CES Energy Solutions Corp.

Welcome to the CES Energy Solutions first quarter 2025 results conference call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you will press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator for pressing star, then 0. I would now like to turn the conference over to Tony Alcino, Chief Financial Officer. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for attending today's call. I'd like to note that in our commentary today, there will be forward-looking financial information and that our actual results may differ materially from the expected results due to various risk factors and assumptions. These risk factors and assumptions are summarized in our first quarter MD&A and press release dated May 8th, 2025. And in our annual information forum dated March 6th, 2025. In addition, certain financial measures that we will refer to today are not recognized under current general accepted accounting policies. And for a description and definition of these, please see our first quarter MD&A. At this time, I'd like to turn the call over to Ken Zinger, our president and CEO.

Thank you, Tony. Welcome, everyone, and thank you for joining us for our first quarter 2025 earnings call. On today's call, I will provide a brief summary of our impressive financial results released yesterday, followed by an update on capital allocation, and then our divisional updates for Canada and the U.S., as well as our outlook for the remainder of 2025. I will then pass the call over to Tony to provide a detailed financial update. We'll take questions, and then we will wrap up the call. As always, I will start my comments today by highlighting some of the major financial accomplishments we achieved in Q1 of 2025. These include all-time record quarterly revenue of $632.4 million, which was 7% higher than Q1 of last year. Quarterly EBITDA of $99.9 million. EBITDA margins of 15.8%. Total debt to trillion 12 months EBITDA was at 1.17 times at the end of Q1 2025, which was at the lower end of our targeted range of 1 to 1.5 times. Cash conversion cycle days in Q1 of 103 days, a significant achievement, and well below the lower end of our targeted range of 110 to 115 days. As of the end of Q1, we had repurchased 13.3 million shares of the 19.2 million shares, or approximately 70%, of the amount allowed under our current NCIB program. By way of update on our capital allocation plans, I'm happy to report the following. Consistent with our prior messaging, we intend to address the dividend once per year in Q4 or Q1 as evidenced by our 42.5% increase announced in March. This is possible due to our confidence in the cash generating capability of CES in the current market environment. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. This includes anticipated CapEx in 2025 of $80 million. We will continue to investigate strategic tuck-in acquisition opportunities into related business lines or geographies where we believe we can add value and grow returns. In the coming months, we intend to fully execute on our NCIB program of 19.2 million shares, of which approximately 2.9 shares remain to be purchased prior to its expiry on July 21st. At that time, we intend to once again renew the NCIB for another 10% of the float for the upcoming year. We will continue to target a debt level in the one to one and a half times debt to trailing 12 months EBITDA range. I'll now move on to summarize Q1 performance overall and by division. Today, our rig count in North America stands at 182 rigs out of the 687 currently listed as operating representing an industry-leading North American land market share of over 26.5%. In Q1, 64% of CES revenue was generated in the United States and 36% in Canada. In fact, our Canadian revenue set an all-time quarterly record. Of the overall corporate revenue, 54% was generated by the production chemical businesses and 46% by the drilling fluid businesses. As referenced on our year-end 2024 update call in March of this year, margins in Q1 were adversely affected by a variety of headwinds, the most notable being an influx of rigs all starting at the same time in early January, which caused noise in the numbers during the first half of Q1. Canadian dollar devaluation versus the U.S. dollar during Q4 and Q1, which affected cost of goods on our Canadian business purchases, which are almost entirely made in U.S. dollars. Tariff uncertainty, which has caused massive restructuring of our supply chain as we attempt to purchase and manufacture as much as possible within the same country as it is being sold. Counter tariff uncertainty on our Canadian businesses due to approximately 60% of our inputs being purchased in the United States. In Canada, the Canadian drilling fluids business continues to lead the WCSB in market share. Today, we are providing full service to 41 of the 120 jobs listed as underway in Canada, or a 34.2% market share. The active drilling rig count in Canada so far in 2025 has been trending consistently higher by approximately 5% year over year. We remain optimistic about the prospects for 2025 due to completion and full startup of infrastructure projects and their associated takeaway capacity. The impending startup of LNG Canada and the recent startup of Trans Mountain leave us very optimistic about the market conditions and the WCSB as a whole, Although not immune from low oil prices, the WCSB is still in a great position to weather any storm should it materialize. Purechem, our Canadian production chemical business, had another very strong quarter in Q1. Purechem continued its outsized growth versus the general activity increases in the company. All of the business lines within Purechem continued to grow as we take market share, win bids, and optimize formulations. The revenue and earnings from our primary business, production treating, continues to drive the growth in Canada as we consistently strive to deliver superior products and service combined with competitive market pricing. Although we believe there could be a pullback in completion activity in Canada during the second half of 2025, fracking remains a small contributor to our overall pure chem business. We continue to believe we are the clear number one provider of production chemistry to the Canadian conventional market and we are growing meaningfully in the heavy oil market as well. In the United States, AES, our drilling fluids group, is providing chemistries and service to 141 of the 567 rigs listed as active in the U.S. land market today for a continued number one market share of U.S. land rigs at around 25%. This once again marks the highest ever market share by AES at U.S. land market. The number of rigs drilling in the USA is down by just over 4% since we reported in March, versus our AES rig count, which is actually up by over 2%. We continue to look forward to using this tightening market as an opportunity to showcase our R&D and technology development capability, our manufacturing capability, and our procurement sophistication to continue to grow our market share at AES. We see these unique capabilities as key to enabling us to come out of any potential slowdown with an even stronger position in the market. Currently, we enjoy a basin-leading 107 rigs out of the 287 listed as working in the Permian Basin, or an all-time record 37.3%. The Permian industry rig count is down since March by approximately 9% overall. But in spite of this, our rig count is up by 7%. This speaks to the quality of our customer base, as well as the fact that operators continue to put more emphasis on performance, as well as stable strategic suppliers. Finally, AES Completion Services continues to operate at a much higher level than prior to our acquisition of them last year. Although still small within the AES division, this team is experiencing outsized growth as they continue to benefit from the AES infrastructure, people, and reputation. Our JCAM Catalyst division continues its trend of strong growth through these past few years and into 2025. The division is focused on further market penetration in all areas in which they operate. An outweighed share of the announced COPX spend for 2025 is allocated to supporting the growth we anticipate is coming later this year at JChem. We are also adding staff and key employees in this division due to this anticipated growth. It is important to note that JChem's business, like PureChem's, is almost entirely levish to production-related spending by EMPs and therefore not as sensitive to the same activity-related uncertainty that some upstream revenues can face. We look forward to JCAM continuing its march to being the number one provider of production chemistry and service to the United States land market. At this time, I would like to reiterate the confidence that we have in the resilience of our business model in the face of the current market uncertainty. Our business is counter-cyclical and requires minimal capex, especially during times of disruption in our industry. In this WTI and tariff environment, we have witnessed expressions of reduced activity levels and capital spending in earnest by some customers. Our current strategy is a continued cautious focus on growth, maintaining relationships with current clients, and continuing to pursue potential new clients and markets. As we have done in previous periods of industry weakness, we will be supporting operators in the weaker environment, then reaping the benefits of that support as conditions improve. Since our last call in March, the U.S.-Canadian dollar exchange rate has settled back into the range of where it held most of last year. This will alleviate the sudden cost of goods inflation we were feeling throughout Q1 and into Q2 in the Canadian businesses. Although this pressure impacted costs in Q1 and will again to some degree in Q2, it now appears it was transitory and should dissipate in the coming quarters. With regard to USA tariffs, and the suggested Canadian counter tariffs, these continue to have little to no direct effect on our business in their current state. However, we are continuing initiatives to rearrange supply chains in order to minimize potential exposures as much as possible. We are also reworking some internal production schedules in order to realign manufacturing to produce as many products as possible within the same country in which they are being sold. Although this is a month-long process, Significant progress has already been made and we will continue with this strategy until we have insulated the business as much as is possible from future tariff risks. I will state again for clarity that we continue to expect the direct impact from tariffs to be insignificant to our overall business. Finally, to address the macro uncertainty in the markets today, I just want to comment that our business has never been stronger or healthier than it is today and that we are uniquely positioned and strategically focused to not only weather this headwind but also to benefit from it. We intend to accomplish this by not only utilizing our NCIB to repurchase and cancel shares at these levels, but also through strategic execution of plans to expand our business with customers and markets we already are participating in, as well as some we have been working to penetrate. As always, I want to extend my appreciation to each and every one of our employees for their commitment to the business culture and success of CES. Due to the growth we are still experiencing in all parts of our business, we have increased our total number of employees at CES from 2,530 on January 1st to 2,613 at the end of the Q1. This growth is representative of the opportunities we are currently executing on, as well as the business we believe we have upcoming. Although there may be more uncertainty in the markets today, we continue to position ourselves to provide the same industry-leading support to our customers for the business we currently have direct line of sight on. With that, I'll pass the call to Tony for the financial update.