Tetra Technologies, Inc.

Great. Thank you, Chloe. Good morning, and thank you for joining Tetra's second quarter 2025 earnings call. The speakers for today will be Brady Murphy, Chief Executive Officer, and Aligio Serrano, Chief Financial Officer. I'd like to remind you that this conference call may contain statements that are or may be deemed to be forward-looking, including projections, financial guidance, profitability, and estimated earnings. These statements are based on certain assumptions and analysis made by Tetra and are subject to several risks and uncertainties, many of which are beyond the company's control. Your caution that such statements are not guaranteed of future performance and that actual results may differ materially from those projected in the forward-looking statements. In addition, we may refer to EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow, net debt, net leverage ratio, liquidity, returns on net capital employed, or other non-GAAP financial measures. Please refer to our press release for reconciliations of non-GAAP to the GAAP measures. These reconciliations are not a substitute for financial information prepared in accordance with GAAP and should be considered within the context of our complete financial results for the period. We also encourage you to refer to our 10-Q that was filed yesterday. Before turning it over to Brady, I want to remind everyone that Tetra's executive team will be hosting an investor day on Thursday, September 25th, 2025 at the New York Stock Exchange. During the session, attendees will gain insights into the company's operational performance, innovative technologies, emerging growth initiatives, and financial prospects. The registration link can be found in the investor section of our website. Brady?

Thank you, Kurt. Good morning, everyone, and welcome to Tetra's second quarter 2025 earnings call. I'll summarize some highlights for the quarter and provide an update on our strategic initiatives before turning the call over to Aligio to provide more details on our segments and update on our cash flow and balance sheet. Our employees delivered an exceptional second quarter and, across our current business reporting segments, a record-setting adjusted EBITDA for the first six months of 2025. For the quarter, we achieved an adjusted EBITDA of $35.9 million with adjusted EBITDA margins of 20.6% and base business free cash flow of $37.4 million, all above our expectations. The $68.1 million adjusted EBITDA for the first six months of 2025 is a record for our current segments and $3.1 million above the upper range of guidance we provided in our first quarter 2025 earnings. This was largely driven by a record level of deep water activity for Tetra in the first half of 2025. including 25 deep water jobs in the first quarter alone and the completion of the three-well Neptune project in the second quarter. The team delivered an 11% sequential increase in revenue, which included another strong Northern Europe industrial chemical season. Year over year, total revenue was up 1%, but adjusted EBITDA increased by 5.2 million, or 17%. This performance was achieved despite a 16-month decline in the U.S. rig count and lower oil prices, which is due to overall market uncertainty. Compared to the first quarter of 2025, completion fluids and products adjusted EBITDA margins increased by 100 basis points to 36.7% from 35.7%, supported by the C.S. Neptune jobs previously mentioned. Year over year, industrial chemicals grew by 5.5% as it continues to outgrowth both U.S. and the global GDP. The long-term outlook for completion fluids and products business remains strong, driven by our solid deep water market positions in key areas such as Gulf of America, Brazil, and the North Sea, along with continued exceptional performance in our industrial chemicals business, reaching a new high for the 10th consecutive quarter. The strength of our market position is further demonstrated by a new multi-well, multi-year, ultra-deep water 20K completions award in the Gulf of America. Although the pace of deepwater well completions can vary quarter to quarter, the overall annual trend is upward, as shown by a projected 10-year revenue high for this segment in 2025. Revenue for water and flowback services remained flat compared to the first quarter and decreased 10% year over year, outperforming U.S. frac activity, which declined 14% quarter over quarter and 26% year over year. Despite declining U.S. land activity, our automated technology fleet, including automated sandstorm and automated drill-out, is effectively fully utilized and is being recognized for reducing manpower and removing employees from the well-site red zone. Although U.S. land drilling and completion activity has been declining, produced water volumes continue to increase and is expected to increase well into the future. Tetra achieved an important milestone for the quarter, recording our first revenue for Permian Basin-produced water desalination from our commercial grasslands pilot operation. Although a small contribution for the quarter, it represents the successful execution of our Tetra Oasis solution. Water and flow back adjusted EBITDA margins of 10% declined from 13% in the first quarter. However, this result included nearly $2 million of costs not expected to recur in the third quarter, such as inventory write-offs and trailing exit costs for a small sub-segment of the business. Adjusting for the non-recurring costs, adjusted EBITDA margins would have been flat from the first quarter. We'll continue to adjust our cost structure and close underperforming service lines in the U.S. onshore business to protect our margins and maximize free cash flow. Going forward, there remains some uncertainty in U.S. completion activity. But the demand for our automated technology, the focus on produced water treatment and recycling, and a favorable mix of supermajors and large independent operators will help improve margins for the rest of the year. Moving to our strategic growth initiatives, we continue to make significant progress throughout the second quarter. On the electrolyte front, energy storage power capacity is expected to surpass 45 gigawatts by 2025, representing a 76% increase from 2024 levels and growing by 25% annually over the next decade, according to the U.S. Energy Information Administration. This growth highlights the vital role that utility-scale energy storage will play in improving grid stability as the exponential rise in overall demand strains our systems. Zinc-based energy storage systems, such as EOS's Z3 utility-scale energy storage technology, are becoming the preferred choice for utility applications. As the only known U.S. manufacturer of zinc bromide, our U.S. directly supports the increased focus on domestic supply chain resilience and American-made energy solutions. We're seeing strong forecast projections from the U.S. for their energy storage electrolyte needs as they ramp up their automated production line. Once their automated line is finished, which they will expect to be in the fourth quarter of this year, we will see a material increase in electrolyte deliveries. In preparation, we completed the installation of our electrolyte bulk tanker loading system in West Memphis. This will enable us to shift from tote shipments to much larger volumes with less costly tanker deliveries, which we have already begun. Although our baseline electrolyte revenue in 2025 remains modest, 2026 is shaping up to be the first year with a real material impact on our business results. To meet the increasing demand for both EOS electrolyte and our bromine-based deepwater completion fluids, We remain on track with our Arkansas bromine processing facility. In the first half of 2025, we invested $22 million of the $52 million in free cash flow generated from our base business into the project. We plan to invest an additional $22 million in capital expenditures by year-end, which will greatly support site preparation, power infrastructure, and the construction of the bromine tower for plant operation. Since starting this project in 2024, we've invested $44 million in Arkansas to enable the plant to go online by 2027. As outlined in the definitive feasibility and economic analysis completed in 2024, the facility is expected to produce incremental revenues of $200 to $250 million, with adjusted EBITDA of $90 million to $115 million annually at full capacity. We continue to work closely with Standard Lithium and Equinor on their SWA lithium project, with significant project synergies, including potential upstream capex savings of $80 million from the $270 million capex in the DFS study. Moving on to produced water treatment for beneficial reuse, the U.S. oil and gas sector continues to face significant water management challenges. Riestead estimates the Permian Basin alone Over 6 billion barrels of produced water are discharged into saltwater disposal wells each year. Traditionally, this wastewater has been disposed of by injecting the underground, but this method is becoming increasingly unsustainable as downhole formation pressures continue rising. As a result, there is a growing sense of urgency among regulators and industry players to find a solution. In March, the Environmental Protection Agency announced it would review wastewater regulations for the oil and gas industry to help unleash American energy. And in June, the Texas governor signed a law, Texas House Bill 49, enabling and facilitating the industry to treat produced water for beneficial reuse. Following the commercial announcement of our OASIS TDS water desalination technology, we continue to see customer engagement from both operators and water midstream companies. These engagements include signed NDAs, followed by visits to our research center to gain insight into OASIS TDS end-to-end process and results. During the quarter, we engaged an engineering firm to begin designing our first Permian Basin commercial plant, which is planned for 25,000 barrels per day, with a design allowing for 25,000 barrel per day increments to enable scaling. One of the many benefits of the OASIS technology design is that it's well suited for scaling, a key aspect of industry requirements. A completed engineering package, which we expect by the middle of the fourth quarter, will facilitate in-depth commercial discussions with numerous customers requesting commercial engagements. Looking forward to the second half of 2025, although U.S. land activity is trending lower, our automation technology continues to gain traction and will help us improve margins. Second half deepwater activity will not be at the record levels that we've seen in the first half, but still strong enough to project a 10-year high for the full year of 2025. We're maintaining a healthy pipeline of CS Neptune projects worldwide, but given their significance to our financials, we will wait until a project is awarded with a confirmed date before making any announcements. Heading into 2026, we'll have the benefit of a full year of our Brazil Deepwater Award, the recently awarded 20K Golf of America Award, and a projected material ramp-up in EOSA electrolyte deliveries. For the four-year 25, we expect gap net income before taxes to be between $21 million and $34 million, adjusted EBITDA between $100 million to $110 million, and revenue to be between $610 million and $630 million. These guidance ranges are subject to risks associated with scheduled delays for completion fluid projects, hurricane disruptions in the Gulf of America, and changes to oil and gas company spending plans. We have a strong free cash flow generating business that should enable us to navigate through any near-term macro uncertainty and position the company to capitalize on our emerging growth opportunities for the coming years. Now I'll turn it over to Alicia.

Thank you, Brady. Good morning, everybody. Second quarter free cash flow from the base business was very strong as we generated $37 million of cash. From the base business, we generated $1 million more in cash than we did EBITDA. In the first six months of the year, we've generated $53 million of base business free cash flow compared to $68 million of adjusted EBITDA. This ratio of free cash flow to adjusted EBITDA reflects the quality of the earnings and the focus we have on managing working capital and minimizing capital expenditures to be only on those projects with quick paybacks. We remain on track to deliver in excess of $50 million of free cash flow from the base business. We have said that our objective is to bring the Arkansas bromine project online without stressing Tetra's balance sheet. Our objective is to keep Tetra's leverage ratio below two times EBITDA. Out of the $52 million of base business free cash flow generated in the first step of the year, we invested $22 million into Arkansas in the first six months of the year. We increased our cash balance by $32 million and in the process improved our net leverage ratio to 1.2 times trailing 12 months EBITDA. Our objective remains to have the bromine project online by the end of 2027 to keep up with the growing demand for our zinc bromide battery electrolyte and to keep up with the strong demand for deepwater offshore projects. Any incremental capital required above base business free cash flow will be at the project level and will not be diluted to tetra shareholders. We are of the opinion that the growth opportunities we have with water desalination and battery electrolyte are not yet reflected in our share price. And as such, we will take no actions to dilute our Tetra shareholders. To fund the desalination projects that Brady mentioned, we are working toward a licensed model that materially reduces the need for Tetra to invest any material amounts of capital expenditures. If some customers prefer the sharing of capital instead of a licensed model, we'll also pursue non-dilutive capital at the project level. Liquidity as of yesterday was approximately $219 million, up $15 million from the end of June. Liquidity includes a $75 million delay draw feature that is available to Tetra for the bromine project. Let me close out by summarizing what I believe the key items everybody should focus upon. First, our base business continues to perform. Our completion fluid and calcium chloride business is achieving record highs and generating significant free cash flow. Our onshore water and flow back business remains in the double-digit EBITDA margins, despite the continued decline in fracking activity. Our objective is cash generation. Second, the balance sheet keeps getting stronger, giving us the capital necessary to fund our bromine project. Third, we continue to make very measured and methodical progress toward the growth initiatives. We are focused on getting it right and not launching anything until we have all the engineering support in place customer acceptance, and our economics fully fleshed out. If it takes a bit longer, that's fine, as our focus is getting it right and not getting it faster than we believe to be appropriate. And lastly, we encourage you to visit with us on September 25th at the New York Stock Exchange for our Investor Day, or join us on our webcast. We plan on laying out our financial targets for our growth initiatives and lay out what Tetra will look like when these technologies have been deployed to the market. Brady, let me turn it back to you for some closing comments before we open it up to questions.