NYSE:NR Newpark Resources Q1 2023 Earnings Report Earnings HistoryForecast Newpark Resources EPS ResultsActual EPS$0.09Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ANewpark Resources Revenue ResultsActual Revenue$200.03 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ANewpark Resources Announcement DetailsQuarterQ1 2023Date5/2/2023TimeN/AConference Call DateWednesday, May 3, 2023Conference Call Time9:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Newpark Resources Q1 2023 Earnings Call TranscriptProvided by QuartrMay 3, 2023 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Greetings, and welcome to the Newpark Resources First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you, Ken Dennard. Operator00:00:26Thank you, Ken. You may begin. Speaker 100:00:29Thank you, operator, and good morning, everyone. We appreciate you joining us for the Newpark Resources conference call and webcast To review Q1 2023 results, participating from the company in today's call are Matthew Lanigan, Newpark's President and Chief Executive Officer and Greg Piontek, Chief Financial Officer. Following my remarks, Management will provide a high level commentary on the financial details of the Q1 results and near term outlook before opening the call for Q and A. Before I turn over the call, I have a few housekeeping items to run through. There will be a replay of today's call be available by webcast on the company's website at newpark.com. Speaker 100:01:13There will also be a telephonically recorded replay available until May 17, 2023 and that information on how to access is included in yesterday's release. Please note that information reported on this call speaks only as of today, May 3, 2023, and therefore, you're advised that time sensitive information may no longer be accurate Conference call may contain forward looking statements within the meaning of the United States Federal Securities Laws. These forward looking statements reflect the current views of management. However, various risks, uncertainties and contingencies could cause the company's actual results, Performance or achievements could differ materially from those expressed in the statements made by management. The listener is encouraged To read the annual report on Form 10 ks, quarterly reports on Form 10 Q and current reports on Form 8 ks to understand certain of those risks, uncertainties and contingencies. Speaker 100:02:21The comments also today may include certain non GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP measures are included in the quarterly earnings release, which can be found on the Newpark website. And now with that behind me, I'd like to turn the call over to Newpark's President and CEO, Mr. Matthew Laggard. Matthew? Speaker 200:02:44Good morning, everyone. Our Q1 2023 continued the momentum from the Q4, marked by solid performance both financially and against our stated key initiatives. Our financial performance was highlighted by the strongest Q1 revenue level for our Industrial Solutions business in our history With $56,000,000 in revenue generating $20,000,000 in EBITDA, validating the strength of our offering and the robustness of market demand. Utilities and Industrial end markets contributed nearly 80% of our industrial segment revenues, and we are pleased with our progress to silicate by Newpark as a leader in the development of Within Fluids, Q1 was Highlighted by the strongest revenue quarter in our history in the EMEA region and continued solid performance in our Canadian business, along with ongoing progress in our efforts to improve the returns on invested capital. As expected, we saw strong cash flow generation from both businesses, which contributed to a reduction of debt and the return of capital to shareholders by the repurchase of a further 4% of our outstanding shares in the quarter. Speaker 200:03:53Consolidated revenues were $200,000,000 in the Q1, including $144,000,000 from Fluid Systems following the Q4 divestitures, While the industrial business contributed $56,000,000 Adjusted EBITDA was $21,000,000 for the quarter And adjusted EPS improved 28% sequentially to $0.09 per diluted share. Greg will cover more specifics The financial results in a few moments. However, before I hand the call over to him, I wanted to provide an update on our progress against the key priorities I laid out in our February call. We are pleased with the progress we've made in recent months, taking meaningful steps forward to reposition our company to organize around the strong growth opportunity and performance Our Industrial Solutions business, while continuing to monetize investments and reduce the cost and complexity within our Fluids business. As discussed in February, our first priority for 2023 is to drive operating cost optimization and efficiency improvements Systems division to be a more agile and capital light business, our efforts in recent months have been primarily focused on overhead cost reductions that were made possible by the divestitures. Speaker 200:05:11We have implemented several changes in recent weeks intended to reduce management layers and simplify our business support activities, particularly within our Fluids Systems and Corporate Office Organizations. On that note, I'd like to extend my sincere thanks to Chip Earl, who served as our General Counsel and Chief Compliance Officer for the last 5 years and recently left Newpark as a part of these cost reduction efforts. Chip was instrumental in building the strong governance and succession processes that enabled the decision for him to leave the company. We wish Chip every success going forward. In addition, we have recently shut down our U. Speaker 200:05:50S. Stimulation chemicals business, which was unable to demonstrate a path to profitability and we are also in the process of winding down operations in Chile as well as closing down several nonoperational and subscale entities throughout the EMEA region. While cost optimization efforts are ongoing, our company wide action translate to roughly $6,000,000 in annual recurring cost savings with the benefits being realized over the next few quarters. Looking ahead, we will continue to streamline our overheads both at a corporate and divisional level as we work to further simplify our business and move decision making closer to our key end markets, while also continuing to take decisive actions to monetize investments in underperforming businesses and evaluate our value enhancing strategic portfolio options. We believe strongly that simplifying our support cost structure to reflect the increasingly agile environments in which Newpark operates is critical to ensuring that our businesses can continue to deliver world class products and services and generate acceptable returns. Speaker 200:06:53Our second priority is to focus investment capital on the growth of our Specialty Rental and Services business. At At this point, I'm pleased to highlight that in the Q1, we invested nearly $7,000,000 in Industrial Solutions, primarily to expand our rental fleet in support of our growth in the utility We also began production of our new Durabase 800 Series mat, which fully integrates with our existing Durabase mat format And offers a nearly 15% reduction in weight, therefore driving further efficiency in transportation costs and associated carbon emissions without impacting product performance. As we roll this new product into our rental fleet in the coming months, we're excited to showcase Newpark once again as the industry innovator for heavy duty composite matting, Our focus on growing the Industrial Solutions segment is showing tangible results With Q1 trailing 12 month revenues now at $213,000,000 which reflects an 11% improvement from the full year 2022 revenues. Trailing 12 month adjusted EBITDA for Industrial Solutions increased to $74,000,000 a 12% improvement from our full year 2022 results. With a strong start to the year, we are confident that Industrial Solutions can deliver a mid to upper teens top line growth rate in 2023, while maintaining solid operating margins. Speaker 200:08:14Funding our continued expansion into the utilities and critical infrastructure markets remains our highest Capital and resource priority. And finally, our 3rd priority is a commitment to maintaining a strong balance sheet and using excess cash generation to reduce our debt and return value to our shareholders. During the Q1, we generated $23,000,000 of free cash flow, While the wind down of retained assets from last year's Gulf of Mexico divestitures generated a further $7,000,000 of cash. Our usage of the cash was balanced with $15,000,000 in debt reduction and $15,000,000 in share repurchases. I'd like to highlight that in addition to the 4,400,000 shares purchased in Q4 and the 3,400,000 shares that we repurchased in the 1st quarter, We have also repurchased 1,200,000 additional shares in April. Speaker 200:09:06Including the Q2 activity, we've now repurchased 10% of our outstanding shares over the past 6 months, while our net leverage stands below one turn of adjusted EBITDA. We believe that the combination of funding our Industrial Solutions growth plans, while balancing our debt reduction and returning value to shareholders via our share repurchase program Speaker 300:09:31And now, I'd like to Speaker 200:09:32hand the call over to Greg to provide more color on the specifics of the financials for the quarter. Speaker 300:09:36Greg? Thanks, Matthew, and good morning, everyone. I'll start with the specifics of the segment and consolidated financial results for the quarter before providing an update on our near term outlook. As Matthew touched on, the Q1 was highlighted by strong performance from Industrial Solutions, reflecting our continued success penetrating and expanding our presence in the multibillion dollar utility infrastructure market. As expected, following the seasonally strong Q4 result, total Industrial Solutions revenues pulled back modestly sequentially, but grew 58% year over year with the business posting 1st quarter revenues of $56,000,000 The segment's strongest Q1 revenue in our history. Speaker 300:10:22The Q1 once again benefited from the robust demand from utility infrastructure projects, impacting both rental and service and direct sales activity. Following the exceptionally strong Q4 project activity, Rental and service revenues pulled back somewhat to $36,000,000 in the Q1. The Q1 result reflects a 17% improvement year over year, driven by a combination of stronger pricing and increased volume following our fleet expansion investments during 2022. Product sales contributed $19,000,000 of revenues in the Q1 as the robust demand from the utility sector Has improved the quarterly stability in product sales volumes. As Matthew touched on, for the trailing 4 quarters, Industrial Solutions generated $213,000,000 of revenues, including $162,000,000 of revenue from Utilities and Industrial Markets and delivered $74,000,000 of adjusted EBITDA, a 35% adjusted EBITDA margin. Speaker 300:11:29Notably, we've seen the stability of the segment's quarterly revenue, profit and cash generation continuing to improve as we expand our presence within the utility In Fluid Systems, following the completion of the previously announced divestitures in the Q4, Our focus remains on strengthening our position within key markets where customers value our differentiated fluids offering, while continuing to streamline our business support and monetizing working capital in areas that no longer demonstrate a clear pathway to generating sufficient returns. During the Q1, we reduced our net capital employed in the Fluid Systems business by $22,000,000 largely from the ongoing wind down of assets remaining from the divestitures. The Fluids segment generated $144,000,000 of revenues adjusted EBITDA of $8,700,000 in the 1st quarter or a 6% adjusted EBITDA margin. Excluding the ex Calibar divestiture, revenues from North America land operations decreased 5% sequentially As declines in the U. S, including the effects of elevated downhole losses on a number of projects in the prior quarter, We're partially offset by strong seasonal growth in Canada. Speaker 300:12:49Revenues from international markets improved 2% on a sequential basis As the effect of our wind down of operations in Chile was more than offset by improvement in the EMEA region, which posted its strongest revenue quarter in our history. The Q1 segment operating margin from ongoing activities was 4.7%, down from 5.3% in the prior quarter, primarily reflecting the effects of lower revenue in U. S. Land. Notably, international pricing has improved in the past quarter, So the effects in Q1 were largely offset by a weaker product sales mix. Speaker 300:13:26As of the end of the Q1, the Fluids business has nearly 2 $20,000,000 of net working capital, consisting primarily of inventory and receivables, which represents roughly 85% of the segment's net capital employed. SG and A expenses increased on both a sequential and year over year basis, primarily reflecting the effects of nearly $1,000,000 1st quarter 2023 spending on strategic planning activities and an organizational design project. Interest expense declined sequentially driven by reduced debt levels, but increased year over year largely reflective of the sharp increase in borrowing rates Tax expense was $2,100,000 in the quarter, reflecting a 27% effective tax rate. Adjusted EPS improved 28% sequentially to $0.09 per diluted share in the Q1, reflecting both the stronger adjusted net income and the decline in our shares outstanding. In terms of cash flow, we had a solid start to the year, reflecting the benefits of our recent divestitures and the ongoing business transformation. Speaker 300:14:40Free cash flow for the quarter was $23,000,000 including operating cash flow of $29,000,000 while using $7,000,000 to fund capital investments, the vast majority of which supports the expansion of our rental fleet in the utility sector. As Matthew touched on, We used our cash generation in the quarter to fund a $15,000,000 reduction in debt and $15,000,000 of share repurchases. Reflecting the full impact of the additional April share purchases, our outstanding share count now stands at 85,000,000, down 10% from the 94,000,000 shares outstanding just 2 quarters ago. Now turning to our near term operational outlook. We remain encouraged by the strong fundamentals for utility infrastructure spending, which we expect will provide a multiyear tailwind For our Industrial Solutions growth, for Fluids, while we are seeing the effects of the lower natural gas prices impacting certain basins In the U. Speaker 300:15:41S. In the near term, we are encouraged by the mid and longer term outlook for the North America and EMEA markets As we continue to right size our cost structure, monetize working capital and focus our footprint on key markets that demonstrate an ability to generate a sufficient return. As we look specifically at the Q2 for Industrial Solutions, we expect rental and service revenues to improve sequentially, benefiting from the recent start up of several utility infrastructure projects. We also continue to see strength in the direct sales opportunity pipeline. Overall, we expect our Industrial Solutions segment will show modest year over year improvements in both revenues and EBITDA as compared to the Q2 of last year. Speaker 300:16:27For Fluids, we expect revenues to pull back roughly 15% sequentially, reflecting the typical seasonal effect of spring breakup in Canada And a lower contribution from the U. S, which is impacted both by market softness and our ongoing focus on price discipline. International revenues are expected to remain relatively stable benefiting from the continuing strength in customer activity. With respect to operating margins, while we expect EMEA to see margins improve sequentially and we begin to see additional benefits from our ongoing cost Reduction efforts. The impact of the lower revenues will more than offset these benefits resulting in an Operating margin likely in the low single digits prior to any restructuring charges. Speaker 300:17:15Corporate expense is expected to improve modestly in Q2 Prior to any restructuring charges, as we wrap up our strategic planning projects. Looking beyond Q2, we expect corporate office spending will decrease further, reflecting the completion of our strategic planning work and the effects of roughly $2,000,000 of annual cost savings from actions executed to date. As we continue to reduce our debt, we expect interest expense to reduce modestly, while the effective tax rate will likely remain below 30%, fairly in line with Q1. We expect strong free cash flow generation to continue in the 2nd quarter, primarily benefiting from the anticipated solid EBITDA generation as well as meaningful reductions in working capital, primarily in the Fluids business as we maintain our focus on improving returns. We expect our 2nd quarter cash generation will primarily be used to further reduce our debt and fund our growth investments in Industrial Solutions. Speaker 300:18:17And with that, I'd like to turn the call back over to Matthew for his concluding remarks. Speaker 200:18:22Thanks, Greg. I'm proud of our execution in the Q1 as we posted double digit growth in trailing 12 month revenue in the Industrial Solutions business, Fluids delivered record quarterly revenue in the EMEA region and another solid performance in Canada. We also continue to see progress in the transformation of our Fluids business into a more agile, capital light and simplified business, and we delivered strong free cash flow and improved value for our shareholders. Just like we did in 2022, we are making progress against each of our stated priorities for Industrial Solutions is our primary profit driver today and we expect that within the next few quarters, this business will also represent the majority of our invested capital, We believe the strong market fundamentals in the utility and critical infrastructure markets will support a double digit annual growth rate for our industrial business for years to come. We remain committed to prioritizing capital into our expansion in this division, further positioning Newpark as a scaled specialty rental and infrastructure services company, while reducing our presence and exposure within oil and gas end markets. Speaker 200:19:37We plan to continue strengthening the financial performance of our Fluids business, which has consistently been recognized by the industry as a technology and service leader in both conventional oil and gas and geothermal markets. Optimizing investment in areas of the business that do not have a clear pathway to meeting profitability requirements will remain a priority as we seek to improve returns on the capital deployed in this division. We believe that by continuing to take meaningful steps to strengthen the financial performance of our Fluids segment and reshape our balance sheet, we will be able to generate consistent free cash flow while improving our returns in that division, which in turn will provide us with more flexibility as we continue to execute our industrial growth plans and thoughtfully evaluate each of our strategic portfolio options. I'm enormously proud of our business units and our dedicated staff, and I remain optimistic about the year ahead. And with that, I'd like to close by thanking our shareholders for investing in us and thanking our employees for their hard work and their continued focus on compliance and safety. Speaker 200:20:40We'll now take your questions. Operator? Operator00:20:44Thank you, sir. We will now be conducting a question and answer One moment please while we poll for questions. And the first question comes from the line of Bill Dezellem with Tieton Capital. Please proceed with your question. Speaker 400:21:18Thank you. Let me start, if I could, with the Mats business. Last quarter, you said that pricing had improved for Mats, and I think you made reference to that again here in your opening remarks. Would you discuss that, the pricing dynamic that you're experiencing and how you see This playing out for the remainder of the year? Speaker 300:21:43Sure, Bill. It's Greg. So the pricing dynamic over the past year we've seen kind of steadily improve as we went through the back half of the year. I think that's really a reflection of kind of the robust Demand dynamics that you have in the marketplace, as we had noted in Q4, that was an extremely strong quarter in terms of It was very high utilization, had some call out work that was at particularly Higher prices that benefited. We did see that pullback somewhat, kind of modestly here as we went into Q1, which was very much what we expected. Speaker 300:22:20I think as you look at Speaker 400:22:28And Is there anything that you can do either with innovation with the Mats or with service that will move pricing up further? Or really would Should we anticipate any margin expansion that you would have to be a function of efficiencies as that business becomes larger? Speaker 200:22:48Yes. Bill, this is Matthew. Look, I think on the overall pricing, it's going to be more of a mix related issue in terms of Where we're putting the product down geographically and what the specifics of the particular contracts that or projects that we're working on are. Beyond that, I think you're spot on. I think it's going to be transportation efficiencies. Speaker 200:23:10Obviously, longer term as we introduce more of the lighter weight mat Into the fleet, we're going to get a lift in transportation efficiency from that. But I think When you think of pricing, it's going to be more project related in terms of that lever and then the rest will come from operational efficiency. Speaker 400:23:31Great. That's helpful. And then I think you called out that the UK Was a bit slower with the MAT revenues. Would you talk through that and the dynamics that you're seeing In that part of the world? Speaker 300:23:49Yes. The U. K. Has been actually relatively stable over the past few quarters. Yes, look at Q3, Q4 and into Q1, it's been a pretty consistent contributor. Speaker 300:24:00Now that is a fairly small piece Of the business, we're talking mid to upper single digits in terms of the percentage of revenue that comes from the UK. Speaker 400:24:12Got it. And I can either go back in the queue or I've got a couple more questions that I'll hit you with if you'll allow. Speaker 100:24:21Keep going. Keep Speaker 400:24:23going. Okay. So the fluids business, you had the facility exit costs. Does that tie back to the businesses that you referenced that you exited stimulation chemical and closing down Chile or is there something more to that? Speaker 300:24:44For the most part, the cost that we incurred in the Q1, you do have a certain piece of severance and such that went along with the organizational But the lion's share of it was actually Gulf of Mexico related. That's just kind of the follow on wind down Of that facility here following the Q4 divestiture transaction. Speaker 400:25:11Okay. Thank you. And so there was not a lot of cost to exit the either stimulation chemicals or Chile? Correct. All right. Speaker 400:25:21Thank you. And then I think that there is also a reference To efforts to flatten the fluids organization, would you talk through that please? Speaker 200:25:36Yes, sure, Bill. I'll address that one. I think as we look at the business and the way things are playing out here in terms Some of the layers that we've added on the corporate overhead structure to manage product lines, Stimulation being one of them that we're now kind of exiting not seeing a pathway to acceptable returns there and starting to think of the business more regionally Then with a kind of global oversight moving decision making closer to the customers and kind of looking at Potential efficiencies between divisions and eliminating layers, that's really where we're looking to drive that level of And really as you look at the simplifying the business, streamlining the overall operation that has that knock In fact, not only at kind of that division level, but then the corporate overhead as well, because you're just organizing differently. Speaker 400:26:34That's helpful. And then I believe that the corporate expenses included some Consulting costs, which were reasonably meaningful. In the past, when we have seen you all spend Larger amounts on consultants, there were some reasonably meaningful outcomes that came from that. Would you And not to have you disclosed too much too early, I mean, not that I would be opposed, but Would you please kind of walk us through what the dollars are being spent on And what outcomes that you're driving towards with those consulting efforts? Speaker 200:27:23Yes. Thanks, Bill. Yes, I think you're right. If you look at it sort of every 4 years roughly, if you go back in history, we have looked To kind of refresh and revalidate our strategy, and we hadn't done that since 2019. We took the decision to do another look at it here in Q1. Speaker 200:27:42What I will say is every dollar that was really just kind of looking at further growth opportunities on the industrial side of the business, part of it revalidating our Existing strategic assumptions part of it looking for adjacencies really looking at the exploration of core competencies beyond the rental and service business and how we may add Some additional revenue streams on that side of the business. So you're right, I'm not going to go into too much detail as to what that was on this call. It's fair to say we're going to continue to distill this work as we lock that into our longer term strategic growth plans. Speaker 400:28:21Great. Thank you. We'll look forward to hearing more about that later. And then finally, How much more are you anticipating that there will be in terms of restructuring cost, etcetera? Maybe not dollars as much as timing. Speaker 400:28:45Are we essentially done here in the second quarter? Or will there still be more to go after this? Speaker 300:28:54Yes, that's a tough one to answer. I will say that I think we the big pieces that we had in front of us were Completed by, I will say that it is an ongoing effort, as Matthew had described, and it is a function as Business evolves and changes and simplifies each step you take, you look at how what the knock on effects That is your overall overhead structure and is that another opportunity to simplify. I just kind of look at it simply when you look at our overall SG and A Run rate, we've we're calling it in a 12%, 12 plus percentage and that's a number that we'll continue to evaluate as the business How do we get that lower? But I don't necessarily have a firm target or an end date of when that is. Speaker 400:29:45Okay. That's helpful. I am going to kind of push a little further on that. So for example, Chile, That was not a region or a business line that I was familiar with. Are there more opportunities like that that maybe those of us on the outside haven't been particularly focused on That may have opportunities to streamline further that don't have a path to a solid ROI? Speaker 400:30:19Or are those really now few and far between? Speaker 300:30:26Look, I think I would say there is more opportunity. But when you look at this, where we find it particularly challenging to Reached the economic hurdles, our subscale markets, I think Shelley is a great example of that. It was a relatively small Market, it was generating in the area of $5,000,000 of revenues annually. And so we do have a large There are a number of those markets that are pretty small. And You remove one market like that and it doesn't necessarily change the picture, but the more steps you take in addressing those Markets that don't have a clear pathway to generating sufficient return and you shrink your footprint, okay, now you're talking about something that does have the knock on effect of your overheads and your So I'm not sure if that's helpful, but that's kind of how we're looking at it. Speaker 400:31:26Understood. I think think I understood anyhow. So what you're saying is if you were to take more actions like that, then there could be then a domino effect that, that would then Free up the opportunity to simplify the organization further up From some of those small markets? Speaker 300:31:46Yes, I think that's fair. Speaker 400:31:48Great. Thank you both for allowing all the questions. Speaker 100:31:53Great questions, Bill. This is Ken. As we always get emails prior to the call, here's one, Greg, Matthew, that came through said, much of the improvement you experienced during the quarter was due to strong demand and favorable Pricing in the utility and industrial sectors as well as your EMA markets in the fluids business. The question is, do you expect the fundamentals in those markets to continue Proving or at least hold at current levels and how sustainable is elevated spending we are seeing in the electric utilities infrastructure Thanks. Just to combine those. Speaker 200:32:29Yes. Look, on the first one, the fundamentals, I think we're continuing to be encouraged in the I'll start with the oil and gas first. In the EMEA region, I think we've worked hard on repricing a lot of those contracts We're getting the margin expansion that we needed off the back of the kind of supply chain inflation issues that we saw through last year. So off the back of that and with a stable kind of demand there, we see that sort of being sustained, which And then on the utility side, I think as we've touched on it before with a very stable historical Trying to spend in that space within the infrastructure investment and the Jobs Act, etcetera, giving more stimulus to that, We see that being sustained for years to come, which I think we also touched on Speaker 100:33:20in the call. Great. So about the so did you get that second one there with the sustainability? Yes. Where you wanted to hit it hard? Speaker 100:33:30Okay. Any other Additions for you guys? Oh, Bill's back. Bill, let's open the call back to Bill. He showed that. Speaker 200:33:39Come on ahead. Speaker 400:33:41I have one additional question relative to CapEx and just thinking about free cash flow this year. I think CapEx last year was $28,000,000 or somewhere in that neighborhood. How are you thinking about $23,000,000 on a full year basis? Speaker 300:33:58Overall, I would say that 2023 looks a lot like 20 22 in terms of the overall CapEx. As you see in Q1's results, 95% of our CapEx was in the Industrial Solutions business. So similar to what we've seen in recent years, I would You'll see the vast majority of that spend will be in Industrial Solutions and supporting that growth. Speaker 400:34:23Great. Thank you. Congratulations again on a great quarter. Speaker 300:34:29Thank you. Thanks, Bill. Appreciate it. Operator00:34:32At this time, there are no further questions. And I would like to hand the call back over to Greg Piantek for closing comments. Speaker 300:34:38All right. Thanks again for joining us Operator00:34:47Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a great rest of the day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallNewpark Resources Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Newpark Resources Earnings HeadlinesTwo new option listings and two option delistings on December 19thDecember 20, 2024 | markets.businessinsider.comNewpark Resources Focuses on Specialty Rental ServicesDecember 5, 2024 | markets.businessinsider.comGet Your Bank Account “Fed Invasion” Ready with THESE 4 Simple StepsStarting as soon as a few months from now, the United States government will make a sweeping change to bank accounts nationwide. It will give them unprecedented powers to control your bank account.April 21, 2025 | Weiss Ratings (Ad)Newpark Resources management to meet with Craig-HallumDecember 2, 2024 | tipranks.comNewpark Resources reports Q3 EPS ($1.99) vs 9c last yearNovember 9, 2024 | markets.businessinsider.comNewpark Resources Inc (NR) Q3 2024 Earnings Call Highlights: Navigating Challenges with ...November 9, 2024 | finance.yahoo.comSee More Newpark Resources Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Newpark Resources? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Newpark Resources and other key companies, straight to your email. Email Address About Newpark ResourcesNewpark Resources (NYSE:NR) provides products, rentals, and services primarily to the oil and natural gas exploration and production (E&P) industry. It operates through two segments, Fluids Systems and Industrial Solutions. The Fluids Systems segment provides drilling, completion, and stimulation fluids products and related technical services to customers primarily in the North America, Europe, the Middle East, and Africa, as well as other countries in the Asia Pacific and Latin America. The Industrial Solutions segment offers composite matting system rentals utilized for temporary worksite access; related site construction and services to customers in various markets, including power transmission, E&P, pipeline, renewable energy, petrochemical, construction, and other industries primarily in the United States and Europe; recyclable composite mats to customers worldwide; and access road construction, site planning and preparation, environmental protection, erosion control, and site restoration services. The company was incorporated in 1932 and is headquartered in The Woodlands, Texas.View Newpark Resources ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Aviation Unveils NYC Network Ahead of Key Earnings Report3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? 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There are 5 speakers on the call. Operator00:00:00Greetings, and welcome to the Newpark Resources First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you, Ken Dennard. Operator00:00:26Thank you, Ken. You may begin. Speaker 100:00:29Thank you, operator, and good morning, everyone. We appreciate you joining us for the Newpark Resources conference call and webcast To review Q1 2023 results, participating from the company in today's call are Matthew Lanigan, Newpark's President and Chief Executive Officer and Greg Piontek, Chief Financial Officer. Following my remarks, Management will provide a high level commentary on the financial details of the Q1 results and near term outlook before opening the call for Q and A. Before I turn over the call, I have a few housekeeping items to run through. There will be a replay of today's call be available by webcast on the company's website at newpark.com. Speaker 100:01:13There will also be a telephonically recorded replay available until May 17, 2023 and that information on how to access is included in yesterday's release. Please note that information reported on this call speaks only as of today, May 3, 2023, and therefore, you're advised that time sensitive information may no longer be accurate Conference call may contain forward looking statements within the meaning of the United States Federal Securities Laws. These forward looking statements reflect the current views of management. However, various risks, uncertainties and contingencies could cause the company's actual results, Performance or achievements could differ materially from those expressed in the statements made by management. The listener is encouraged To read the annual report on Form 10 ks, quarterly reports on Form 10 Q and current reports on Form 8 ks to understand certain of those risks, uncertainties and contingencies. Speaker 100:02:21The comments also today may include certain non GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP measures are included in the quarterly earnings release, which can be found on the Newpark website. And now with that behind me, I'd like to turn the call over to Newpark's President and CEO, Mr. Matthew Laggard. Matthew? Speaker 200:02:44Good morning, everyone. Our Q1 2023 continued the momentum from the Q4, marked by solid performance both financially and against our stated key initiatives. Our financial performance was highlighted by the strongest Q1 revenue level for our Industrial Solutions business in our history With $56,000,000 in revenue generating $20,000,000 in EBITDA, validating the strength of our offering and the robustness of market demand. Utilities and Industrial end markets contributed nearly 80% of our industrial segment revenues, and we are pleased with our progress to silicate by Newpark as a leader in the development of Within Fluids, Q1 was Highlighted by the strongest revenue quarter in our history in the EMEA region and continued solid performance in our Canadian business, along with ongoing progress in our efforts to improve the returns on invested capital. As expected, we saw strong cash flow generation from both businesses, which contributed to a reduction of debt and the return of capital to shareholders by the repurchase of a further 4% of our outstanding shares in the quarter. Speaker 200:03:53Consolidated revenues were $200,000,000 in the Q1, including $144,000,000 from Fluid Systems following the Q4 divestitures, While the industrial business contributed $56,000,000 Adjusted EBITDA was $21,000,000 for the quarter And adjusted EPS improved 28% sequentially to $0.09 per diluted share. Greg will cover more specifics The financial results in a few moments. However, before I hand the call over to him, I wanted to provide an update on our progress against the key priorities I laid out in our February call. We are pleased with the progress we've made in recent months, taking meaningful steps forward to reposition our company to organize around the strong growth opportunity and performance Our Industrial Solutions business, while continuing to monetize investments and reduce the cost and complexity within our Fluids business. As discussed in February, our first priority for 2023 is to drive operating cost optimization and efficiency improvements Systems division to be a more agile and capital light business, our efforts in recent months have been primarily focused on overhead cost reductions that were made possible by the divestitures. Speaker 200:05:11We have implemented several changes in recent weeks intended to reduce management layers and simplify our business support activities, particularly within our Fluids Systems and Corporate Office Organizations. On that note, I'd like to extend my sincere thanks to Chip Earl, who served as our General Counsel and Chief Compliance Officer for the last 5 years and recently left Newpark as a part of these cost reduction efforts. Chip was instrumental in building the strong governance and succession processes that enabled the decision for him to leave the company. We wish Chip every success going forward. In addition, we have recently shut down our U. Speaker 200:05:50S. Stimulation chemicals business, which was unable to demonstrate a path to profitability and we are also in the process of winding down operations in Chile as well as closing down several nonoperational and subscale entities throughout the EMEA region. While cost optimization efforts are ongoing, our company wide action translate to roughly $6,000,000 in annual recurring cost savings with the benefits being realized over the next few quarters. Looking ahead, we will continue to streamline our overheads both at a corporate and divisional level as we work to further simplify our business and move decision making closer to our key end markets, while also continuing to take decisive actions to monetize investments in underperforming businesses and evaluate our value enhancing strategic portfolio options. We believe strongly that simplifying our support cost structure to reflect the increasingly agile environments in which Newpark operates is critical to ensuring that our businesses can continue to deliver world class products and services and generate acceptable returns. Speaker 200:06:53Our second priority is to focus investment capital on the growth of our Specialty Rental and Services business. At At this point, I'm pleased to highlight that in the Q1, we invested nearly $7,000,000 in Industrial Solutions, primarily to expand our rental fleet in support of our growth in the utility We also began production of our new Durabase 800 Series mat, which fully integrates with our existing Durabase mat format And offers a nearly 15% reduction in weight, therefore driving further efficiency in transportation costs and associated carbon emissions without impacting product performance. As we roll this new product into our rental fleet in the coming months, we're excited to showcase Newpark once again as the industry innovator for heavy duty composite matting, Our focus on growing the Industrial Solutions segment is showing tangible results With Q1 trailing 12 month revenues now at $213,000,000 which reflects an 11% improvement from the full year 2022 revenues. Trailing 12 month adjusted EBITDA for Industrial Solutions increased to $74,000,000 a 12% improvement from our full year 2022 results. With a strong start to the year, we are confident that Industrial Solutions can deliver a mid to upper teens top line growth rate in 2023, while maintaining solid operating margins. Speaker 200:08:14Funding our continued expansion into the utilities and critical infrastructure markets remains our highest Capital and resource priority. And finally, our 3rd priority is a commitment to maintaining a strong balance sheet and using excess cash generation to reduce our debt and return value to our shareholders. During the Q1, we generated $23,000,000 of free cash flow, While the wind down of retained assets from last year's Gulf of Mexico divestitures generated a further $7,000,000 of cash. Our usage of the cash was balanced with $15,000,000 in debt reduction and $15,000,000 in share repurchases. I'd like to highlight that in addition to the 4,400,000 shares purchased in Q4 and the 3,400,000 shares that we repurchased in the 1st quarter, We have also repurchased 1,200,000 additional shares in April. Speaker 200:09:06Including the Q2 activity, we've now repurchased 10% of our outstanding shares over the past 6 months, while our net leverage stands below one turn of adjusted EBITDA. We believe that the combination of funding our Industrial Solutions growth plans, while balancing our debt reduction and returning value to shareholders via our share repurchase program Speaker 300:09:31And now, I'd like to Speaker 200:09:32hand the call over to Greg to provide more color on the specifics of the financials for the quarter. Speaker 300:09:36Greg? Thanks, Matthew, and good morning, everyone. I'll start with the specifics of the segment and consolidated financial results for the quarter before providing an update on our near term outlook. As Matthew touched on, the Q1 was highlighted by strong performance from Industrial Solutions, reflecting our continued success penetrating and expanding our presence in the multibillion dollar utility infrastructure market. As expected, following the seasonally strong Q4 result, total Industrial Solutions revenues pulled back modestly sequentially, but grew 58% year over year with the business posting 1st quarter revenues of $56,000,000 The segment's strongest Q1 revenue in our history. Speaker 300:10:22The Q1 once again benefited from the robust demand from utility infrastructure projects, impacting both rental and service and direct sales activity. Following the exceptionally strong Q4 project activity, Rental and service revenues pulled back somewhat to $36,000,000 in the Q1. The Q1 result reflects a 17% improvement year over year, driven by a combination of stronger pricing and increased volume following our fleet expansion investments during 2022. Product sales contributed $19,000,000 of revenues in the Q1 as the robust demand from the utility sector Has improved the quarterly stability in product sales volumes. As Matthew touched on, for the trailing 4 quarters, Industrial Solutions generated $213,000,000 of revenues, including $162,000,000 of revenue from Utilities and Industrial Markets and delivered $74,000,000 of adjusted EBITDA, a 35% adjusted EBITDA margin. Speaker 300:11:29Notably, we've seen the stability of the segment's quarterly revenue, profit and cash generation continuing to improve as we expand our presence within the utility In Fluid Systems, following the completion of the previously announced divestitures in the Q4, Our focus remains on strengthening our position within key markets where customers value our differentiated fluids offering, while continuing to streamline our business support and monetizing working capital in areas that no longer demonstrate a clear pathway to generating sufficient returns. During the Q1, we reduced our net capital employed in the Fluid Systems business by $22,000,000 largely from the ongoing wind down of assets remaining from the divestitures. The Fluids segment generated $144,000,000 of revenues adjusted EBITDA of $8,700,000 in the 1st quarter or a 6% adjusted EBITDA margin. Excluding the ex Calibar divestiture, revenues from North America land operations decreased 5% sequentially As declines in the U. S, including the effects of elevated downhole losses on a number of projects in the prior quarter, We're partially offset by strong seasonal growth in Canada. Speaker 300:12:49Revenues from international markets improved 2% on a sequential basis As the effect of our wind down of operations in Chile was more than offset by improvement in the EMEA region, which posted its strongest revenue quarter in our history. The Q1 segment operating margin from ongoing activities was 4.7%, down from 5.3% in the prior quarter, primarily reflecting the effects of lower revenue in U. S. Land. Notably, international pricing has improved in the past quarter, So the effects in Q1 were largely offset by a weaker product sales mix. Speaker 300:13:26As of the end of the Q1, the Fluids business has nearly 2 $20,000,000 of net working capital, consisting primarily of inventory and receivables, which represents roughly 85% of the segment's net capital employed. SG and A expenses increased on both a sequential and year over year basis, primarily reflecting the effects of nearly $1,000,000 1st quarter 2023 spending on strategic planning activities and an organizational design project. Interest expense declined sequentially driven by reduced debt levels, but increased year over year largely reflective of the sharp increase in borrowing rates Tax expense was $2,100,000 in the quarter, reflecting a 27% effective tax rate. Adjusted EPS improved 28% sequentially to $0.09 per diluted share in the Q1, reflecting both the stronger adjusted net income and the decline in our shares outstanding. In terms of cash flow, we had a solid start to the year, reflecting the benefits of our recent divestitures and the ongoing business transformation. Speaker 300:14:40Free cash flow for the quarter was $23,000,000 including operating cash flow of $29,000,000 while using $7,000,000 to fund capital investments, the vast majority of which supports the expansion of our rental fleet in the utility sector. As Matthew touched on, We used our cash generation in the quarter to fund a $15,000,000 reduction in debt and $15,000,000 of share repurchases. Reflecting the full impact of the additional April share purchases, our outstanding share count now stands at 85,000,000, down 10% from the 94,000,000 shares outstanding just 2 quarters ago. Now turning to our near term operational outlook. We remain encouraged by the strong fundamentals for utility infrastructure spending, which we expect will provide a multiyear tailwind For our Industrial Solutions growth, for Fluids, while we are seeing the effects of the lower natural gas prices impacting certain basins In the U. Speaker 300:15:41S. In the near term, we are encouraged by the mid and longer term outlook for the North America and EMEA markets As we continue to right size our cost structure, monetize working capital and focus our footprint on key markets that demonstrate an ability to generate a sufficient return. As we look specifically at the Q2 for Industrial Solutions, we expect rental and service revenues to improve sequentially, benefiting from the recent start up of several utility infrastructure projects. We also continue to see strength in the direct sales opportunity pipeline. Overall, we expect our Industrial Solutions segment will show modest year over year improvements in both revenues and EBITDA as compared to the Q2 of last year. Speaker 300:16:27For Fluids, we expect revenues to pull back roughly 15% sequentially, reflecting the typical seasonal effect of spring breakup in Canada And a lower contribution from the U. S, which is impacted both by market softness and our ongoing focus on price discipline. International revenues are expected to remain relatively stable benefiting from the continuing strength in customer activity. With respect to operating margins, while we expect EMEA to see margins improve sequentially and we begin to see additional benefits from our ongoing cost Reduction efforts. The impact of the lower revenues will more than offset these benefits resulting in an Operating margin likely in the low single digits prior to any restructuring charges. Speaker 300:17:15Corporate expense is expected to improve modestly in Q2 Prior to any restructuring charges, as we wrap up our strategic planning projects. Looking beyond Q2, we expect corporate office spending will decrease further, reflecting the completion of our strategic planning work and the effects of roughly $2,000,000 of annual cost savings from actions executed to date. As we continue to reduce our debt, we expect interest expense to reduce modestly, while the effective tax rate will likely remain below 30%, fairly in line with Q1. We expect strong free cash flow generation to continue in the 2nd quarter, primarily benefiting from the anticipated solid EBITDA generation as well as meaningful reductions in working capital, primarily in the Fluids business as we maintain our focus on improving returns. We expect our 2nd quarter cash generation will primarily be used to further reduce our debt and fund our growth investments in Industrial Solutions. Speaker 300:18:17And with that, I'd like to turn the call back over to Matthew for his concluding remarks. Speaker 200:18:22Thanks, Greg. I'm proud of our execution in the Q1 as we posted double digit growth in trailing 12 month revenue in the Industrial Solutions business, Fluids delivered record quarterly revenue in the EMEA region and another solid performance in Canada. We also continue to see progress in the transformation of our Fluids business into a more agile, capital light and simplified business, and we delivered strong free cash flow and improved value for our shareholders. Just like we did in 2022, we are making progress against each of our stated priorities for Industrial Solutions is our primary profit driver today and we expect that within the next few quarters, this business will also represent the majority of our invested capital, We believe the strong market fundamentals in the utility and critical infrastructure markets will support a double digit annual growth rate for our industrial business for years to come. We remain committed to prioritizing capital into our expansion in this division, further positioning Newpark as a scaled specialty rental and infrastructure services company, while reducing our presence and exposure within oil and gas end markets. Speaker 200:19:37We plan to continue strengthening the financial performance of our Fluids business, which has consistently been recognized by the industry as a technology and service leader in both conventional oil and gas and geothermal markets. Optimizing investment in areas of the business that do not have a clear pathway to meeting profitability requirements will remain a priority as we seek to improve returns on the capital deployed in this division. We believe that by continuing to take meaningful steps to strengthen the financial performance of our Fluids segment and reshape our balance sheet, we will be able to generate consistent free cash flow while improving our returns in that division, which in turn will provide us with more flexibility as we continue to execute our industrial growth plans and thoughtfully evaluate each of our strategic portfolio options. I'm enormously proud of our business units and our dedicated staff, and I remain optimistic about the year ahead. And with that, I'd like to close by thanking our shareholders for investing in us and thanking our employees for their hard work and their continued focus on compliance and safety. Speaker 200:20:40We'll now take your questions. Operator? Operator00:20:44Thank you, sir. We will now be conducting a question and answer One moment please while we poll for questions. And the first question comes from the line of Bill Dezellem with Tieton Capital. Please proceed with your question. Speaker 400:21:18Thank you. Let me start, if I could, with the Mats business. Last quarter, you said that pricing had improved for Mats, and I think you made reference to that again here in your opening remarks. Would you discuss that, the pricing dynamic that you're experiencing and how you see This playing out for the remainder of the year? Speaker 300:21:43Sure, Bill. It's Greg. So the pricing dynamic over the past year we've seen kind of steadily improve as we went through the back half of the year. I think that's really a reflection of kind of the robust Demand dynamics that you have in the marketplace, as we had noted in Q4, that was an extremely strong quarter in terms of It was very high utilization, had some call out work that was at particularly Higher prices that benefited. We did see that pullback somewhat, kind of modestly here as we went into Q1, which was very much what we expected. Speaker 300:22:20I think as you look at Speaker 400:22:28And Is there anything that you can do either with innovation with the Mats or with service that will move pricing up further? Or really would Should we anticipate any margin expansion that you would have to be a function of efficiencies as that business becomes larger? Speaker 200:22:48Yes. Bill, this is Matthew. Look, I think on the overall pricing, it's going to be more of a mix related issue in terms of Where we're putting the product down geographically and what the specifics of the particular contracts that or projects that we're working on are. Beyond that, I think you're spot on. I think it's going to be transportation efficiencies. Speaker 200:23:10Obviously, longer term as we introduce more of the lighter weight mat Into the fleet, we're going to get a lift in transportation efficiency from that. But I think When you think of pricing, it's going to be more project related in terms of that lever and then the rest will come from operational efficiency. Speaker 400:23:31Great. That's helpful. And then I think you called out that the UK Was a bit slower with the MAT revenues. Would you talk through that and the dynamics that you're seeing In that part of the world? Speaker 300:23:49Yes. The U. K. Has been actually relatively stable over the past few quarters. Yes, look at Q3, Q4 and into Q1, it's been a pretty consistent contributor. Speaker 300:24:00Now that is a fairly small piece Of the business, we're talking mid to upper single digits in terms of the percentage of revenue that comes from the UK. Speaker 400:24:12Got it. And I can either go back in the queue or I've got a couple more questions that I'll hit you with if you'll allow. Speaker 100:24:21Keep going. Keep Speaker 400:24:23going. Okay. So the fluids business, you had the facility exit costs. Does that tie back to the businesses that you referenced that you exited stimulation chemical and closing down Chile or is there something more to that? Speaker 300:24:44For the most part, the cost that we incurred in the Q1, you do have a certain piece of severance and such that went along with the organizational But the lion's share of it was actually Gulf of Mexico related. That's just kind of the follow on wind down Of that facility here following the Q4 divestiture transaction. Speaker 400:25:11Okay. Thank you. And so there was not a lot of cost to exit the either stimulation chemicals or Chile? Correct. All right. Speaker 400:25:21Thank you. And then I think that there is also a reference To efforts to flatten the fluids organization, would you talk through that please? Speaker 200:25:36Yes, sure, Bill. I'll address that one. I think as we look at the business and the way things are playing out here in terms Some of the layers that we've added on the corporate overhead structure to manage product lines, Stimulation being one of them that we're now kind of exiting not seeing a pathway to acceptable returns there and starting to think of the business more regionally Then with a kind of global oversight moving decision making closer to the customers and kind of looking at Potential efficiencies between divisions and eliminating layers, that's really where we're looking to drive that level of And really as you look at the simplifying the business, streamlining the overall operation that has that knock In fact, not only at kind of that division level, but then the corporate overhead as well, because you're just organizing differently. Speaker 400:26:34That's helpful. And then I believe that the corporate expenses included some Consulting costs, which were reasonably meaningful. In the past, when we have seen you all spend Larger amounts on consultants, there were some reasonably meaningful outcomes that came from that. Would you And not to have you disclosed too much too early, I mean, not that I would be opposed, but Would you please kind of walk us through what the dollars are being spent on And what outcomes that you're driving towards with those consulting efforts? Speaker 200:27:23Yes. Thanks, Bill. Yes, I think you're right. If you look at it sort of every 4 years roughly, if you go back in history, we have looked To kind of refresh and revalidate our strategy, and we hadn't done that since 2019. We took the decision to do another look at it here in Q1. Speaker 200:27:42What I will say is every dollar that was really just kind of looking at further growth opportunities on the industrial side of the business, part of it revalidating our Existing strategic assumptions part of it looking for adjacencies really looking at the exploration of core competencies beyond the rental and service business and how we may add Some additional revenue streams on that side of the business. So you're right, I'm not going to go into too much detail as to what that was on this call. It's fair to say we're going to continue to distill this work as we lock that into our longer term strategic growth plans. Speaker 400:28:21Great. Thank you. We'll look forward to hearing more about that later. And then finally, How much more are you anticipating that there will be in terms of restructuring cost, etcetera? Maybe not dollars as much as timing. Speaker 400:28:45Are we essentially done here in the second quarter? Or will there still be more to go after this? Speaker 300:28:54Yes, that's a tough one to answer. I will say that I think we the big pieces that we had in front of us were Completed by, I will say that it is an ongoing effort, as Matthew had described, and it is a function as Business evolves and changes and simplifies each step you take, you look at how what the knock on effects That is your overall overhead structure and is that another opportunity to simplify. I just kind of look at it simply when you look at our overall SG and A Run rate, we've we're calling it in a 12%, 12 plus percentage and that's a number that we'll continue to evaluate as the business How do we get that lower? But I don't necessarily have a firm target or an end date of when that is. Speaker 400:29:45Okay. That's helpful. I am going to kind of push a little further on that. So for example, Chile, That was not a region or a business line that I was familiar with. Are there more opportunities like that that maybe those of us on the outside haven't been particularly focused on That may have opportunities to streamline further that don't have a path to a solid ROI? Speaker 400:30:19Or are those really now few and far between? Speaker 300:30:26Look, I think I would say there is more opportunity. But when you look at this, where we find it particularly challenging to Reached the economic hurdles, our subscale markets, I think Shelley is a great example of that. It was a relatively small Market, it was generating in the area of $5,000,000 of revenues annually. And so we do have a large There are a number of those markets that are pretty small. And You remove one market like that and it doesn't necessarily change the picture, but the more steps you take in addressing those Markets that don't have a clear pathway to generating sufficient return and you shrink your footprint, okay, now you're talking about something that does have the knock on effect of your overheads and your So I'm not sure if that's helpful, but that's kind of how we're looking at it. Speaker 400:31:26Understood. I think think I understood anyhow. So what you're saying is if you were to take more actions like that, then there could be then a domino effect that, that would then Free up the opportunity to simplify the organization further up From some of those small markets? Speaker 300:31:46Yes, I think that's fair. Speaker 400:31:48Great. Thank you both for allowing all the questions. Speaker 100:31:53Great questions, Bill. This is Ken. As we always get emails prior to the call, here's one, Greg, Matthew, that came through said, much of the improvement you experienced during the quarter was due to strong demand and favorable Pricing in the utility and industrial sectors as well as your EMA markets in the fluids business. The question is, do you expect the fundamentals in those markets to continue Proving or at least hold at current levels and how sustainable is elevated spending we are seeing in the electric utilities infrastructure Thanks. Just to combine those. Speaker 200:32:29Yes. Look, on the first one, the fundamentals, I think we're continuing to be encouraged in the I'll start with the oil and gas first. In the EMEA region, I think we've worked hard on repricing a lot of those contracts We're getting the margin expansion that we needed off the back of the kind of supply chain inflation issues that we saw through last year. So off the back of that and with a stable kind of demand there, we see that sort of being sustained, which And then on the utility side, I think as we've touched on it before with a very stable historical Trying to spend in that space within the infrastructure investment and the Jobs Act, etcetera, giving more stimulus to that, We see that being sustained for years to come, which I think we also touched on Speaker 100:33:20in the call. Great. So about the so did you get that second one there with the sustainability? Yes. Where you wanted to hit it hard? Speaker 100:33:30Okay. Any other Additions for you guys? Oh, Bill's back. Bill, let's open the call back to Bill. He showed that. Speaker 200:33:39Come on ahead. Speaker 400:33:41I have one additional question relative to CapEx and just thinking about free cash flow this year. I think CapEx last year was $28,000,000 or somewhere in that neighborhood. How are you thinking about $23,000,000 on a full year basis? Speaker 300:33:58Overall, I would say that 2023 looks a lot like 20 22 in terms of the overall CapEx. As you see in Q1's results, 95% of our CapEx was in the Industrial Solutions business. So similar to what we've seen in recent years, I would You'll see the vast majority of that spend will be in Industrial Solutions and supporting that growth. Speaker 400:34:23Great. Thank you. Congratulations again on a great quarter. Speaker 300:34:29Thank you. Thanks, Bill. Appreciate it. Operator00:34:32At this time, there are no further questions. And I would like to hand the call back over to Greg Piantek for closing comments. Speaker 300:34:38All right. Thanks again for joining us Operator00:34:47Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a great rest of the day.Read morePowered by