Newpark Resources, Inc.

Good morning. My name is Katie, and I will be your conference operator today. At this time, I would like to welcome everyone to the New Park Resources Second Quarter 2023 Earnings Conference Call. Today's call is being recorded and will be available for replay beginning at 1230 p.m. Eastern Standard Time. The recording can be accessed by dialing 800-934-7000. 3336 Domestic or 402-220-1148 International. All lines are currently muted and after the prepared remarks, there will be a live question and answer session. If you would like to ask a question during the Q&A segment, please press star one on your phone. If your question has been answered, you may remove yourself from the queue at any time by pressing star two. We do ask that you please pick up your handset for optimal sound quality. It is now my pleasure to turn the floor over to Rob Crote, Vice President of Investor Relations, Strategy, and Corporate Development. Please go ahead, sir.

Thank you, operator. On behalf of the entire team at New Park Resources, I'd like to welcome you to our second quarter 2023 results conference call. Leading the call today are Matthew Lanigan, our President and Chief Executive Officer, and Greg Piontek, our Chief Financial Officer. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statement 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 obligations to update our forward-looking statements. Our comments on today's calls 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 corporate website. There will be a replay of today's call, and it will be available by webcast within our investor relations section our website at newpark.com please note that the information disclosed on today's call is current as of august 2nd 2023 at the conclusion of our prepared remarks we'll open the line for questions with that i'd like to turn over the call to our president and ceo matthew lanigan thank you rob and welcome to everyone joining us on today's call

During the second quarter, we continue to execute on our business transformation strategy, demonstrating meaningful progress around our commercial growth, operational excellence, and capital allocation priorities, while continuing to build an industrial solutions platform equipped to drive long-term value creation for our shareholders. We delivered the second quarter net income of $1.7 million, or two cents per diluted share, on revenues of $183.3 million. with net income improving $9.5 million on the year-over-year basis in the period. Adjusted EBITDA increased 49% year-over-year to $19.8 million in the second quarter, while adjusted EBITDA margin increased nearly 400 basis points to 10.8% in the period. Adjusted EPS came in at $0.08 per diluted share, increasing from $0.01 per diluted share in the prior second quarter. We generated positive free cash flow and continued to monetize our fluids to vestiges in the second quarter, which contributed to a modest reduction of debt and the return of capital to shareholders through continued repurchases of our equity in the open market. The timing of working capital changes in Q2 also sets up well for a re-acceleration of free cash flow generation in Q3 from the collection of receivables. Let's now begin with the progress update on our commercial growth in the second quarter. Within our industrial solutions segment, our actions to drive sustained, profitable growth have yielded encouraging results. On a trailing 12-month basis through the second quarter, industrial solutions segment revenue and adjusted EBITDA have increased by 20% and 41%, respectively, driven by our continued penetration of utility projects, improved pricing, along with raw material sourcing and operating cost efficiencies. Importantly, we continue to have a significant pipeline of scheduled rental projects and product sales opportunities, which positions the business well heading into the second half of the year. Across the industrial solutions business, we've continued to prioritise investment to support the expansion of our higher margin specialty rental and service offering. During the second quarter, we invested $7 million to expand our rental fleet. Notably, roughly $2.5 million of this investment was related to the deployment of our new Durabase 800 series mat, which fully integrates with our existing Durabase mat format and offers a nearly 15% reduction in weight, driving further efficiency in transportation costs and associated carbon emissions without impacting product performance. We believe our continued organic investment in fleet will equip us to drive sustained double-digit annualized revenue growth as we capitalize on accelerating demand in the utilities and critical infrastructure markets we serve. Within our fluid segment, the second quarter was highlighted by yet another record performance from our Eastern Hemisphere team, which generated 65 million in revenue and surpassed the US in terms of fluid systems revenue contribution. At the same time, we've continued to take steps to harvest cash from the fluid segment, reducing our net capital employed by $20 million in the second quarter, with reductions coming primarily from the US. Moving now to a progress update on our recent efforts to drive operating cost optimization and efficiency improvements across our global footprint. As outlined in first quarter call, we've taken decisive actions to reduce layers of redundancy across our organization while building an increasingly durable, competitive business structure positioned for profitable growth throughout the cycle. In 2023, we've taken actions to remove $6 million in annualized fixed overhead costs across both corporate and fluids consistent with our cost optimization initiatives. In addition to these cost reduction efforts, we've also continued to closely examine areas of the business that do not meet the required return thresholds. During the second quarter, we incurred $5 million in charges related to the substantial completion of our exit of the Gulf of Mexico, as well as asset impairments related to the previously discussed decision to wind down our US Stimulations Chemicals business, along with the recent decision to shutter our dampier facility in Australia. We expect to incur additional exit-related costs as we complete the exit of the dampier facility in the second half of the year. Further, on June 20, we issued a press release announcing that NUPARC is exploring strategic alternatives for the long-term positioning of our fluid systems division. While we've made significant progress improving the operating performance of our fluids business during the last year, we believe that now is the appropriate time to explore synergistic opportunities for the business. We remain committed to exploring all viable options that are in the best interest of the fluid system business and our shareholders. We are confident that in pursuing this course of action, we will enhance the competitive positioning of the fluids business and unlock the inherent value in our two divisions for our shareholders, while also positioning our industrial solutions business for accelerated growth, transforming New Bark into a scaled industrial rental and service company. Should we successfully divest the fluids business, we believe this would create opportunity to further simplify our overhead structure and drive a meaningful SG&A reduction within the remaining organisation. As a reminder, we do not intend to disclose developments with respect to the progress of our evaluation of any strategic options until such a time as the Board of Directors has approved a transaction or we otherwise deem disclosure required or appropriate. Finally, turning to a discussion about capital allocation priorities. We remain committed to maintaining a conservative, well-capitalized balance sheet, one that prioritizes maintaining a conservative net leverage profile while providing for organic fleet investment to support growing demand within our critical utilities and infrastructure markets, and positioning the company for creative acquisitions to accelerate our growth plans together with return of capital through SARE repurchases. With that, I'll turn the call over to Greg for his prepared remarks.