Q2 2026 NPK International Inc Earnings Call

July 30, 2026

Operator 3: Thank you for joining us. Welcome to NPK International Q2 2026 Earnings. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Gregg Piontek, Senior Vice President and Chief Financial Officer. Please go ahead.

Operator: Thank you for joining us. Welcome to NPK International Q2 2026 Earnings. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Gregg Piontek, Senior Vice President and Chief Financial Officer. Please go ahead.

Speaker #1: To withdraw your question, press star 1 again. I will now hand the conference over to Gregg Piontek, Senior Vice President and Chief Financial Officer.

Speaker #1: Please go ahead.

Speaker #2: Thank you, operator. I'd like to welcome everyone to the NPK International second quarter 2026 conference call. Joining me today is Matthew Lanigan, our President and Chief Executive Officer.

Gregg Piontek: Thank you, operator. I'd like to welcome everyone to the NPK International Q2 2026 conference call. Joining me today is Matthew Lanigan, our President and Chief Executive Officer. Before handing over to Matthew, I'd like to highlight that today's discussion contains forward-looking statements regarding future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. Our comments on today's call may also include certain non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our quarterly earnings release, which can be found on our website.

Speaker #2: Before handing over to Matthew, I'd like to highlight that today's discussion contains forward-looking statements regarding future business and financial expectations. 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.

Speaker #2: Except as required by law, we undertake no obligation to update our forward-looking statements. Our comments on today's call may also include certain non-GAAP financial measures.

Speaker #2: 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 website.

Speaker #2: 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 npki.com.

Gregg Piontek: There will be a replay of today's call. It will be available by webcast within the investor relations section of our website at npki.com. Please note that the information disclosed on today's call is current as of 30 July 2026. At the conclusion of our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to our President and CEO, Matthew Lanigan.

Speaker #2: Please note that the information disclosed on today's call is current as of July 30, 2026. At the conclusion of our prepared remarks, we will open the line for questions.

Speaker #2: And with that, I would like to turn the call over to our President and CEO, Matthew Lanigan.

Speaker #3: Thanks, Gregg, and welcome to everyone joining us on today's call. Our solid second quarter results yet again demonstrate our team's commitment to growth, the continued momentum in our core markets, and the operating leverage inherent in our business model.

Matthew Lanigan: Thanks, Gregg. Welcome to everyone joining us on today's call. Our solid Q2 results yet again demonstrate our team's commitment to growth, the continued momentum in our core markets, and the operating leverage inherent in our business model. During the quarter, we made meaningful progress on our strategic priorities, including our manufacturing expansion, which has us well positioned for further scale and strength moving forward. Looking at the quarter, we delivered $82 million of revenue, an increase of 20% from last year, with strong profitability capture driven by year-over-year growth in both product sales and rentals. Total rental and service revenues achieved another quarterly high at $54 million, a 16% year-over-year increase. This result was particularly pleasing due to the unique nature of our Q2.

Speaker #3: During the quarter, we made meaningful progress on our strategic priorities, including our manufacturing expansion, which has as well positioned for further scale and strength moving forward.

Speaker #3: Looking at the quarter, we delivered $82 million of revenue, an increase of 20 percent from last year, with strong profitability capture driven by year-over-year growth in both product sales and rentals.

Speaker #3: Total rental and service revenues achieved another quarterly high at $54 million, a 16 percent year-over-year increase. This result was particularly pleasing due to the unique nature of our second quarter.

Speaker #3: As we mentioned on our Q1 call, our Q2 expectation was influenced by the anticipated completion timing of multiple large-scale projects, which ultimately represented over 25 percent of our domestic MAT fleet.

Matthew Lanigan: As we mentioned on our Q1 call, our Q2 expectation was influenced by the anticipated completion timing of multiple large-scale projects, which ultimately represented over 25% of our domestic mat fleet. Despite the accelerated timing relative to previous expectations, our ability to absorb these large project transitions while continuing to grow profitably in the quarter once again demonstrates the benefits of our scale, the resilience of our business model, and our operations team ability to manage multiple large project transitions for our customers. Product sales demand was very strong, contributing $28 million to Q2 revenue, a 28% year-over-year increase reflecting continued strong demand from our utility customers along with international sales. As a result of this continued quarterly growth, combined with solid operating leverage, we delivered $26 million of adjusted EBITDA in the quarter, representing a 37% year-over-year improvement and a 31.5% adjusted EBITDA margin.

Speaker #3: Despite the accelerated timing relative to previous expectations, our ability to absorb these large project transitions while continuing to grow profitably in the quarter once again demonstrates the benefits of our scale, the resilience of our business model, and our operations team's ability to manage multiple large project transitions for our customers.

Speaker #3: Product sales demand was very strong, contributing 28 million dollars to second quarter revenue, a 28 percent year-over-year increase, reflecting continued strong demand from our utility customers along with international sales.

Speaker #3: As a result of this continued quarterly growth, combined with solid operating leverage, we delivered $26 million of adjusted EBITDA in the quarter, representing a 37 percent year-over-year improvement and a 31.5 percent adjusted EBITDA margin.

Speaker #3: Off the back of the strong profitability, we are again raising our full-year profitability guidance, which Gregg will cover in more detail in his prepared remarks.

Matthew Lanigan: Off the back of the strong profitability, we are again raising our full year profitability guidance which Gregg will cover in more detail in his prepared remarks. As I mentioned earlier, we also made solid progress on our manufacturing expansion project in Louisiana, investing $4 million in the quarter. We are confident that this expansion, which is expected to increase our production capacity by approximately 50%, as well as our continuing de-bottlenecking initiatives, will support our long-term growth and composite matting market share expansion for the foreseeable future, while also enhancing margins through reduced usage of cross-rental mats. We are also very pleased with our Q2 cash flow, delivering $22 million of cash from operations and $6 million of free cash flow, while also expanding our mat rental fleet by 3%.

Speaker #3: As I mentioned earlier, we also made solid progress on our manufacturing expansion project in Louisiana, investing 4 million dollars in the quarter. We are confident that this expansion, which is expected to increase our production capacity by approximately 50 percent, as well as our continuing to bottlenecking initiatives, will support our long-term growth expansion for the foreseeable future, while also enhancing margins through a reduced usage of cross-rental MATs.

Speaker #3: We are also very pleased with our second quarter cash flow, delivering 22 million of cash from operations and 6 million of free cash flow.

Speaker #3: While also expanding our MAT rental fleet by 3 percent, we maintained our strong financial position, ending the quarter with net debt of just $2 million. This provides ample financial flexibility to continue executing on our strategic objectives.

Matthew Lanigan: We maintained our strong financial position ending the quarter with net debt of just $2 million, providing ample financial flexibility to continue executing on our strategic objectives. Overall, Q2 once again demonstrated our consistent strong execution, which we believe is a direct reflection of our commitment to our key strategic priorities. With that, I'll turn the call over to Gregg for his prepared remarks.

Speaker #3: Overall, Q2 once again demonstrated our consistent, strong execution, which we believe is a direct reflection of our commitment to our key strategic priorities. With that, I'll turn the call over to Gregg for his prepared remarks.

Speaker #2: Thanks, Matthew. I'll begin with a more detailed discussion of our second quarter and first-half results, then provide an update on our operational outlook and capital allocation priorities for the remainder of 2026.

Gregg Piontek: Thanks, Matthew. I'll begin with a more detailed discussion of our Q2 and H1 results, then provide an update on our operational outlook and capital allocation priorities for the remainder of 2026. The Q2 results were highlighted by strength in product sales and continued growth in rental revenues, which reflect the momentum in our end markets. As Matthew touched on, product sales grew by 21% sequentially and 28% year over year, primarily benefiting from continued strong demand from utility customers along with elevated international sales. Rental and service revenues grew 3% sequentially and 16% year over year to a quarterly record $54 million, despite the accelerated completion of the large-scale projects that Matthew mentioned. Breaking the revenue down further, rental revenues grew 18% year over year, reflecting 4% organic growth, combined with a $4 million contribution from the Grassform acquisition.

Speaker #2: The second quarter results were highlighted by strength in product sales and continued growth in rental revenues, which reflect the momentum in our end markets.

Speaker #2: As Matthew touched on, product sales grew by 21 percent sequentially and 28 percent year over year, primarily benefiting from continued strong demand from utility customers, along with elevated international sales.

Speaker #2: Rental and service revenues grew 3 percent sequentially and 16 percent year-over-year, to a quarterly record 54 million dollars, despite the accelerated completion of the large-scale projects that Matthew mentioned.

Speaker #2: Breaking the revenue down further, rental revenues grew 18 percent year-over-year, reflecting 4 percent organic growth, combined with a 4 million dollar contribution from the Grasform acquisition.

Speaker #2: The organic growth reflects the impact of improved pricing, partially offset by lower fleet utilization attributable to large project completions and the natural lag in fleet redeployment.

Gregg Piontek: The organic growth reflects the impact of improved pricing, partially offset by the lower fleet utilization attributable to the large project completions and the natural lag in the fleet redeployment. Service revenues grew 12%, with substantially all of the increase coming from the acquisition. Turning to gross profit, the Q2 gross margin was 37%, representing an 80 basis point sequential improvement and in line with prior year. The sequential gross margin improvement primarily reflects the effect of stronger product sales activity and stable rental margins. The year over year comparison reflects the effects of stronger product sales and increased manufacturing operating leverage, offset by lower rental utilization. Q2 SG&A expenses totaled $14.2 million compared to $13.2 million in the Q1 and $13.7 million in the Q2 of last year.

Speaker #2: Service revenues grew 12 percent, with substantially all of the increase coming from the acquisition. Turning to gross profit, the second quarter gross margin was 37 percent, representing an 80 basis point sequential improvement and in line with the prior year.

Speaker #2: The sequential gross margin improvement primarily reflects the effect of stronger product sales activity and stable rental margins, while the year-over-year comparison reflects the effects of stronger product sales and increased manufacturing operating leverage, offset by lower rental utilization.

Speaker #2: Second quarter SG&A expenses totaled $14.2 million, compared to $13.2 million in the first quarter and $13.7 million in the second quarter of last year.

Speaker #2: As noted in yesterday's press release, the second quarter results included a $900,000 charge resulting from a board-approved modification to the retirement eligibility terms applicable to long-term incentive awards, to better align with market practices.

Gregg Piontek: As noted in yesterday's press release, the Q2 results included a $900,000 charge resulting from a board-approved modification to the retirement eligibility terms applicable to long-term incentive awards to better align with market practices. Income tax expense was $3.9 million in Q2, reflecting an effective tax rate of 25%. Adjusted EPS from continuing operations was $0.15 per diluted share in Q2, compared to $0.12 per share in Q1 and $0.11 per share in Q2 of last year. For H1 2026, total revenues have increased 18% year over year, while adjusted EBITDA and Adjusted EPS grew by 25% and 20% respectively.

Speaker #2: Income tax expense was 3.9 million dollars in the second quarter, reflecting an effective tax rate of 25 percent. Adjusted EPS from continuing operations was 15 cents per diluted share in the second quarter, compared to 12 cents per share in the first quarter, and 11 cents per share in the second quarter of last year.

Speaker #2: For the first half of 2026, total revenues have increased 18 percent year-over-year, while adjusted EBITDA and adjusted EPS grew by 25 percent and 20 percent, respectively.

Speaker #2: Looking at first half revenues by geography and sector, our US revenues increased 11 percent year-over-year to $138 million, including 11 percent growth in rental revenues, with the utility sector driving the substantial majority of that growth.

Gregg Piontek: Looking at H1 revenues by geography and sector, our US revenues increased 11% year over year to $138 million, including 11% growth in rental revenues, with the utility sector driving the substantial majority of our growth. UK revenues more than doubled year over year to $19 million in H1 2026, primarily reflecting the Grassform contributions. Turning to cash flows, our Q2 performance remained relatively in line with prior quarter. Operating activities generated $22 million of cash in Q2, including $25 million from net income adjusted for non-cash expenses, somewhat offset by $3 million of cash used by a net increase in working capital. Net CapEx used $16 million, which includes $10 million of net investment into fleet expansion and $4 million to fund the manufacturing expansion.

Speaker #2: UK revenues more than doubled year-over-year to $19 million in the first half of 2026, primarily reflecting the Grasform contribution. Turning to cash flows, our Q2 performance remained relatively in line with the prior quarter.

Speaker #2: Operating activities generated $22 million of cash in the second quarter, including $25 million from net income adjusted for non-cash expenses, somewhat offset by $3 million of cash used by a net increase in working capital.

Speaker #2: Net capex used 16 million dollars, which includes 10 million dollars of net investment into fleet expansion, and 4 million dollars to fund the manufacturing expansion.

Speaker #2: We ended the quarter with total debt of 11 million dollars and total cash of position of 2 million dollars. Additionally, we have 148 million dollars of availability under our bank facility, providing us with ample financial flexibility to continue executing on our strategic growth objectives, including our manufacturing expansion.

Gregg Piontek: We ended the quarter with total debt of $11 million and total cash of $8 million for a net debt position of $2 million. Additionally, we have $148 million of availability under our bank facility, providing us with ample financial flexibility to continue executing on our strategic growth objectives, including our manufacturing expansion. Now turning to our business outlook. Overall, our customers remain highly constructive on the near and longer-term outlook for utilities and critical infrastructure spending, which we see within our robust quoting activity. As for the near-term outlook, despite Q3 being our typical seasonal low point in customer project activity and the effects of the ongoing redeployments from recently completed large-scale projects, we expect total Q3 rental and service revenues to remain fairly in line with Q2 levels, reflecting a year over year improvement of more than 20%.

Speaker #2: Now, turning to our business outlook. Overall, our customers remain highly constructive on the near- and longer-term outlook for utilities and critical infrastructure spending, which we see within our robust quoting activity.

Speaker #2: As for the near-term outlook, despite Q3 being our typical seasonal low point in customer project activity and the effects of the ongoing redeployments from recently completed large-scale projects, we expect total Q3 rental and service revenues to remain fairly in line with Q2 levels, reflecting a year-over-year improvement of more than 20 percent.

Speaker #2: Product sales are expected to revert back to levels more in line with Q1 following the exceptionally strong Q2 result. Q3 gross margin is also expected to be roughly in line with the first half result, though remained dependent on the specifics of project timings.

Gregg Piontek: Product sales are expected to revert back to levels more in line with Q1 following the exceptionally strong Q2 result. Q3 growth margin is also expected to be roughly in line with the H1 result, though remain dependent on the specifics of project timing. In light of the strong H1 profitability and favorable near-term outlook, we have revised our full year 2026 outlook, narrowing the total revenues range to $313 to $323 million, and increasing adjusted EBITDA to a range of $97 to $103 million. The midpoint of our range reflects 15% revenue growth and 32% adjusted EBITDA growth over 2025. The midpoint of our revenue guidance continues to reflect double-digit organic rental revenue growth, along with the contribution from the Grassform acquisition, while product sales are expected to grow modestly from 2025 levels.

Speaker #2: In light of the strong first half profitability and favorable near-term outlook, we have revised our full-year 2026 outlook, narrowing the total revenues range to $313 to $323 million, and increasing adjusted EBITDA to a range of $97 to $103 million.

Speaker #2: The midpoint of our range reflects 15% revenue growth and 32% adjusted EBITDA growth over 2025. The midpoint of our revenue guidance continues to reflect double-digit organic rental revenue growth, along with the contribution from the Grasform acquisition, while product sales are expected to grow modestly from 2025 levels.

Speaker #2: Our CapEx plan for 2026 has been reduced, primarily reflecting changes in the timing of the manufacturing expansion expenditures. Though this does not impact our anticipated mid-year 2027 startup date.

Gregg Piontek: Our CapEx plan for 2026 has been reduced, primarily reflecting changes in timing of the manufacturing expansion expenditures, though this does not impact our anticipated midyear 2027 start-up date. Total net CapEx is now expected to be $65 to $80 million for the year, including $20 to $25 million of current year spending for the manufacturing expansion project, along with $35 to $45 million targeted for the rental fleet expansion. This level of investment is expected to grow our DURA-BASE rental fleet by a low to mid-teens percentage, supporting our organic growth and also displacing a portion of cross-rent assets currently deployed on projects. Our SG&A expectation remains unchanged at roughly $13 million quarterly level in the near term, while tax rate is expected to remain relatively in line with the H1 rate for the remainder of the year.

Speaker #2: Total net capex is now expected to be 65 to 80 million dollars for the year, including 20 to 25 million dollars of current-year spending for the manufacturing expansion project, along with 35 to 45 million dollars targeted for the rental fleet expansion.

Speaker #2: This level of investment is expected to grow our database rental fleet by a low to mid-teens percentage, supporting our organic growth and also displacing a portion of cross-rent assets currently deployed on projects.

Speaker #2: Our SG&A expectation remains unchanged at roughly $13 million at the quarterly level in the near term, while the tax rate is expected to remain relatively in line with the first half rate for the remainder of the year.

Speaker #2: As highlighted previously, we entered 2026 with roughly 40 million dollars of NOLs and other tax credit carry forwards, which when combined with the accelerated deductions for capital investments, are expected to significantly limit our cash tax obligations for the next several years.

Gregg Piontek: As highlighted previously, we entered 2026 with roughly $40 million of NOLs and other tax credit carry-forwards, which, when combined with the accelerated deductions for capital investments, are expected to significantly limit our cash tax obligations for the next several years. As it relates to our capital allocation strategy, we continue to prioritize investments in the growth of our rental fleet and our manufacturing capacity expansion, as well as strategic acquisitions, while also remaining committed to returning a portion of free cash flow generation to shareholders through our disciplined share repurchase program. With that, I'll turn the call back over to Matthew for his concluding remarks.

Speaker #2: As it relates to our capital allocation strategy, we continue to prioritize investments in the growth of our rental fleet and our manufacturing capacity expansion, as well as strategic acquisitions, while also remaining committed to returning a portion of free cash flow generation to shareholders through our disciplined share repurchase program.

Speaker #2: And with that, I'll turn the call back over to Matthew for his concluding remarks.

Speaker #1: Yeah, thanks, Gregg. As we close out the first half of the year, we remain confident in our double-digit growth outlook and committed to executing our strategic priorities through 2026.

Matthew Lanigan: Yeah, thanks, Gregg. As we close out the H1 of the year, we remain confident in our double-digit growth outlook and commitment to the execution of our strategic priorities in 2026. Our primary focus remains the scale-up of our rental platform, which generates the highest long-term returns for our business. As we have discussed, our strategy includes a combination of the geographic expansion and market share growth in the US and UK. Our quoting pipeline continues to support our confidence with roughly 20% year-over-year increase in quoted volumes, with over half of that volume being originated in our expansion geographies. We remain confident that the strong momentum in these markets will support our continued fleet and operational expansion. Though as we saw this quarter, we recognize the quarterly cadence remains dependent on project timings, particularly for large-scale projects.

Speaker #1: Our primary focus remains the scale-up of our rental platform, which generates the highest long-term returns for our business. As we have discussed, our strategy includes a combination of the geographic expansion and market share growth in the US and UK.

Speaker #1: Our quoting pipeline continues to support our confidence with roughly 20 percent year-over-year increase in quoted volumes with over half of that volume being originated in our expansion geographies.

Speaker #1: We remain confident that the strong momentum in these markets will support our continued fleet and operational expansion though as we saw this quarter, we recognize the quarterly cadence remains dependent on project timings, particularly for large-scale projects.

Speaker #1: To support our strategy, we remain committed to making the necessary investments for growth, investing in the expansion of our database composite rental fleet, while also advancing our manufacturing expansion project.

Matthew Lanigan: To support our strategy, we remain committed to making the necessary investments for growth, investing in the expansion of our DURA-BASE composite mat rental fleet, while also advancing our manufacturing expansion project. Our decision to expand our Louisiana facility was driven by superior economics relative to other alternate locations, as this location maintains our proximity to strategic raw material supply, captures operational benefits and efficiencies through co-location with our existing infrastructure and skilled workforce, and continues our decades-long investment in and support of the local community. Our second focus area remains on driving organizational efficiencies across the business. We continue to see this play out in both gross margins and SG&A as a percent of revenues, as we are on pace to exceed 30% EBITDA margin in 2026.

Speaker #1: Our decision to expand our Louisiana facility was driven by superior economics relative to other alternate locations, as this location maintains our proximity to strategic raw material supply, captures operational benefits and efficiencies through co-location with our existing infrastructure and skilled workforce, and continues our decades-long investment in and support of the local community.

Speaker #1: Our second focus area remains on driving organizational efficiencies across the business. We continue to see this play out in both gross margins and SG&As a percent of revenues, as we are on pace to exceed 30 percent EBITDA margin in 2026.

Speaker #1: As we continue to grow, we see opportunity to expand our EBITDA margins and returns on invested capital through operating leverage, while also making targeted investments to drive sustainable, long-term revenue growth for the company.

Matthew Lanigan: As we continue to grow, we see opportunity to continue to expand our EBITDA margins and returns on invested capital through operating leverage, while also making targeted investments to drive sustainable long-term revenue growth for the company. As Gregg touched on, our final priority is the allocation of capital beyond our organic requirements. With a strong balance sheet and disciplined approach, we remain active in the evaluation of core strategic and organic opportunities that increase our market coverage, value, and relevance to customers in key critical infrastructure markets, as well as the continuation of our share repurchase program. As it pertains to strategic inorganic execution, I wanted to call out our recent UK acquisition and our entire UK team, who are integrating our two UK platforms while running ahead of expectations and delivering excellent results.

Speaker #1: And as Gregg touched on, our final priority is the allocation of capital beyond our organic requirements. With a strong balance sheet and a disciplined approach, we remain active in the evaluation of core, strategic, and organic opportunities that increase our market coverage, value, and relevance to customers in key critical infrastructure markets, as well as the continuation of our share repurchase program.

Speaker #1: As it pertains to strategic and organic execution, I wanted to call out our recent UK acquisition and our entire UK team who are integrating our two UK platforms while running ahead of expectations and delivering excellent results.

Speaker #1: The combined UK entity provided our business with strong, profitable growth during the quarter, while our US team successfully managed the large-scale project transitions, which are a natural part of our business strategy and cadence.

Matthew Lanigan: The combined UK entity provided our business with strong, profitable growth during the quarter, while our US team successfully managed the large-scale project transitions, which are a natural part of our business strategy and cadence. With robust market outlooks in our served geographies, a clear strategic focus, and a robust balance sheet, we remain on pace to deliver another strong year of profitable growth for 2026. 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. With that, we'll open the call for questions.

Speaker #1: With robust market outlooks in our served geographies, a clear strategic focus, and a strong balance sheet, we remain on pace to deliver another strong year of profitable growth for 2026.

Speaker #1: 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.

Speaker #1: And with that, we'll open the call for questions.

Speaker #3: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.

Operator 3: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Aaron Spychala with Craig-Hallum. Aaron, you please go ahead.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Aaron Spychala with Craig-Hallum. Aaron, you please go ahead.

Speaker #3: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Aaron Spicala with Craig-Hallum.

Speaker #3: Aaron, you please go ahead.

Speaker #4: Good morning, Matthew and Gregg. First, can you maybe talk about visibility and confidence into the guidance? You talked a little bit about project timing.

Aaron Spychala: Good morning, Matthew and Gregg. First, can you maybe talk about visibility and confidence into the guidance? You talked a little bit about project timing, the 20% growth in the pipeline. Just curious if you're seeing any impacts from any data center slowing or just secondary impacts on customer spend.

Speaker #4: The 20 percent growth in the pipeline—just curious if you're seeing any impacts from any data center slowing, or just secondary impacts on customer spend.

Speaker #1: Yeah, thanks, Aaron. I think the short answer to that is that we're not seeing any impact of, I think, what's been affecting participants in the space over the last few days.

Matthew Lanigan: Yeah. Thanks, Aaron Spychala. I think the short answer to that is that we're not seeing any impact of, I think, what's been affecting participants in the space over the last few days. Our pipeline is fairly advanced and locked in, so we're not concerned about any risk there. Visibility is good. What I will say, we're always kind of alerting people to the fact that timings are not necessarily under our control, so they can shift a little bit, which may impact here or there. The way we see it, looking at it today, H2 is very much in line with the guidance that we called.

Speaker #1: Our pipeline is fairly advanced and locked in, so we're not concerned about any risk there. And visibility is good. What I will say is, we're always kind of alerting people to the fact that timings are not necessarily under our control, so they can shift a little bit, which may impact here or there, but the way we see it looking at it today, the second half is very much in line with the guidance that we called.

Speaker #4: Great. Thanks. And then just second, I mean, obviously, really good margin performance. Can you just talk about some of the drivers there, again, confidence and kind of the outlook?

Aaron Spychala: Great, thanks. Just second, obviously, really good margin performance. Can you just talk about some of the drivers there, again, confidence and kind of the outlook, and then just the impact from cross-rentals on the business. What has that been, and just how might that reverse or see a benefit next year as you bring on capacity?

Speaker #4: And then, just the impact from cross-rentals on the business—what has that been? And how might that reverse, or see a benefit, next year as you bring on capacity?

Speaker #1: Yeah, so I guess I'll start with that one first. The cross-rentals—the cost has been fairly stable. It's about three points a headwind on the R&S.

Gregg Piontek: Yeah. I guess I'll start with that one first. The cross-rentals, the cost has been fairly stable. It's about 3 points of headwind, basically, on the R&S margins overall. As we had talked about, we see over time, we'll be reducing that. You'll see some lift from that. In terms of the improvement of the margins, you got a little bit of mix. The rental versus service continues to trend more toward the rental, which is the higher margin. Within that, it's a lot of operating leverage and cost management, both on the rental operations side as well as on the manufacturing side. The increase in the manufacturing volume and just the leverage that you're getting there, that's really what's driving it. As we look ahead, we don't see a substantial change to that.

Speaker #1: Margins overall. And as we had talked about, we see over time, we'll be reducing that. So you'll see some lift from that. But in terms of the improvement of the margin, you got a little bit of mix.

Speaker #1: The rental versus service continues to trend more toward rental, which is the higher margin. But then within that, there's a lot of operating leverage and cost management, both on the rental operations side as well as on the manufacturing side.

Speaker #1: The increase in manufacturing volume and just the leverage that you're getting there—that's really what's driving it. And as we look ahead, we don't see a substantial change to that.

Speaker #4: Great. Thank you for taking the questions. I'll turn it over.

Aaron Spychala: Great. Thank you for taking the questions. I'll turn it over.

Speaker #1: Thanks, Aaron. Sorry.

Matthew Lanigan: Thanks, Aaron.

Operator 3: Oh. Your next question is from the line of Laura Mayer with B. Riley Securities. Laura, please go ahead.

Operator: Oh. Your next question is from the line of Laura Mayer with B. Riley Securities. Laura, please go ahead.

Speaker #4: Nope.

Speaker #3: Your next question is from the line of Laura Mayer with B. Reilly Securities. Laura, please go ahead.

Speaker #5: Hi, good morning, Matthew and Gregg.

Laura Mayer: Hi, good morning, Matthew and Gregg.

Speaker #1: Hey, Laura.

Gregg Piontek: Hey, Laura.

Speaker #5: So for my first question, the release site strong demand from key customer accounts, could you give some color on how concentrated rental growth was this quarter?

Laura Mayer: For my first question, the release cites strong demand from key customer accounts. Could you give some color on how concentrated rental growth was this quarter, and then some more color on the customer base broadening among your top accounts?

Speaker #5: And then can you some more color on the customer-based broadening among your top accounts?

Speaker #1: Yeah, I think when you look at this quarter, a lot of the demobilizations were attributed to one of our larger customers, Laura. So if anything, that would have addressed any concentration associated with the overall rental mix.

Matthew Lanigan: Yeah. I think when you look at this quarter, a lot of the demobilizations were attributed with one of our larger customers, Laura. If anything, that would have kind of addressed any concentration associated with the overall rental mix. Other than that, I think it was a fairly standard distribution across multiple regions. I think that would be how I'd summarize that one. You'll have to remind me the second part of your question.

Speaker #1: And so other than that, I think it was a fairly standard distribution across multiple regions. And so I think that would be how I'd summarize that one.

Speaker #1: You'll have to remind me the second part of your question.

Speaker #5: Do you see the customer-based broadening among your top accounts?

Laura Mayer: Do you see the customer base broadening among your top accounts?

Speaker #1: Yeah, thank you. Yeah, we do, actually. I think I touched on it in my pipeline commentary that we're seeing build-up in our kind of emerging or growing regions.

Matthew Lanigan: Yeah. Thank you. Yeah, we do, actually. I think I touched on it in my pipeline commentary that we're seeing buildup in our kind of emerging or growing regions. We're happy with the way that our geographic distribution is starting to play out. Obviously, we've got some work to do to have it balance out our historical footprint. Encouraging that we're starting to see a broader distribution of geographic regions in our activity.

Speaker #1: So we're happy with the way that our geographic distribution is starting to play out. Obviously, we've got some work to do to have it balance out our historical footprint, but it's encouraging that we're starting to see a broader distribution of geographic regions in our activity.

Speaker #1: Yeah, I think going back to our commentary over the past several quarters, the good news with the success that we saw in 2025 with these larger projects is that we saw a great uptake with one particular customer.

Gregg Piontek: Yeah. I think going back to our commentary over the past several quarters. The good news with the success that we saw in 2025 with these larger projects, we saw a great uptake with one particular customer. That's what caused that customer to be a, what, 19% customer here in 2025. Here in 2026, a key focus of ours is diversifying and finding the next customers to really help diversify that. It's kind of playing out as we expected. We know these things take a little bit of time to get there, but we're on a good path.

Speaker #1: That's what caused that customer to be what, 19% customer here in 2025. And here in '26, the a key focus of ours is diversifying and finding the next customers to really help diversify that and so it's kind of playing out as we expected.

Speaker #1: We know these things take a little bit of time to get there, but we're on a good path.

Speaker #5: Thanks. I guess a follow-up on that then. How much of the fleet is deployed on transmission and distribution work versus data center site development and other end markets?

Laura Mayer: Thanks. I guess a follow-up on that. How much of the fleet is deployed on transmission and distribution work versus data center, site development, and other end markets? Could you give a little-

Speaker #5: Could you give a little color there on whether there's any update on the change in the mix?

Matthew Lanigan: Yeah, I'll start.

Laura Mayer: -color there on if there's any update on the change in the mix?

Speaker #1: Yeah, Laura, I'll stop by saying we have no MATS deployed on data center build-out or development. So I just want to kind of point that out on the get-go.

Matthew Lanigan: Yeah, Laura, I'll start by saying we have no mats deployed on data center build-out or development. I just want to kind of point that out on the get-go. The majority of our products, the rental distribution largely reflects the revenue concentrations that Gregg spoke about. 70%+ of the fleet would be on transmission projects and the balance largely domestically on our oil and gas footprint around fracking basins in the country. Then obviously in the UK, more concentrated again on transmission and perhaps rail and general construction.

Speaker #1: The majority of our products the rental distribution largely reflects the revenue concentrations that Gregg spoke about, 70-plus percent of the fleet would be on transmission projects and the balance largely on domestically on our oil and gas footprint around fracking basins in the country.

Speaker #1: And then obviously in the UK, more concentrated again on transmission and perhaps rail and general construction.

Speaker #5: Great. Thanks.

Laura Mayer: Great, thanks.

Speaker #1: Thanks, Laura.

Matthew Lanigan: Thanks, Laura.

Speaker #3: Your next question comes from Bill Desellum with Titan Capital Management. Bill.

Operator 3: Your next question comes from Bill Dezellem with Tieton Capital Management. Bill?

Operator: Your next question comes from Bill Dezellem with Tieton Capital Management. Bill?

Speaker #2: Agree. Thank you. Two questions. The first one is, how are you thinking about additional acquisitions at this point relative to where you're at with the integration of Grassform?

Bill Dezellem: Great. Thank you. Two questions. The first one is, how are you thinking about additional acquisitions at this point, relative to where you're at with the integration of Grassform?

Speaker #1: Yeah, Bill. I think we've been consistent with this. We'll continue to look at opportunities that will accelerate our presence into geographic markets if we think that economics pencils out.

Matthew Lanigan: Yeah, Bill, I think we've been consistent with this. We'll continue to look at opportunities that will accelerate our presence into geographic markets, if we think that economics pencils out. We're constantly looking at those. As it pertains to integration with Grassform, I'd say that's going very well. I think if you recall, when we purchased that business, we said there wasn't a lot of integration we wanted to do. It was a business that ran itself very well, had a great team around it. We weren't looking to change that in a material way, and I think that acquisition has responded well to that as a backdrop. I'm not sure we would classify that as any form of distraction, if that's what you were alluding to in the question.

Speaker #1: So we're constantly looking at those. As it pertains to integration with Grassform, I'd say that's going very well. I think if you recall, when we purchased that business, we said there wasn't a lot of integration we wanted to do.

Speaker #1: It was a business that ran itself very well, had a great team around it. We weren't looking to change that in a material way.

Speaker #1: And I think that that acquisition has responded well to that as a backdrop. So I'm not sure we would classify that as any form of distraction, if that's what you were alluding to in the question.

Speaker #2: Yeah, that's exactly right. So you're prepared to move to the next acquisition if it were to present itself, essentially, is what you're saying?

Bill Dezellem: That's exactly right. You're prepared to move to the next acquisition if it were to present itself essentially, is what you're saying?

Speaker #1: That's right.

Matthew Lanigan: That's right.

Speaker #2: And then my second question is, relative to the project completions—if we heard you correctly, there were several that were accelerated. Would you walk us through what the dynamics were behind the scenes with that customer, and what's happening within them that led to those accelerated completions of projects?

Bill Dezellem: My second question is, relative to the project completions, if we heard you correctly, there were several that were accelerated. Would you walk us through what the dynamics were behind the scenes, with that customer and what's happening within them that led to those accelerated completions of projects? If it's just that they have so much work that they're trying to get through things more quickly than originally planned, or if they have priorities that have shifted. Help with that would be appreciated.

Speaker #2: If it's just that they have so much work that they're trying to get through things more quickly than originally planned or if they have priorities that have shifted, help with that would be appreciated.

Speaker #1: Yeah, I think putting it into some sort of relativity is important here, Bill. These are projects that have been down almost a year, so we're talking days at the end of several hundred days of projects.

Matthew Lanigan: Yeah, I think putting it into some sort of relativity is important here, Bill. These are projects that have been down almost a year. We're talking days at the end of several hundred days of projects. The ability to accurately call when they're coming up is always dependent on weather, other parts of the supply chain, labor productivity on the customer and their contractor side. They give us their best estimates, but ultimately, they're motivated to wind the project up as soon as they can. We just saw that there was some projects there that were a few days here or there out of sync, but at the scale that those projects are, they have the kind of impacts that we saw on the overall P&L from our perspective.

Speaker #1: So the ability to accurately call when they're coming up is always dependent on weather, other parts of the supply chain, labor productivity on the customer, and their contractor side.

Speaker #1: So, they give us their best estimates, but ultimately, they're motivated to wind the project up as soon as they can. And we just saw that there were some projects there that were a few days here or there out of sync, but at the scale that those projects are, they have the kind of impacts that we saw on the overall P&L from our perspective.

Speaker #1: Yeah, and I think it goes back to really highlighting what we've talked about in the past—the dynamic of why it's so critical that you're able, you have the scale and the flexibility to respond, because these project timings, both starts and ends, shift around.

Gregg Piontek: Yeah, I think it goes back to really highlighting what we've talked about in the past, the dynamic of why it's so critical that you have the scale and the flexibility to respond because these project timings, both starts and the ends shift around. Some of these projects had been extended previously beyond what they were originally scheduled for, but ultimately you get very limited notice on when that decision is made, and you have to respond to it. That's where the acceleration was referring to relative to our expectations at the 1 May call.

Speaker #1: Some of these projects had been extended previously beyond what they were originally scheduled for, but ultimately, you get very limited notice on when that decision is made, and you have to respond to it.

Speaker #1: And so that's where the acceleration is that was referring to relative to our expectations at the May 1st call.

Bill Dezellem: That's helpful. Essentially I've over-indexed to that comment, it sounds like.

Speaker #2: That's helpful. So essentially, I have over-indexed to that comment, it sounds like.

Speaker #1: Yep. Yeah, there was certainly no macro change, if you will, to the business dynamic. It was business as normal, but at that scale, it obviously has a slightly larger impact.

Matthew Lanigan: Yeah. There was certainly no macro change, if you will, to the business dynamic. It was business as normal, but at that scale, it obviously has a slightly larger impact.

Speaker #2: Great. That's fine. And I'm going to break the rules on the number of questions and ask one more if I may. Relative to data centers, you said you're currently not deployed on any data centers.

Bill Dezellem: Great. That's fine. Then I'm gonna break the rules on the number of questions and ask one more, if I may. Relative to data centers, you said you're currently not deployed on any data centers. Given the amount of electricity that these consume, do you see any burgeoning opportunity to essentially, I guess I'll call them, mini distribution lines or maybe even mini transmission lines going from a main trunk off to a data center, that's going to lead to any meaningful work for you? Or are those really two short of distances to be needle movers for you?

Speaker #2: Given the amount of electricity that these consume, do you see any burgeoning opportunity to essentially, I guess I'll call them mini-distribution lines or maybe even mini-transmission lines going from a main trunk off to a data center that's going to lead to any meaningful work for you?

Speaker #2: Or are those really too short of distances to be needle movers for you?

Speaker #1: Yeah, I mean, I think the way I'd kind of lay that out, Bill, is obviously, connectivity to loads, which I think we need to remind ourselves that data centers, capture most of the public narrative at this point, but we're also onshoring manufacturing and other sources of load demand on the grid, and they're all going to need some sort of interconnectivity.

Matthew Lanigan: Yeah, I think the way I'd lay that out, Bill, is obviously connectivity to loads, which I think we need to remind ourselves that data centers capture most of the public narrative at this point, but we're also onshoring manufacturing and other sources of load demand on the grid. They're all gonna need some sort of interconnectivity. I think ultimately these large load cases will have to be tied into the grid versus some of behind the meter temporary kind of accommodations that will accelerate their startup. All of that is opportunity for us as those lines are constructed. As it pertains to their cadencing and everything, we'll have to see the way that plays out. I'd say every large load is going to need to be supplied by a line unless it's sitting right beside an existing transmission line, and that's opportunity for our business.

Speaker #1: I think, ultimately, these large load cases will have to be tied into the grid, versus some of the behind-the-meter temporary accommodations that will accelerate their startup.

Speaker #1: And all of that is opportunity for us as those lines are constructed. As it pertains to their cadencing and everything, we'll have to see the way that plays out.

Speaker #1: But I'd say every large load is going to need to be supplied by a line unless it's sitting right beside an existing transmission line.

Speaker #1: And that's opportunity for our business.

Speaker #2: Great. Thank you.

Bill Dezellem: Great. Thank you.

Speaker #3: Your next question is from the line of Mincho with Texas Capital Securities. Please go ahead.

Operator 3: Your next question is from the line of Min Cho with Texas Capital Securities. Please go ahead.

Operator: Your next question is from the line of Min Cho with Texas Capital Securities. Please go ahead.

Min Cho: Great. Thank you, Matthew and Gregg. Quick questions here. Are you starting to lay down mats for greenfield projects or are you still working mostly on brownfield? What could change if that transition starts to occur? Do you need more mats, longer rentals, or just any commentary there, please?

Speaker #2: Great. Thank you, Matthew and Greg. Quick questions here. Are you starting to lay down mats for Greenfield projects, or are you still working mostly on Brownfield?

Speaker #2: And what could change if that transition starts to occur? Do you need more mats, longer rentals, or any commentary there, please?

Speaker #1: Yeah, I'd say the majority of what we're doing is still on existing lines and rights-of-way, versus greenfields. I think the major driver for that, looking forward, is more likely to be some of the higher-voltage lines, but they're out in '27, '28. Most of the meaningful construction on those is in a '27–'28 timeframe.

Matthew Lanigan: Yeah, I'd say, Min, the majority of what we're doing is still on existing lines and right of ways versus greenfields. I think the major driver for that looking forward is more likely to be some of the higher voltage lines, but they're out in 2027, 2028. Most of the meaningful construction on those is in the 2027, 2028 timeframe. Roughly speaking, one and a half times the matting is a fair rule of thumb on these right of ways for the larger, higher voltage trunks that are planned in some of the regions. Hopefully that addresses your question.

Speaker #1: And roughly speaking, one and a half times the matting is a fair rule of thumb on these right-of-ways for the larger higher voltage trunks that are planned in some of the regions.

Speaker #1: So, hopefully that addresses your question.

Speaker #2: Yeah, thank you. And just—can you talk a little bit about what you're seeing in the UK? Obviously, you had some increased product sales there, and it looks like the Grassworm revenues are pretty much in line with the first quarter.

Min Cho: Yeah, thank you. Just can you talk a little bit about what you're seeing in the UK? Obviously, you had some increased product sales there, and it looks like the Grassform revenues were pretty much in line with the Q1. Just anything to note in terms of demand, just overall demand in the UK and opportunities.

Speaker #2: Is there anything to note in terms of overall demand in the UK or opportunities?

Speaker #1: Yeah, I think that market is playing exactly the way we thought it was. I feel like the demand is still strong there. Our businesses are had a slightly softer start to the year than we had planned ourselves, which is largely just the customers getting themselves organized and getting back to work after the holiday season.

Matthew Lanigan: Yeah, I think that market is playing exactly the way we thought it was. I feel like the demand is still strong there. Our businesses had a slightly softer start to the year than we had planned ourselves, which is largely just the customers getting themselves organized and getting back to work after the holiday season. We're seeing that market continue to strengthen and perform well for us. The one thing I will say is we did not have any sales to the UK. Our international sales were into other markets, just wanted to clarify that for you, Min.

Speaker #1: And we're seeing that market continue to strengthen and perform well for us. So the one thing I will say is we did not have any sales to the UK, our international sales were into other markets.

Speaker #1: And so just wanted to clarify that for you, Minh.

Speaker #2: Oh, perfect. Thank you. Thanks for that clarification. All right, thank you.

Min Cho: Oh, perfect. Thank you. Thanks for that clarification. All right. Thank you.

Speaker #1: Thanks, Minh.

Matthew Lanigan: Thanks, Min.

Speaker #3: And this concludes the Q&A session. I will now turn the call back to management for closing remarks.

Operator 3: This concludes the Q&A session. I will now turn the call back to management for closing remarks.

Operator: This concludes the Q&A session. I will now turn the call back to management for closing remarks.

Speaker #1: Thanks again for joining us on today's call. Should you have any questions or requests, please reach out to us at investors@npki.com, and we look forward to hosting you again next quarter.

Gregg Piontek: Thanks again for joining us on today's call. Should you have any questions or requests, please reach out to us at investors@npki.com. We look forward to hosting you again next quarter.

Speaker #3: That concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining NPK International 2Q26 earnings.

Operator 3: That concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining NPK International Q2 2026 earnings. The line will disconnect automatically.

Operator: That concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining NPK International Q2 2026 earnings. The line will disconnect automatically.

Q2 2026 NPK International Inc Earnings Call

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