity in Canada during the second half of 2025, fracking remains a small contributor to our overall pure chem business. We continue to believe we are the clear number one provider of production chemistry to the Canadian conventional market and we are growing meaningfully in the heavy oil market as well.

Although...

Speaker Change: We believe there could be a pullback in completion activity in Canada during the second half of 2025, fracking remains a small contributor to our overall PRCAM business.

Speaker Change: We continue to believe we are the clear number one provider of production chemistry to the Canadian conventional market and we are growing meaningfully in the heavy oil market as well.

Kenneth Zinger: In the United States, AES, our drilling fluids group, is providing chemistries and service to 141 of the 567 rigs listed as active in the U.S. land market today, for a continued number one market share of U.S. land rigs at around 25%. This once again marks the highest ever market share by AES of U.S. land market. The number of rigs drilling in the USA is down by just over 4% since we reported in March, versus our AES rig count, which is actually up by over 2%.

Speaker Change: In the United States, AES, our drilling fluids group is providing chemistries and service to 141 of the 567 rigs listed as active in the US land market today for continued number one market share of US land rigs at around 25%.

Speaker Change: This once again marks the highest-ever market share by AES at the U.S. Land Market. The number of rigs drilling in the USA is down by just over 4% since we reported in March versus our AES rig count, which is actually up by over 2%

Kenneth Zinger: For more information visit www.aes.gov We continue to look forward to using this tightening market as an opportunity to showcase our R&D and technology development capability, our manufacturing capability, and our procurement sophistication to continue to grow our market share at AAS. We see these unique capabilities as key to enabling us to come out of any potential slowdown with an even stronger position in the market. Currently we enjoy a basin leading 107 rigs out of the 287 listed as working in the Permian Basin, or an all-time record 37.3%. The Permian industry rig count is down since March by approximately 9% overall.

We continue to look forward to using this [inaudible]

Speaker Change: Tightening Market as an opportunity to showcase our R&D and technology development capability, our manufacturing capability, and our procurement sophistication to continue to grow our market share at AES.

Speaker Change: We see these unique capabilities as key to enabling us to come out of any potential slowdown with an even stronger position in the market.

Speaker Change: Currently, we enjoy a basin leading 107 rigs out of the 287 listed as working in the Permian Basin, or an all-time record 37.3%.

Speaker Change: The Permian Industry Reg count is down since March by approximately 9 percent overall, but in spite of this, our Reg count is up by 7 percent. This speaks to the quality of our customer base as well as the fact that operators continue to put more emphasis on performance as well as stable strategic suppliers.

Kenneth Zinger: But in spite of this, our rig count is up by 7%. This speaks to the quality of our customer base as well as the fact that operators continue to put more emphasis on performance as well as stable strategic suppliers.

Kenneth Zinger: Finally, AES Completion Services continues to operate at a much higher level than prior to our acquisition of them last year. Although still small within the AES division, this team is experiencing outsize growth as they continue to benefit from the AES infrastructure, people, and reputation.

Kenneth Zinger: Our J-Chem Catalyst division continues its trend of strong growth through these past few years and into 2025. The division is focused on further market penetration in all areas in which they operate. An outweighed share of the announced CapEx spend for 2025 is allocated to supporting the growth we anticipate is coming later this year at J-Chem. We are also adding staff and key employees in this division due to this anticipated growth. It is important to note that J-Chem's business, like PureChem's, is almost entirely levish to production-related spending by EMPs and therefore not as sensitive to the same activity-related uncertainty that some upstream revenues can face.

Kenneth Zinger: We look forward to J-Chem continuing its march to being the number one provider of production chemistry and service to the United States land market.

Kenneth Zinger: At this time, I would like to reiterate the confidence that we have in the resilience of our business model in the face of the current market uncertainty. Our business is counter cyclical and requires minimal capex, especially during times of disruption in our industry. In this WTI or tariff and tariff environment, we have witnessed expressions of reduced activity levels and capital spending in earnest by some customers. Our current strategy is a continued cautious focus on growth, maintaining relationships with current clients and continuing to pursue potential new clients and markets. As we have done in previous periods of industry weakness, we will be supporting operators in the weaker environment, then reaping the benefits of that support as conditions improve.

Kenneth Zinger: Since our last call in March, the U.S.-Canadian dollar exchange rate has settled back into the range of where it held most of last year. This will alleviate the sudden cost of goods inflation we were feeling throughout Q1 and into Q2 in the Canadian businesses. Although this pressure impacted costs in Q1 and will again to some degree in Q2, it now appears it was transitory and should dissipate in the coming quarters. With regard to USA tariffs and the suggested Canadian counter tariffs, these continue to have little to no direct effect on our business in their current state.

Kenneth Zinger: However, we are continuing initiatives to rearrange supply chains in order to minimize potential exposures as much as possible. We are also reworking some internal production schedules in order to realign manufacturing to produce as many products as possible within the same country in which they are being sold. Although this is a month long process. Significant progress has already been made and we will continue with this strategy until we have insulated the business as much as is possible from future tariff risks. I will state again for clarity that we continue to expect the direct impact from tariffs to be insignificant to our overall business.

Kenneth Zinger: Finally, to address the macro uncertainty in the markets today, I just want to comment that our business has never been stronger or healthier than it is today, and that we are uniquely positioned and strategically focused to not only weather this headwind, but also to benefit from it. We intend to accomplish this by not only utilizing our NCIB to repurchase and cancel shares at these levels, but also through strategic execution of plans to expand our business with customers and markets we already are participating in, as well as some we have been working to penetrate.

Speaker Change: Finally to address the macro uncertainty in the markets today I just want to comment that our business has never been stronger healthier than it is today and that we are uniquely positioned and strategically focused to not only weather. This headwind, but also to benefit from it we intend to accomplish this by not only utilizing our N CIB to re purchase and cancel shares.

Speaker Change: These levels, but also through strategic edge execution of plans to expand our business with customers in markets. We already are participating in as well as some of them we have been working to penetrate.

Kenneth 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. Due to the growth we are still experiencing in all parts of our business, we have increased our total number of employees at CES from 2,530 on January 1 to 2,613 at the end of the Q1. This growth is representative of the opportunities we are currently executing on, as well as the business we believe we have upcoming. Although there may be more uncertainty in the markets today, we continue to position ourselves to provide the same industry-leading support to our customers for the business we currently have direct line-of-sight on.

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 C. S. Due to the growth we are still experiencing in all parts of our business. We have increased our total number of employees at CES from 20 530 on January 1st to 'twenty 613 at the end of the Q1.

Speaker Change: This growth is representative of the opportunities. We are currently executing on as well as the business. We believe we have upcoming although there may be more uncertainty in the markets. Today, we continue to position ourselves to provide the same industry, leading support to our customers for the business. We currently have direct line of sight on.

Anthony Aulicino: With that, I'll pass the call to Tony for the financial update. Thank you, Ken. CES's financial results for the first quarter set a record revenue level and demonstrate a continuation of strong adjusted EBITDAC, funds flow from operations and high quality earnings, despite muted recounts in the US. These results underpin the unique resilience of CES's consumable chemicals business model. CES continued to effectively deploy strong surplus cash flow to return capital to shareholders while investing in strategic CapEx and working capital to support our record revenue run rate and position the company for identified growth opportunities. In Q1, CES generated revenue of $632 million, representing an annualized run rate of approximately $2.53 billion.

Speaker Change: With that I'll pass the call to Tony for the financial update Thank you Ken.

Tony Allott: <unk> financial results for the first quarter set a record revenue level and demonstrated a continuation of strong adjusted EBITDAX funds flow from operations.

Tony Allott: And high quality earnings despite muted rig counts in the U S. These results underpin the unique resilience of C. S as consumable chemicals business model.

Tony Allott: See us continued to effectively deploy strong surplus cash flow to return capital to shareholders, while investing in strategic Capex and working capital to support our record revenue run rate and position the company for identified growth opportunities.

Tony Allott: In Q1, <unk> generated revenue of 632 million, representing an annualized run rate of approximately $2.53 billion.

Anthony Aulicino: and a 7% increase over the prior year's $589 million. revenue generated in the US was $402 million and represented 64% of total revenue compared to $390 million in Q4 2024 and an increase of 4% over prior year revenue of $388 million. Revenue generated in Canada achieved an all time record at $230 million, up from $215 million in Q4, and 14% above the $201 million generated a year ago, driven by strong performance in both Canadian drilling fluids and pure chem production chemicals operations. CES continued to support high levels of service intensity and production chemical volumes driven by complex drilling programs, and also benefited from the appreciating US dollar during the quarter.

Tony Allott: And a 7% increase over the prior year's $589 million.

Tony Allott: Revenue generated in the U S was 402 million and represented 64% of total revenue compared to $390 million in Q4, 2024, and an increase of 4% over prior year revenue of $388 million.

Tony Allott: Revenue generated in Canada achieved an all time record at $230 million up from $215 million in Q4, and 14% above the.

Speaker Change: <unk> $201 million generated a year ago, driven by strong performance in both Canadian drilling fluids, and Pierre can production chemicals operations.

Speaker Change: CES continued to support high levels of service intensity and production chemical volumes driven by complex drilling programs and also benefited from the appreciating U S. Dollar during the quarter customer emphasis on optimizing production through effective chemical treatments benefited both countries and Cao.

Anthony Aulicino: Customer emphasis on optimizing production through effective chemical treatments benefited both countries, and counter declines in US industry rig counts showcasing the resilience of our business model. Adjusted EBITDAC in Q1 was approximately $100 million compared to $103 million in Q4 2024 and $102 million in Q1 2024. Q1's adjusted EBITDAC margin of 15.8% compared to prior year and prior quarter margins of 17.3% and 17.0% respectively. and was in line with the company guidance of being in the midpoint of our targeted 15.5 to 16.5% range for the quarter. This margin reflected variations in product mix, elevated SG&A to support upcoming growth opportunities, and input cost fluctuations realized during the quarter, primarily related to FX swings.

Speaker Change: <unk> declines in U S industry rig counts showcasing the resilience of our business model.

Speaker Change: Adjusted EBITDA in Q1 was approximately $100 million compared to $103 million in Q4, 2024 and $102 million in Q1, 2024, Q1's, adjusted EBITA margin of 15, 8% compared to prior year and prior quarter margins.

Speaker Change: 17, 3% and 17.0% respectively.

Speaker Change: And was in line with the company guidance of being in the midpoint of our targeted 15, five to 16, 5% range for the quarter.

Speaker Change: This margin reflected variations in product mix elevated SG&A to support upcoming growth opportunities and input cost fluctuations realized during the quarter primarily related to FX swings.

Anthony Aulicino: CES generated $60 million in cash flow from operations in the quarter, compared to $62 million in Q4 and $86 million in Q1 2024. The slight decrease in cash flow from operations was driven by an increase in working capital requirements to support record revenue levels, offset by very strong funds flow from operations.

Speaker Change: CES generated $60 million in cash flow from operations in the quarter compared to $62 million in Q4 and $86 million in Q1 2020 for the slight decrease in cash flow from operations was driven by an increase in working capital requirements to support record revenue levels offset.

Speaker Change: A very strong funds flow from operations.

Speaker Change: Yeah.

Unknown Attendee: Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, Pre-cash flow for the quarter was $26 million compared to $35 million in Q4 2024 and $58 million in Q1 2024. As measured by a free cash flow to adjusted EBITDA conversion rate, this equates to approximately 26% in the current quarter or 39% on a trailing 12-month basis. The sequential decrease in free cash flow was driven directly by an $18 million investment in working capital to support record revenue levels. Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, Absent these items, free cash flow for Q1 would have been $48 million, representing a free cash flow to adjusted EBITDA conversion rate of 48%.

Speaker Change: Funds flow from operations, or <unk>, which isolates the effect of seasonal working capital builds was $78 million in Q1 compared to $69 million in Q4, and $74 million a year ago pre.

Speaker Change: Free cash flow for the quarter was $26 million compared to $35 million in Q4, 2024 and $58 million in Q1 2024.

Speaker Change: As measured by a free cash flow to adjusted EBITA conversion rate. This equates to approximately 26% in the current quarter or <unk>, 39% on a trailing 12 month basis.

Speaker Change: The sequential decrease in free cash flow.

Speaker Change: Does driven directly by an $18 million investment in working capital to support record revenue levels.

Speaker Change: Compared to an investment of $7 million in Q4, combined with an acceleration of approximately $5 million of incremental strategic capex initiatives during the quarter to mitigate potential future tariff related pricing and cost increases absent. These items free cash flow for Q1 would have.

Speaker Change: $48 million, representing a free cash flow to adjusted EBITDA conversion rate of 48%.

Anthony Aulicino: CES maintained a prudent approach to capital spending through the quarter, with CAPEX spend net of disposal proceeds of $26 million, representing 4% of revenue. We will continue to adjust plans as required to align with business conditions while supporting attractive growth opportunities throughout our divisions. For 2025, we continue to expect cash CAPEX to be approximately $80 million, split evenly between maintenance and expansion capital to support incremental accretive business development opportunities and current record revenue levels. and we have the flexibility to alter spending levels commensurate with changes in end markets and required support levels. During the quarter, we continue to be active in our NCIB program purchasing 2.7 million shares at an average price of $7.89 per share for a total cash outlay of $21.1 million, representing 1.2% of outstanding shares as of January 1, 2025.

Speaker Change: CES maintained a prudent approach to capital spending through the quarter with Capex spend net of disposal proceeds of $26 million, representing 4% of revenue. We will continue to adjust plans as required to align with business conditions, while supporting attractive growth opportunities throughout our divisions for <unk>.

Speaker Change: 125, we continue to expect cash capex to be approximately $80 million split evenly between maintenance and expansion capital to support incremental accretive business development opportunities and current record revenue levels and we have the flexibility to alter spending levels commensurate.

Speaker Change: With changes in end markets and required support levels.

Speaker Change: During the quarter, we continued to be active in are in CIB program purchasing two 7 million shares at an average price of $7 89 per share for a total cash outlay of $21.1 million, representing one 2% of outstanding shares as of January one 2025.

Anthony Aulicino: To date, we have repurchased $16.3 million of the $19.2 million available under the current NCIB at an average price of $7.59 per share. And since the inception of the NCIB program in July of 2018, CES has repurchased 75 million shares, representing approximately 32% of the outstanding shares at that time. purchased for an average price of $3.71 per share. We ended the quarter with $469 million in total debt, representing an increase of $17 million from the prior quarter and $35 million year over year. Total debt is primarily comprised of the $200 million senior notes and a net draw on the senior facility of $158 million.

Speaker Change: To date, we have repurchased $16 3 million of the $19 2 million available under the current in CIB at an average price of $7 59 per share and since the inception of the <unk> program in July of 2018, CES has repurchased 70.

Speaker Change: 5 million shares representing approximately 32% of the outstanding shares at that time.

Speaker Change: Purchased for an average price of $3 71 per share.

Speaker Change: We ended the quarter with $469 million in total debt, representing an increase of $17 million from the prior quarter and $35 million year over year total debt is primarily comprised of the $200 million senior notes and a net draw on the senior facility of 158 million.

Anthony Aulicino: and $102 million in lease obligation. Total debt to adjusted EBITDAAC of 1.17 times at the end of the quarter compared to 1.12 times at December 31st and 1.28 times a year ago, demonstrating our continued commitment to maintaining prudent leverage levels. The prudent capital structure is further illustrated by our current net draw of $173 million, which has increased by $15 million from the end of the quarter, primarily as a result of our quarterly dividend payment and continued NCIB spending.

Speaker Change: And $102 million in lease obligations.

Speaker Change: Total debt to adjusted EBITDA of $1, one seven times at the end of the quarter compared to 112 times at December 31, and 128 times, a year ago, demonstrating our continued commitment to maintaining prudent leverage levels.

Speaker Change: Prudent capital structure is further illustrated by our current net draw of $173 million, which has increased by $15 million from the end of the quarter, primarily as a result of our quarterly dividend payment and continued in CIB spending.

Anthony Aulicino: Following the quarter end, we closed the amendment and extension of our senior credit facility, which included an increase to the Canadian facility by $100 million to get to a total facility size of approximately $550 million versus $450 million previously. The new facility also provides improved pricing, right size definitions and covenants, and an extended term out to November 2028.

Speaker Change: Following the quarter end, we closed the amendment and extension of our senior credit facility, which included an increase to the Canadian facility by $100 million to get to the total facility size of approximately $550 million versus $450 million previously.

Speaker Change: The new facility also provides improved pricing right size definitions and covenants and an extended term out to November 2028. This amendment in conjunction with last year's issuance of senior notes due may 2029 leaves us with no near term debt.

Anthony Aulicino: This amendment, in conjunction with last year's issuance of senior notes due May 2029, leaves CES with no near term debt maturity. The upsized credit facility and improved terms are consistent with the increased size, scale, and improved credit profile of CES. The new credit facility provides ample liquidity, optionality on return of capital opportunities, and flexibility to repay or refinance the senior notes on our own schedule on suitable terms over the coming years.

Speaker Change: Maturities.

Speaker Change: The Upsized credit facility and improved terms are consistent with the increased size scale and improved credit profile of CES. The new credit facility provides ample liquidity.

Speaker Change: Genuity on return of capital opportunities and flexibility to repay or refinance the senior notes on our own schedule on suitable terms over the coming years.

Anthony Aulicino: On May 2, DBRS announced a ratings upgrade from BI positive to BB low stable, reinforcing the resiliency and creditworthiness of CES Energy Solutions. We are very comfortable with our current debt level maturity schedule and leverage in the lower end of the one to one and a half times range, thereby enabling strong return of capital to shareholders and prioritizing a sustainable dividend and share buyback. I would also note that our working capital surplus of $687 million exceeded total debt by $218 million and demonstrated continued improvement compared to $203 million in the prior year. Our continued focus on working capital optimization has led to sustained improvements in cash conversion cycle, which ended the quarter in 103 days.

Speaker Change: On may 2nd D Brs announced a ratings upgrade from be high positive to double b low stable reinforcing the resiliency and creditworthiness creditworthiness of CES energy solutions.

Speaker Change: We are very comfortable with our current debt level maturity schedule and leverage in the lower end of the one to one five times range, thereby enabling strong return of capital to shareholders and prioritizing a sustainable dividend and share buybacks I would also note that our working capital surplus of 687.

Speaker Change: <unk>.

Speaker Change: Exceeded total debt by $218 million and demonstrated continued improvement compared to $203 million in the prior year.

Speaker Change: Our continued focus on working capital optimization has led to sustained improvements in cash conversion cycle, which ended the quarter at 103 days. This also translates to a reduction in operating working capital as a percentage of annualized quarterly revenue to 27% from 28.

Anthony Aulicino: This also translates to a reduction in operating working capital as a percentage of annualized quarterly revenue to 27% from 28% last quarter. Each percentage improvement at these revenue levels represents approximately $20 million of additional cash on our balance sheet. Internally, we have continued to focus on return on average capital employed metrics at the divisional levels. This approach has led to a cultural adoption of ROACE maximizing factors such as profitable growth, strong margins, working capital optimization, and prudent capital expenditures.

Speaker Change: Percent last quarter each percentage improvement at these revenue levels represents approximately $20 million of additional cash on our balance sheet.

Speaker Change: Internally, we have continued to focus on return on average capital employed metrics at the divisional levels. This approach has led to a cultural adoption of row CE maximizing factors such as profitable growth strong margins working capital optimization and prudent capital.

Anthony Aulicino: I am proud to report that the resulting consolidated TTM ROACE continues to be strong at 22% compared to 24% a year ago.

Speaker Change: <unk> I am proud to report that the resulting consolidated TTM ROA CE continues to be strong at 22% compared to 24% a year ago.

Anthony Aulicino: As demonstrated through our results, CES is bigger, stronger, and more resilient than ever before, enabling financial stability during volatile industry periods, and valuable optionality for capital allocation options.

Speaker Change: As demonstrated through our results <unk> bigger stronger and more resilient than ever before enabling financial stability during volatile industry periods and valuable Optionality for capital allocation options. At this time I would like to turn the call back to the operator to allow for question.

Operator: At this time, I'd like to turn the call back to the operator to allow for questions. Thank you. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause a moment as callers join the queue.

Speaker Change: <unk>.

Speaker Change: Thank you.

Speaker Change: During the question.

Speaker Change: Alright, and then one on your telephone keypad.

Speaker Change: Yes.

Speaker Change: Your question.

Speaker Change: Speakers, please pickup your handset before pressing.

Speaker Change: And equal.

Speaker Change: A question. Please press Star then two.

Speaker Change: We will pause a moment of callers join the queue.

John Gibson: Our first question comes from John Gibson with BMO Capital Markets. Please go ahead. Hey, good morning. Thanks for taking my questions.

John Gibson: First question comes from John Gibson BMO capital. Please.

Speaker Change: Oh go ahead.

Speaker Change: Hey, good morning, Thanks for taking my questions just first on some of the investments you've made in J counter.

Kenneth Zinger: Just first on some of the investments you made in J-Chem. Can you talk about how that business could perform in a lower commodity environment? I know it's more production oriented, but Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, Yeah, sure. I mean, we've got some, we believe we have some business coming this year that we've been kind of verbally notified of this hasn't been formally awarded yet. So we're not prepared to speak to that yet. But it's enough business that we couldn't handle it with the current structure. So we had to put some capital on the ground in order to increase storage at the facilities and get some delivery capability as well as hire quite a few people to support it.

Speaker Change: Jeff can you talk about how that business okay.

Speaker Change: We're forming a lower commodity environment I know it is more production oriented but.

Speaker Change: Maybe weigh that with potential growth, especially with the investments you've made.

Speaker Change: Yes, sure I mean, we've got some.

Speaker Change: We believe we have some business coming this year that we've been kind of verbally notified of this hasnt.

Speaker Change: Been formally awarded yet so we're not prepared to speak to that yet, but it's enough business that we couldn't handle it with the current structure. So we had to put some.

Speaker Change: Capital on the ground in order to increase storage at the facilities.

Speaker Change: And get some delivery capability as well as higher <unk>.

Speaker Change: A few people to support it so.

John Gibson: So I'm pretty excited about JCAM and PureCam. Both are growing in this, well actually, every division is growing in this market right now. So I don't believe there's any risk in the market that that growth doesn't continue this year based on what we see in front of us. Okay, got it.

Speaker Change: Pretty excited about J Cam MPR can both are growing and this is actually on <unk>.

Speaker Change: The division is growing at this in this market right now so.

Speaker Change: Don't believe there is a.

Speaker Change: If there is any risk in the market that that growth doesn't continue this year based on what we see in front of us.

Speaker Change: Okay got it thank you.

John Gibson: Thank you.

Unknown Attendee: And second for me, I mean, you talked about in the preamble about CES is historically taken. Unknown Attendee, thank you. I don't even know if we're there yet. I guess, are we there yet in terms of pricing, compression, having to work with customers a little bit in any of your businesses? Or is that something you're maybe projecting here? Unknown Attendee No, I think there's been the analysts are all out there talking about a potential slowdown. I personally, you know, we've we've had some a couple of handful of customers, let's put it that way, reach out about finding ways to improve costing, either through how they're utilizing chemistries, or the types of chemistries they're using.

Speaker Change: Second for me you talked about in the preamble about.

Speaker Change: <unk> historically taken these downturns and turned it into market share gains I don't even know if we're there yet but.

Speaker Change: I guess, how are we there yet in terms of pricing compression, having to work with customers a little bit and any of your businesses or is that something youre, maybe projecting here into Q2 or the back half of the year.

Speaker Change: No I think theres been all the analysts are all out there talking about a potential slowdown I personally we've had some a couple of handful of customers, let's put it that way reach out about.

Speaker Change: Finding ways to improve costing.

Speaker Change: Either through how they're utilizing chemistries or the types of chemistries are using.

Kenneth Zinger: So, you know, there's a little bit of noise in the market, I would describe it as more so in the US than Canada. But, you know, personally, I don't This is nowhere near any kind of a downturn. We're facing something that could happen. It's not a definite, and it'll all depend on the outcome of the tariff stuff that's going on in the U.S., as well as whatever happens at OPEC. But we're not anticipating a big slowdown, and we're definitely positioned and have already started taking advantage of some of that, as you can see by the rig counts in the U.S.

Speaker Change: So.

Speaker Change: There's a little bit of noise in the market I would describe it as more so in the U S and Canada.

Speaker Change: But personally I don't.

Speaker Change: This is nowhere near any kind of a downturn, where we're facing something that could happen, it's not a definite and it'll all depend on the outcome of the tariff stuff that's going on in the U S as well as whatever happens at OPEC, but but we're not anticipating a big slowdown and we're definitely positioned and have already started taking advantage of some of.

Speaker Change: That as you can see by the rig counts in the U S and how we're growing share even though the counts are declining.

Kenneth Zinger: and how we're growing share, even though the rig counts are declining. We've been talking about the fact that our U.S. drilling fluids group has been growing throughout the last couple of years, and that has continued into this call it a little bit of a lull here while everybody waits to see what's going on. The other thing I would add, and this is updated every quarter in our investor presentation that's posted on the website, is the nature of our customers that support the outsized growth and maintenance of strong market share. 80% of our revenue is derived by public company customers that are typically bigger, more active, and more results-oriented.

Speaker Change: And we've been talking about the fact that that our U S drilling fluids group has been growing throughout the last couple of years and that has continued into this call. It a little bit of a lull here, while everybody waits to see what's going on.

Speaker Change: The other thing I would add and this is updated every quarter in our investor presentation, that's posted on the website.

Speaker Change: The nature of our customers that support the outsized growth and maintenance of <unk>.

Speaker Change: Strong market share.

Speaker Change: 80% of our customers.

Speaker Change: 80% of our revenue is derived by public company customers.

Speaker Change: Are typically bigger more active and more results oriented.

Kenneth Zinger: And 70% of all of the revenue that we get are from companies that have market caps of $10 billion plus, up to $700-800 billion. So, these are results-oriented guys that aren't tone-deaf to the WTI fluctuations, especially as you get into the 60s or lower than that for a period of time, hopefully. But these are also typically, as you've seen through research and a lot of announcements towards the lower end of declines in activity levels.

Speaker Change: And 70% of all of the revenue that we get are from companies that have market caps of $10 billion plus up to $7 billion to $800 billion.

Speaker Change: So these are results oriented guys that that arent arent arent tone deaf to the WTO fluctuations, especially as you get into the <unk> are lower than not for.

Speaker Change: Short period of time, hopefully, but these are also typically as you've seen through research and a lot of announcements towards the <unk>.

Speaker Change: Lower end of of of.

Speaker Change: Declines in activity levels and rig counts.

John Gibson: And Rick, Great. I appreciate the response, guys, and I'll turn it back. Thanks. Thanks, John.

Speaker Change: Okay, Great I appreciate the responses guys on okay.

Speaker Change: Thanks.

Joe: Thanks, Joe.

Operator: Once again, if you have a question, please press star then one.

Speaker Change: Once again, if you have a question. Please press Star then one the next question comes from John and Daniel Daniela 19.

John M. Daniel: The next question comes from John M. Daniel with Daniel Energy Partners. Please go ahead. Good morning, guys. Thanks for having me. I was trying to write as fast as I could and I missed some things, so hopefully you can remind me.

Joe: Please go ahead.

Speaker Change: Good morning, guys. Thanks for having me.

Speaker Change: I was trying to write as fast as I could and I missed some things. So hopefully you can remind me on the head count can you tell me what those numbers were and the change in and what's driving that.

Unknown Attendee: On the head count, can you tell me what those numbers were and the change and then what's driving that? Unknown Attendee Yeah, sure. I mean, the I'm just pulling that paper up. I know roughly what it is. But the change is being driven primarily by the growth that we're seeing, both that contributed to the revenue increase in Q1, as well as what we have in the books coming in the second half of the year. So our growth was, we went up by 83 people. between January 1 and March 31 from 2530 to 2613.

Speaker Change: Okay.

Speaker Change: Yes sure.

Speaker Change: But I'm just pulling up paper up I know roughly what the change is being driven.

Speaker Change: Primarily by the growth that we're seeing.

Speaker Change: Both that contributed to the revenue increase in Q1.

Speaker Change: As well as what we have in the books coming in the second half of the year. So our growth was we went up by 83 people.

Speaker Change: Between January one and March 31 from $25 30 to $26 13.

Unknown Attendee: Okay, it's impressive. Going back to your customers, you mentioned you work for a lot of the sort of more consequential ones, sort of 10 billion market cap and more. And those have been the ones leading.

Speaker Change: Wow Okay.

Speaker Change: Yes.

Speaker Change: <unk>.

Speaker Change: Going back to your customers you mentioned you work for a lot of the sort of more consequential, one sort of $10 billion market cap and more and those have been the ones leading the.

Unknown Attendee: Consolidation Efforts, can you speak to how quickly they shift work from to their incumbent such as CES? What's the transition time? Yeah, it takes time. It can take, it can take months. But on average, the punch line is we've been neutral and most of those cases positively affected by that consolidation for the reason that you just mentioned.

Speaker Change: Consolidation efforts can you speak to how quickly they shift work from.

Speaker Change: To their own comments such as CES.

Speaker Change: What's the transition time.

Speaker Change: Yes. It takes time, it can take and can take months, but on averaging the.

Speaker Change: The bunch line is.

Speaker Change: We've been neutral in most of those cases positively affected by that consolidation for the reason that you just mentioned.

Unknown Attendee: Okay, that's good.

Speaker Change: Okay, that's great and then last one and sorry to be a question hog, but I think you mentioned in response to the prior question.

Kenneth Zinger: And then the last one, I'm sorry to be a question hog, but I think you mentioned in response to the prior question, you said something along changes in the chemistry. Can you elaborate on that? And how did those changes The types of chemistry we run vary, like the prices on that stuff moves around all the time. So different ingredients can cause different commercial products to vary. And you can have chemistries that work equally as well. It's just that as prices come down on a specific input, it can affect the overall cost of that product. So it's just, it's constantly evaluating to see if we can find go back and forth between the cheaper commodities that are out there.

Speaker Change: You said something along changes in the chemistry can you elaborate on that and how do those changes impact well performance.

Speaker Change: The types of chemistry, we run very like the prices on that stuff moves around all the time, so different ingredients can cause different.

Speaker Change: Commercial products to Barry and you can have chemistries that work that equally as well, it's just that as prices come down on a specific input it can affect the overall cost of that product. So it's just it's constantly evaluating to see if we can find go back and forth between the the cheaper commodities that are out there.

Unknown Attendee: Fair enough. Okay.

Unknown Attendee: So nothing material from a production standpoint down the road for people by changing the chemistry. Correct. Okay, awesome. Thanks for including me. And it's done in conjunction with operators. Okay, perfect. Thank you. Thanks, John.

Speaker Change: Fair enough, okay. So nothing material from a production standpoint down the road for people are changing the chemistry.

Speaker Change: Correct.

Speaker Change: Okay, awesome and I calculate that in conjunction with operators.

Speaker Change: Okay perfect. Thank you.

John Gibson: Thanks, John Thanks, John.

Keith Mackey: The next question comes from Keith MacKey with RBC, please go ahead. Hey, good morning. Just like to start out on the margin, can you comment on what you think the margin in Q1 would have been absent some of those transitory items you talked about? And secondarily, you know, how do you think the rest of the year plays out relative to that 15 and a half to 16 and a half percent range? Yeah, sure, I'll get it. I'll start off. So when you look at those items, product mix is something that is, is unpredictable in a given month, week, quarter.

Speaker Change: The next question comes from Keith Mackey with RBC. Please go ahead.

Keith Mackey: Hey, good morning.

Keith Mackey: Just like to start out on the margin can you comment on what you think the margin in Q1 waterborne.

Keith Mackey: Absent some of those transitory items, you talked about and secondarily, how do you think the rest of the year plays out relative to that 15, five to 16, 5% range.

Keith Mackey: Yeah sure I'll guess I'll start off so when you look at those items product mix is something that.

Keith Mackey: Is is unpredictable in any given month week quarter. So let's park that one because that could go either way.

Anthony Aulicino: So let's park that one because that could go either way. And then there's another component, which is an elevated level of SG&A that we began to realize in Q1 to support some of the very very focused revenue increase opportunities that we're likely to see in Q2 and Q3, and we're prepared for them right now. And so that one is going to stick for the next couple of quarters. But the bigger one that was the transitory nature was the increased cost that we realized in Q1, as a result of FX fluctuation, where our products got more expensive, and it takes a little bit of time to pass that on.

Keith Mackey: And then there is.

Another component, which is an elevated <unk>.

Keith Mackey: Level of SG&A.

Keith Mackey: We began to realize in Q1 to support some of the very.

Keith Mackey: Right.

Keith Mackey: Gary.

Keith Mackey: Focused.

Keith Mackey: Revenue increase opportunities that we're likely to see in Q2 and Q3.

Keith Mackey: And we're prepared for them right now.

Keith Mackey: And so that one is going to stick for the next couple of quarters.

Keith Mackey: And but the bigger one that was.

Keith Mackey: Was the transitory nature was the increased cost that we realized in Q1 as a result of FX fluctuation, where our products Scott more expensive and it takes a little bit of time to pass that on.

Anthony Aulicino: And absent that specific one, we would have expected margins to be up by approximately 40 to 50 basis points versus the 15.8% that we're And then I guess the other part that I'd be remiss in not emphasizing is the fact that that product mix can swing either way. The SG&A drag is not massive, but it's a great investment given the great opportunities we see in front of us. And we could throttle that back if we need to over the next quarter or so. But again, logically, we're going into Q2 versus Q1. And because of our business and breakup, you'll see EBITDA margins a little bit lower, as you always see every year.

Keith Mackey: Absent that specific one we would've expected.

Keith Mackey: <unk> margins to be up by approximately.

40 to 50 basis points versus the 15, 8% that we're at.

Keith Mackey: And then I guess, the other part that I'd be remiss in not not not emphasizing is the fact that that product mix can swing either way.

Keith Mackey: SG&A drags not massive but its a great investment given the great opportunities, we see in front of us and we could throttle that back if we need to over the next quarter or so, but again logically we're going into Q2 versus Q1, and because of our Canadian business and breakup Youll see youll see EBITDA and margins a little bit lower.

Keith Mackey: As you always see every year.

Anthony Aulicino: got it. Okay. So does it? Yeah, it does. The baseline would have been higher in Q1. You're going to see a bit of a downtick in Q2 based on some seasonal factors and whatnot. Correct, and also inherent in that is the answer to the second part of your question was expectation of higher margins in the second half of the year.

Keith Mackey: Got it okay.

Keith Mackey: Yes, yes.

Keith Mackey: The baseline and would've been higher in Q1, youre going to see a bit of a downtick in Q2 based on some seasonal factors and whatnot.

Keith Mackey: Correct and then also inherent in that is.

Keith Mackey: The rest of the answer to the second part of your question was expectation of higher margins.

In.

Keith Mackey: In the second half of the year.

Keith Mackey: Got it.

Keith Mackey: Got it okay.

Unknown Attendee: Now if we think about some of the CapEx reductions announced by some of the E&Ps Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, Are you starting to see outsized asks for Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, forecasting margins for the for the rest of the year. Unknown AttendeeYeah, I guess it's I'll start and like Ken's a veteran having led this company through through previous downturns right 2015 2008 again COVID but What we've seen was, to be honest, a shockingly muted response to the significant WTI volatility that we started seeing three or four weeks ago, when TI got down to $55.

Keith Mackey: Now if we think about some of the Capex reductions announced by some of the E&ps.

Keith Mackey: In the U S mostly.

Keith Mackey: Yes.

Keith Mackey: Are you starting to see outsized.

Keith Mackey: Yes for sure.

Keith Mackey: Pricing cuts or the same level of pricing pressure you're experiencing currently.

Keith Mackey: Just curious if we can get some commentary there that might help us think about how we should be.

Keith Mackey: Forecasting margins for the rest of the year.

Keith Mackey: Yes.

Keith Mackey: Okay.

Ken Zinger: I'll start and then Ken as a veteran having led this company through through previous downturns, right 2015, 2008, again COVID-19, but.

Ken Zinger: What we've seen was to be honest, a shockingly muted response to the significant wty volatility that we started seeing three or four weeks ago, when Ti got down to $55 at that time like we worked with all of our partners across the company.

Kenneth Zinger: At that time, like we worked with all of our partners across the company, and there was very muted response. And in fact, over the ensuing couple of weeks, there were only a couple of situations where there were very significant demands for pricing concessions, and it was less than you would count on one hand. And in each of those few cases, our divisions were able to negotiate something that was a little bit of a price reduction, and came to terms on a scaling slide where they understand that there will be a reduction in pricing pressure if you're in $55 area.

Ken Zinger: There was very muted response and in fact over the ensuing.

Ken Zinger: <unk> of weeks there are only a couple of situations, where there were very significant demands for pricing concessions.

Ken Zinger: Hugh.

Ken Zinger: It was less than you would count on one hand and in each of those few cases, our divisions were able to negotiate something that was a little bit of a price reduction and came to terms on a scaling slide where they understand that there will be a reduction in.

Ken Zinger: Pricing pressure if your <unk> 55.

Kenneth Zinger: For WTI, that's pretty clear. The consensus seemed to be if you're at $65, nobody loves it, but things are okay. At this level, at $60, it's tough, right? And then you saw some great companies like Diamondback and EOG over the last week. doing the right thing by by adjusting some of their plans. But I would say compared if you look at the at the information and the relative responses During 2020-2015, we've seen nothing as significant as you saw in those periods. Yeah, I think I'll jump in there and just say that, you know, that what we've seen so far, as far as impact from WTI is nowhere near to what the extremes that we've seen in the past.

<unk>, it's pretty clear and the consensus seemed to be if you're at 65 nobody loves it things are okay. At this level at $60. It's tough right and then you saw some great companies like Diamondback and EOG over last week.

Ken Zinger: Doing the right thing by by adjusting some of their plans, but I would say compare if you look at the at the information and their relative responses.

Ken Zinger: During 2000 22015, we saw we've seen nothing significant as you saw in those in those periods.

Speaker Change: I think I'll jump in there and just say that what we've seen so far as far as impact from W. Ti is nowhere near to what the extremes that we've seen in the past. So let's first of all sort of quantify that this is a this.

Kenneth Zinger: So let's first of all, sort of quantify that this is a, this is a sort of minor downturn at this point, that looks like it, it could either turn into something or it could turn into nothing. So I would say that customers have come to us pretty much all of them, and we've been talking to them about pricing in the event that oil prices collapse. And we'll have a plan for that. But where we're at currently, you know, it's we're working with everyone, they don't want to see us making outsized margins, I would describe it as based on our inputs going down in costs, which happens to a slight degree when oil prices come down.

Speaker Change: This is sort of minor downturn at this point that looks like it could either turn into something or it could turn into nothing so.

Speaker Change: I would say that.

Speaker Change: Customers have come to us pretty much all of them and we've been talking to them.

Speaker Change: About pricing in the event that oil prices collapse, and we'll have a plan for that but where we're at currently.

It's we're working with everyone. They don't want to see us, making outsized margins I would describe it as.

Speaker Change: Based on our inputs going down and costs, which happens to a slight degree when oil prices come down.

Kenneth Zinger: So we've got to be cautious of that and cognizant of that and make sure that we're sharing those wins on the cost side. But other than that, it's you know, every day, the way that an oil company can demand price relief is to tell you they're going to fire you and put someone else on it. And when every service company is facing the same pressure, it's unusual that somebody drops to the bottom, especially with a limited number of service company competitors we have today. So discipline on the service side combined with being fair with oil companies will get us through this.

Speaker Change: So we've got to be cautious of that and cognizant of that and make sure that we're sharing those wins on the cost side, but other than that.

Speaker Change: <unk>.

Speaker Change: Every day, the way that an oil company can demand.

Speaker Change: Rice relief is to tell you theyre going to fire, you and put someone else on it and when every service company is facing the same pressure.

Speaker Change: It's unusual that effort that somebody drops to the bottom, especially with a limited number of service company competitors. We have today. So disciplined on the service side combined with being fair with oil companies will get us through this and once again. This is we're kind of in no man's land here at $60, where it's really.

Keith Mackey: And once again, we're kind of in no man's land here at $60, where it's not great, but it's not that bad. We're not in the $40 range like we were in 2016. And we're not in the negative range like we were in 2020. So, you know, I think it's a much more muted pressure right now. Thanks, I appreciate the comment.

Speaker Change: It's not great, but it's not that bad, but we're not in the $40 range like we were in 2016 and were not in the negative range like we were in 2020.

Speaker Change: So.

Speaker Change: It's a much more muted pressure right now.

Speaker Change: Yes.

Speaker Change: Thanks, I appreciate the comments.

Keith Mackey: Thanks, Keith.

Speaker Change: Thanks, Matt Good question.

Tim Monachello: Next question. The next question comes from Tim Monachello with ATB Capital Markets. Please go ahead. Yes. Good morning, Tim. Good morning. The Canadian market share was through the roof this quarter. Again, as you have 45% to record, US market share also really strong.

Speaker Change: The next question comes from Tim <unk> with APB capital Michael. Please go ahead.

Speaker Change: Yes.

Speaker Change: Good morning, Tim Good morning, Tom.

Speaker Change: Good morning.

Speaker Change: The Canadian market share was through this quarter.

Speaker Change: Yes, 45% so record.

Speaker Change: U S market share also really strong.

Unknown Attendee: As part of the product mix issue that you're seeing just Based on the fact you've got more activity and that activity profile probably has Unknown Attendee, Aaron MacNeil, monetized. offerings within it.

Speaker Change: As part of the product mix issue that Youre seeing.

Speaker Change: Yes.

Speaker Change: Just on attack you got more activity in that activity profile probably has.

Speaker Change: More.

Speaker Change: Monetize.

Speaker Change: <unk> within it.

Kenneth Zinger: One thing that we did notice, I'll start on something that was a little bit revealing during Q1 especially, was that big uptick that we saw or that notable uptick that we saw in rig count that we were on in the US in particular. That came pretty quickly and with a steep curve. And when you look through the numbers and the nature of those rigs that we were bringing on, many of them were not turning to the right immediately. Some of them were moving and many of them were initially working on the lower revenue per rig per day parts of the drilling programs on multi-well pads for a few weeks.

Speaker Change: One thing that we did notice.

Speaker Change: I'll start on something that was a little bit revealing during Q1, especially was was that big uptick that we saw a notable uptick that we saw in rig count.

Speaker Change: Uh huh.

Speaker Change: We were on in the U S in particular.

Speaker Change: That came pretty quickly and with a steep curve.

Speaker Change: And when you look through the numbers and the nature of those rigs that were bringing on many of them were not turning to the right immediately some of them were moving and many of them were initially working on the lower revenue per rig per day.

Speaker Change: Parts of the drilling programs on multi well pads for a few weeks and that results. In yes, you are on the rigs and the rig count is higher but the actual revenue that you're earning in and the EBITDA margin that you're earning is lower during that period of the well program.

Kenneth Zinger: And that results in, yeah, you are on the rigs and yeah, the rig count is higher, but the actual revenue that you're earning and the EBITDA and margin that you're earning is lower during that period of the well program. And then I'll add to that that, you know, direct to your question on on Canada. The pressure in Canada, the work that we picked up in Canada and the inroads we made was primarily in the same stuff we've always chased, which is the higher technology-driven stuff. The problem in Canada was the exchange rate. Q4, Q1, those numbers started to get hit as our costs went up and that aligned.

Speaker Change: And then I'll add to that.

Speaker Change: Direct to your question on on Canada.

Speaker Change: The pressure in Canada.

Speaker Change: The work that we picked up in Canada. The inroads. We made was primarily in the same stuff. We've always chase, which is the higher technology driven stuff that problem in Canada was was the exchange rate Q4, Q1, those numbers started to get hit as our costs went up and that aligned in a normal market, we would've been passing those through as fast as we could.

Kenneth Zinger: In a normal market, we would have been passing those through as fast as we could, but in the market we were in where oil was under pressure, tariff uncertainty, an election, everything that was going on, it was super hard to get anybody to want to accept an increase. We had a really tough time getting increases to match what we were feeling, so we just had to absorb all that. Going forward here, the good news is the Canadian dollar has come back down to where it was, the Canadian dollar-US exchange rate.

Speaker Change: But in the market, we are in where oil was under pressure tariff uncertainty and election and everything that was going on super hard to get anybody they want to accept that increase so we had a really tough time getting increase.

Speaker Change: Increases to match, what we are feeling so we just had to absorb all of that and.

Speaker Change: Going forward here. The good news is Canadian dollar has come back down to where it was getting dollar U S exchange rate. So we're hopeful that the second half of the year will be in a better spot in Canada.

Kenneth Zinger: We're hopeful that the second half of the year we'll be in a better spot in Canada. Got it. I guess the second part of that question is... Do you think that Q1 market share was an anomaly in Canada? Do you think across the threshold where market share will be higher going forward, obviously probably not. Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, Jonathan Goldman, Yeah, I mean, we'll see.

Speaker Change: Got it.

Speaker Change: I guess second part of that question is.

Speaker Change: Do you think that Q1 <unk>.

Speaker Change: <unk> share was an anomaly in Canada you. Thank you.

Speaker Change: Crossed the threshold where market share will be higher going forward, obviously, probably not at the same exact level that youre at in Q1, but higher going forward.

Speaker Change: Yes, I mean, I don't we will see I mean, thats bidding season in Canada right now.

Kenneth Zinger: I mean, it's bidding season in Canada right now. So we got to go through all that over the next few months. We've got, you know, I don't know what the ratio is, but 30 or 40% of our customers have deals that will continue through and the other half to 60% will have to go re-bid. But we're pretty comfortable with, we know where the market is, and we're pretty comfortable we'll be able to retain the work we've had. And so I would say that we would hope to continue. I will also say that your number's higher than what we had based on our rig count versus the posted sort of Nichols-Baker numbers for rig count.

Speaker Change: So we got to go through all that over the next few months we got.

Speaker Change: I don't know what the ratio is but 30 or 40% of our customers have deals that will continue through and they've got the other half to 60% will have to go re bid, but we're pretty comfortable with we know where the market is and we're pretty comfortable we'll be able to retain that work we've had.

Speaker Change: And so I would say that we would hope to continue I will also say that your numbers higher than what we had based on our rig count versus the posted sort of Nichols Baker numbers for for rig count but.

Unknown Attendee: But But it is what it is, and we expect it to continue. Yeah, I was using the Baker one in Canada. I think he has used nickels, so it might be a bit different.

Speaker Change: <unk>.

Speaker Change: It is what it is and we expect it to continue.

Speaker Change: Yes, Thank you Ron and Kevin I think he is he's nichols.

Speaker Change: Okay.

Kenneth Zinger: Okay, and then sorry, I got on the call a little bit late, but of the capital allocation stocks been under pressure, pressure again today. How are you thinking about the NCIB, M&A, growth, all relative to each other, especially in a market that is a little bit uncertain? We're not going to have a knee jerk reaction is number one. And number two is, is given our leverage or liquidity. and our business model, we're well positioned to take advantage of opportunities. And those opportunities could be small, high quality tuck ins that tend to become very attractive opportunities during environments like this.

Speaker Change: Okay, and then sorry, I got on the call little bit late but.

Speaker Change: The capital allocation stock's been under pressure pressure again today.

Speaker Change: <unk>.

How are you thinking about the NCI.

Speaker Change: M&A growth.

Speaker Change: Gross.

Speaker Change: Relative to each other especially in a market that is whether or not certain yet.

Speaker Change: Well, we're not going to have a knee jerk reaction is number one number two is.

Speaker Change: Given our leverage our liquidity.

Speaker Change: And our business model, we are well positioned to take advantage of opportunities and those opportunities could be small high quality tuck ins that tend to become very attractive opportunities during environments like this.

Kenneth Zinger: On the NCIB, we've been buying consistently every single day, including while in blackout, where our dealer has instructions that we don't influence at all during that period. We'll come up for air on Tuesday morning to be able to alter those instructions and be more opportunistic. We'll get through the balance of approximately $3 million on the NCIB. We get asked the question a lot on the SIB. We've learned where the stock lies and how to take advantage of blocks and opportunities, and we'll do that as soon as we come out of blackout. And in terms of an SIB, we absolutely have the liquidity to do it if we wanted to do it.

Speaker Change: On the on the NCI.

Speaker Change: <unk> been buying consistently every single day, including well in blackout, where our dealer has instructions that we don't influence at all during that period, we will come up for air.

Speaker Change: On.

Tuesday morning.

To be able to alter those instructions and being more opportunistic we will get through the balance of approximately $3 million on the NCI.

We get asked the question a lot on the <unk>.

Speaker Change: We've we've learned where the stock lies in how to take advantage of of blocks and opportunities and we'll do that.

Speaker Change: As soon as we come out of blackout and in terms of an SMB, we absolutely have the liquidity to do it if we wanted to do it and as Ken and I have said before.

Kenneth Zinger: As Ken and I have said before, we're very comfortable seriously considering talking to the board about an SIB when there's a very logical dislocation, absolute dislocation, in the value of the stock and the things that are causing the stock or the sector to be under pressure. When you have things like the economic uncertainty that we have in North America and globally, and probably even more specifically the WTI construct uncertainty that you have right now based on what's happening with OPEC in Saudi Arabia, we believe it would be misguided to try something like that with conviction.

Speaker Change: You were very comfortable seriously considering talking to the board about an SMB. When there is a very logical dislocation absolute dislocation.

Speaker Change: The value of the stock and the things that are causing the stock or the sector to be under pressure. When you have things like the economic uncertainty uncertainty that we have in North America, and globally and probably even more specifically.

Speaker Change: <unk> W. <unk>.

Speaker Change: Construct uncertainty that you have right now based on what's happening.

Speaker Change: With OPEC and Saudi Arabia.

Speaker Change: We believe it would be.

Speaker Change: Misguided to try something like that with conviction.

Kenneth Zinger: However, if the business continues to go well and we do see stability on those things that were otherwise big variables like the price of WTI and supply and demand, we would obviously take that more seriously because we have the ability to do it. Thanks for that.

Speaker Change: However, if if the business continues to go well and we do see stability on those things that we're otherwise big variables like the price of <unk> and supply and demand we would obviously take that more seriously because we have the ability to do it.

Speaker Change: Got it.

Speaker Change: Thanks for that and then just one quick follow up on the pricing dynamics is that.

Unknown Attendee: And then just one quick follow up on the pricing dynamics. Is that You know, the conversations you've had around Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, To date, the vast majority has just been on the drilling float side. Thanks.

Speaker Change: The conversations you had around.

Speaker Change:

Speaker Change: Scalable pricing and lower commodity pricing price environments is that.

Speaker Change: Isolated drilling fluids are you seeing on the crushing uncle side as well.

Speaker Change: To date the.

Speaker Change: The vast majority has just been on the drilling fluids side.

Speaker Change: Okay. Thanks, I'll turn it back.

Unknown Attendee: I'll turn it back.

Jonathan Goldman: The next question comes from Jonathan Goldman with Scotiabank. Please go ahead. Hey, good morning, guys. Thanks for taking my question.

Speaker Change: The next question comes from Jonathan <unk> Goldman at Scotia Bank. Please go ahead.

Jonathan Goldman: Hey, good morning, guys. Thanks for taking my questions.

Unknown Attendee: Most of them have already been asked, so I did have one follow-up. Can I believe you guys made some investments to kind of improve operations, whether it's vertical integration by new assets to kind of Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, Jonathan Goldman, Keith MacKey, Unknown Attendee, Aaron MacNeil, Jonathan Goldman, Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, Sure, yeah. I mean, it's been a long process over the years between grinding facilities in the United States, which at the time we built them, provided us with an advantage over our competitors in the United States.

Jonathan Goldman: Most of them have already been answered I just have one follow up.

Jonathan Goldman: Ken I believe you guys made some investments to kind of improve operations, whether its vertical integration by new assets to kind of.

Jonathan Goldman: Buffer margins better maybe improve margins I mean, a lot of the conversation today has been about downside to pricing.

Jonathan Goldman: And the macro but I feel you guys have done a lot of internal initiatives to improve margins through the cycle, regardless of what happens in the macro could you just maybe walk us through some of those things and how those <unk>.

Jonathan Goldman: Actually improve margins.

Jonathan Goldman: Sure Yeah, I mean, it's been a long.

Jonathan Goldman: Process over the years between grinding facilities in the United States, which at the time, we built them provided us with an advantage over our competitors in the United States today, we're using those facilities to support the Canadian market as well.

Kenneth Zinger: Today, we're using those facilities to support the Canadian market as well. So that also is providing advantage for us up here. We do specialty manufacturing for us and kind of work on new products and new opportunities. That's transforming now with all this tariff stuff and the potential cross-border issues to where it's becoming more like a manufacturing facility, similar to what J-Chem is for the J-Chem Catalyst Group, the Kansas facility. Sialco in Vancouver is becoming a bigger part of the just general manufacturing for Pure Chem and CES in Canada. And anytime we can get into, there's not much we can do about the general commodity products and the products that everybody has, but on the stuff that we can make ourselves, it gives us the ability to really specialize, which has of course led to all the service intensity stuff that we've benefits that we've seen over the last couple of years, but also it helps us on cost and security of supply.

Jonathan Goldman: So that also is providing advantage for us up here.

Jonathan Goldman: We bought sea Alco in 17, or 18 days to do specialty manufacturing for us and kind of work on new products and new opportunities. That's transforming now with all this tariff stuff on the potential cross border issues to where it is becoming more like a manufacturing facility similar to what Jay.

Speaker Change: Cam is for.

Speaker Change: For like Jacob Catalyst group, the Kansas facility.

Speaker Change: C Alco and Vancouver is becoming a bigger part of the just general manufacturing for for pure cabin CES in Canada and anytime we can get into there's not much. We can do about the general commodity products and the products that everybody has but on the stuff that we can make ourselves.

Speaker Change: US the ability to really specialize which is of course led to all the service intensity stuff that we have benefits that we've seen over the last couple of years, but also it helps us on cost of goods and security of supply and in this case avoiding potential tariffs.

Kenneth Zinger: And in this case, avoiding potential tariffs.

Kenneth Zinger: And we we are, once again, I just I'll just say it like we were investing right now, for growth, we are not in a position of contraction, we believe we have more in front of us than behind us. Unknown Attendee, Aaron MacNeil, Tim Monachello, Jonathan Goldman, Keith MacKey, John Gibson, How do you see that playing out going forward? Has it increased year on year? Is it still increasing the service intensity and the fluid intensity in the market? It is, yeah. And I think it'll have to continue and potentially even get greater as U.S. production comes down or flattens to come down.

Speaker Change: And we are once again I just I'll just say it like we.

Speaker Change: We're investing right now for growth we are not in a position of.

Speaker Change: Contraction, we believe we have more in front of us not behind us.

Speaker Change: That's good color and then maybe touching on something you mentioned there the service intensity somatic.

Speaker Change: How you see that playing out going forward has it increased year on year is it still increasing service intensity in the fluids intensity in the market.

Speaker Change: It is yes, and I think it will have to continue and potentially even get greater as as U S production comes down.

Kenneth Zinger: And if you do get a 10% drop in rig count in the U.S. short term, that's going to have massive impact on the value they have to get out of the rigs that are working. Plus, I think it'll lead to way more rigs later when it comes back on and that decline starts becoming more prominent. So intensity is still there, still growing, and we're still capitalizing on it. I think part of what's happened is 2024 was an extremely stable period of time for CES, and we were really able to fine-tune our supply chain and our manufacturing and everything we were doing.

Speaker Change: Our flattens to come down and if you do get a 10% drop in rig count in the U S. U S short term.

Speaker Change: It's gonna have massive impact on the value they have to get out of the rigs that are working plus I think it'll lead to weigh more rigs later when it comes back on and that the client starts becoming more prominent.

Speaker Change: <unk> intensity is still they're still growing and we're still capitalizing on it I think.

Speaker Change: Part of what's happened is 2024 was an extremely stable period of time for Ges, and we were really able to fine tune, our supply chain and our manufacturing and everything we were doing was.

Kenneth Zinger: Coming out of the COVID crisis and all the international shipping problems that the world was facing in 2022 and early 2023, we really got locked in over 2024. And then at the end of 2024, beginning of 2025, obviously we have this complete rollover on everything we were doing where we have to re-evaluate everything. And so it's going to take some time to grow into that and figure out all the nuances, but we're working through it and we'll get there.

Speaker Change: Coming out of the Covid crisis and all that.

Speaker Change: International shipping problems of the World is facing in 'twenty. Two in early 2023, we really got locked in over the last over the 2024 and then at the end of 'twenty for beginning of 'twenty. Five obviously, we have this complete rollover on everything we were doing what we have to reevaluate everything and so that's going to take some.

Speaker Change: Time to grow into that and figure out all the nuances, but where we're working through it and we'll get there.

Jonathan Goldman: No, definitely nice to see the work start to bear fruit and continue to bear fruit. Thanks for taking the time. Thanks, Jonathan.

Speaker Change: No definitely nice to see that we're starting to bear fruit and continued to bear fruit.

Speaker Change: Thanks for taking the time guys.

Speaker Change: Thanks, Jonathan Thanks, Jonathan.

Operator: This concludes the question and answer session.

Ken Zinger: This concludes our question and answer session I would like to turn the conference back over to Ken <unk> for any closing remarks. Please go ahead.

Kenneth Zinger: I would like to turn the conference back over to Ken Zinger for any closing remarks. Please go ahead. Thank you, everyone, for joining us on the call today. Well, as always, we appreciate your attendance and we look forward to seeing you in August. This brings us to a close. Today's conference call. You may disconnect your lines.

Ken Zinger: Thank you everyone for joining us on the call today.

Ken Zinger: As always we appreciate your attendance and we look forward to seeing you in August.

Speaker Change: Today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant Paul.

Thank you for participating and have a pleasant day.

Speaker Change: [music].

Okay.

Speaker Change: [music].