Newpark Resources Inc (NYSE:NR). reported a significant decline in its third-quarter revenue, impacted by seasonal slowdowns and maintenance issues. Despite these challenges, the company remains optimistic about future growth, driven by strong demand in the utility sector and strategic transitions.
Key Takeaways
- Third-quarter revenue fell by 23% year-over-year to $44 million.
- Full-year revenue and adjusted EBITDA guidance have been lowered.
- The company is transitioning to focus exclusively on site access solutions.
- Newpark completed the divestiture of its Fluids business.
- October rental volume reached a new monthly record.
Company Performance
Newpark Resources experienced a challenging third quarter, with a 23% drop in revenue compared to the previous year. The decline was attributed to a seasonal slowdown and unplanned maintenance at a manufacturing facility. Despite these setbacks, the company is restructuring to become a pure-play specialty rental business, focusing on site access solutions. This strategic shift positions Newpark to capitalize on strong secular trends in electricity infrastructure and onshoring.
Financial Highlights
- Revenue: $44 million, a 23% decline year-over-year
- Adjusted EBITDA: $7.5 million, down by $4.5 million from the previous year
- Full-year revenue guidance: Reduced to $217-223 million
- Full-year adjusted EBITDA guidance: Reduced to $77-81 million
Company Outlook
Looking ahead, Newpark Resources is optimistic about its fourth-quarter rental revenues, which are expected to be strong. The company recorded a new monthly high in rental volume in October and continues to invest in fleet expansion to meet market demand. Additionally, Newpark is exploring potential strategic acquisitions within the access solutions market to further enhance its growth prospects.
Executive Commentary
"We are building a leaner, more efficient standalone platform," said Matthew Lanigan, CEO. This comment underscores the company's efforts to streamline operations and focus on its core business. Lanigan also noted, "The secular megatrends underpinning demand for our solutions remain significant," highlighting the ongoing opportunities in infrastructure spending.
Q&A
During the earnings call, analysts inquired about the impact of project shifts in the third quarter, which affected approximately $1 million in revenues. The company also addressed questions about the political landscape, viewing it as neutral to positive for business. Additionally, Newpark is preparing for a potential NYSE industry reclassification, which could influence its market positioning.
Risks and Challenges
- Continued revenue decline due to seasonal factors and maintenance issues.
- Execution risk associated with the transition to a pure-play specialty rental business.
- Potential delays in project start dates, impacting revenue recognition.
- Macroeconomic pressures that could affect infrastructure spending.
- Competition from other companies in the site access solutions market.
Newpark Resources is navigating a challenging environment with strategic shifts aimed at positioning the company for future growth. While the recent revenue decline highlights short-term challenges, the company's focus on site access solutions and strong market trends offer potential for long-term success.
Full transcript - Newpark Resources Inc (NR) Q3 2024:
Jamie, Conference Operator: Good morning. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Newpark Resources Third Quarter 2024 Earnings Conference Call. Today's call is being recorded and will be available for replay beginning at 12:30 p. M.
Eastern Standard Time. The recording can be accessed by dialing 87710-5302
: for
Jamie, Conference Operator: domestic or 4022201605 for international. All lines are currently muted and after the prepared remarks, there will be a live question and answer session. It is now my pleasure to turn the floor over to Greg Biontek, Chief Finance Officer for Newpark Resources. Please go ahead.
Greg Biontek, Chief Financial Officer, Newpark Resources: Thank you, operator. I'd like to welcome everyone to the Newpark Resources Q3 2024 Conference Call. Joining me today is Matthew Lanigan, our President and Chief Executive Officer. Before handing over to Matthew, I'd like to highlight that today's discussion contains forward looking statements regarding future business and financial expectations. Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC.
Except as required by law, we undertake no obligation to update our forward looking statements. Our comments on today's call may 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 the Investor Relations section of our website at newpark.com. Please note that the information disclosed on today's call is current as of November 8, 2024.
At the conclusion of our prepared remarks, we will open the line for questions. And with that, I'd like to turn the call over to our President and CEO, Matthew Lanigan.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Thanks, Greg, and welcome to everyone joining us on today's call. I'll begin with an overview of our Q3 performance followed by an outlook for our Q4 and an update on our strategic priorities entering 2025. The 3rd quarter came in below our expectations as two notable factors combined to impact our results after a very strong second quarter. While Q3 generally tends to be a seasonally slower period of the year for our business, this year was more pronounced as a few key customers shifted their priorities during the quarter from scheduled transmission projects to renewable generation related projects. This, combined with unusually dry weather conditions in the southern region, limited the need for matting on individual projects.
As a result, lower rental project activity, which was particularly acute across the southern markets, together with a softer oil and gas customer activity, negatively impacted rental revenues in the quarter. The quarter was also impacted by an unplanned maintenance event at our Louisiana manufacturing facility that resulted in one of our production lines being offline for approximately 6 weeks during the period. This timeline included approximately 2 weeks of delays due to logistical challenges for our 3rd party technicians caused by Hurricane Francine. The facility has been operating at normal production levels since the start of the 4th quarter. In total, the seasonal pullback in rental revenues and 6 weeks of facility maintenance of facility maintenance impacted Q3 adjusted EBITDA by nearly $5,000,000 The impact of the facility maintenance included both unabsorbed fixed costs and incremental maintenance expenditures during the 6 week shutdown period.
As a result, our total 3rd quarter revenue came in at $44,000,000 a decline of 23% versus the year ago period as rental, service and product sales revenues all declined. Including the effects of the pronounced seasonal softness in facility maintenance, our adjusted EBITDA decreased to $7,500,000 a decline of $4,500,000 versus the year ago period. While our 3rd quarter was below expectations, it's worth highlighting that we experienced a sharp rebound in late September October, reflecting a strong resumption of activity combined with a modest lift from emergency response customers supporting hurricane recovery efforts, primarily in Florida, Georgia and North Carolina. We achieved a record level of rental volume in October, positioning us for a strong finish to 2024. Now let's turn to our outlook for 2025.
In the weeks since completing the Fluids sale, we have worked diligently on aligning the final pieces of our transformation from an oilfield services business to a vertically integrated specialty rental and services business servicing critical infrastructure markets. By narrowing our strategic focus exclusively to site access solutions, we're migrating towards a simpler, higher margin, more profitable business profile, one that we believe benefit both our customers and shareholders alike. To that end, immediately following the sale, we've worked with the New York Stock Exchange to provide the necessary documentation to request the appropriate industry reclassification of the company. Based on the indicated time line, we are hopeful to have that process concluded during the Q4. At the same time, we have moved through the preparations to rebrand the company, a process that we anticipate will align with the timing of our industry reclassification.
We're also taking steps to optimize our overhead structure, removing duplication and costs that are no longer required post the fluids divestiture. A key piece of our optimization effort is the retirement of our heavy cost legacy IT systems. And while we were very pleased with the team's progress in moving through the planning and design phases, we recognize that these projects take time and will likely be substantially completed with benefits being realized in early 2026. And finally, we're also pursuing options to enhance the value of our Katy office facility. Over the past few years, we have been working to transform this facility to a multi tenant model, which has reduced our net facility costs and also helps provide optionality through a potential sale of the asset, recognizing that proceeds from the sale could be better deployed to fund our growth plan.
We are firmly committed to reviewing all aspects of our structure and associated costs to ensure we are aligning the future business for growth and operational efficiency. As we continue to navigate the final stages of separation and solidify our go forward operating structure, we anticipate achieving a $5,000,000 cost savings by early 2026, with SG and A as a percentage of revenue reaching a mid teens range, with further improvement possible as we grow and leverage our streamlined cost structure. In summary, with the sale of fluids behind us, our entire organization is now solely focused on the significant market opportunity we see in site access solutions. We are building a leaner, more efficient standalone platform, one well equipped for both organic and inorganic growth. The secular megatrends underpinning demand for our solutions remain significant from multibillion dollar investment programs focused on improving the nation's aging electricity infrastructure to the exponential growth in advanced computing data centers to the combined on shoring of entire industry segments.
It's an exciting time for our business and our industry, one we intend to capitalize on. And with that, I'll turn the call over to Greg for his prepared remarks.
Greg Biontek, Chief Financial Officer, Newpark Resources: Thanks, Matthew. Building on Matthew's commentary, I'll begin with a discussion of our Q3 results, followed by an update on our outlook for the remainder of 2024 and capital allocation priorities. As highlighted in yesterday's press release, with the sale of Fluid Systems completed, our historical financial statements have been restated to reflect the reclassification of Fluid Systems to discontinued operations, and all of my commentary will relate to our continuing operations only. As Matthew touched on, our 3rd quarter revenues came in softer than expected as a pronounced seasonal slowdown in the utility sector activity in the southern region and a pullback in oil and gas led to a decline in rental revenues. Total (EPA:TTEF) rental and service revenues declined 11% sequentially and 15% year over year to $32,000,000 in the 3rd quarter.
Revenues from product sales also pulled back from the record Q2 results coming in at $12,000,000 for the 3rd quarter. On a year to date basis, as a result of the headwind of the more pronounced seasonality in Q3, rental revenues are up 1% over prior year, reflecting increased rental volume offset by a modest reduction in pricing. Service revenues were down 21%, while revenues from product sales are up 20% over the prior year. As discussed last quarter, the lower service revenues are attributable to lower service intensity on rental projects in 2024 as compared to last year. By industry, the utility sector contributed 60% of our year to date revenues, including nearly 55% of rental and service revenues and roughly 2 thirds of our product sales.
In terms of Industrial Solutions operating income, our 3rd quarter was unfavorably impacted by the unplanned downtime event at our manufacturing facility, which provided an estimated $1,300,000 unfavorable impact on operating income income in the quarter, reflecting a combination of unabsorbed fixed costs and incremental maintenance expenditures. Consequently, our 3rd quarter adjusted EBITDA margin declined to 28.3% in the 3rd quarter. SG and A expenses were $11,000,000 in the 3rd quarter, reflecting a 14% sequential reduction and a 21% year over year reduction. The sequential and year over year improvements in SG and A are primarily attributable to the effects of lower performance based incentives and other personnel costs. Interest expense was $900,000 for the 3rd quarter, relatively in line with prior quarter and prior year.
Income taxes provided a $14,000,000 benefit in the 3rd quarter, which included a $14,600,000 benefit from the release of valuation allowances on U. S. Net operating losses and other tax credit carry forwards following the sale of Fluid Systems. Adjusted EPS from continuing operations was breakeven in the 3rd quarter compared to $0.10 in the 2nd quarter and $0.03 in the Q3 of last year. Operating cash flow was $2,000,000 in the 3rd quarter, unfavorably impacted by growth in fluids working capital prior to the divestiture, which we expect to recover through the post closing true up process.
Net CapEx used $8,000,000 in the quarter, primarily reflecting investments in matting fleet expansion in response to the recent surge in rental demand. With the completion of the fluids divestiture, we ended the Q3 with total cash of $43,000,000 and total debt of $14,000,000 for a net cash position of $29,000,000 Additionally, we have $56,000,000 of availability under our U. S. ABL facility, which currently has no outstanding borrowings. Further, it's worth noting that as of the end of the Q3, we have more than $15,000,000 of net assets related to the fluid sale, including the net working capital true up in a $5,000,000 interest bearing note receivable.
We also have approximately $28,000,000 in U. S. Federal net operating loss and other credit carry forwards that are available to offset future U. S. Federal cash tax obligation.
And as Matthew touched on, our corporate office asset base includes our Katy, Texas administration building, which is now largely occupied by 3rd party tenants and carries a net book value of approximately $23,000,000 Now turning to our business outlook. Despite the pronounced seasonal slowdown in Q3, we remain highly constructive on the near term and longer term outlook for utilities and critical infrastructure spending. As we exited September, we experienced a swift seasonal rebound in customer activity to more typical levels, particularly within the utility sector. Further, as we progress through October, we experienced additional demand from hurricane related infrastructure projects in the Southeast. As a result, our U.
S. Rental volume set a new monthly record in October. With the strong start to Q4 and current backlog of projects, we expect very strong 4th quarter rental revenues. We are also encouraged by the level of quoting activity for product sales as certain customers seek to exhaust remaining capital budgets for the year. While we are still fairly early in the quarter, we are confident that we'll see a sequential increase in product sales in Q4.
As referenced earlier, our Q3 performance was impacted by a combination of customer resource allocation changes, unfavorable weather and the extended downtime at our Louisiana plant. Given the combined impact of the headwinds as well as the lower service intensity throughout the year, we're reducing our full year revenue guidance from a range of $230,000,000 to $240,000,000 to a range of $217,000,000 to $223,000,000 dollars while full year Industrial Solutions adjusted EBITDA is revised from a range of $80,000,000 to $85,000,000 to a range of $77,000,000 to 81,000,000 Regarding our corporate office, we expect our near term operating expenses will modestly increase relative to the 3rd quarter levels as we absorb certain fixed infrastructure costs that were historically carried by fluids and continue to fulfill our service obligations to the divested business through our shared service infrastructure. Beyond Q4, we expect our SG and A costs will steadily decline throughout 2025 as we seek to optimize all facets of our overhead structure. In terms of capital allocation priorities, we continue to prioritize investments into the organic growth of our rental fleet. We expect to continue to pace our rental fleet capital investments based upon our longer term view of the rental market penetration and growth opportunities.
Beyond our organic investments in the rental fleet, we expect our free cash generation in the near term will be primarily used to build liquidity or through a return of capital to shareholders through a programmatic share repurchase program. It's also worth noting that in the coming months, we expect to evaluate alternative revolving credit facilities that can provide us with greater liquidity to support our strategic growth plan. And with that, I'd like to turn the call back over to Matthew for his concluding remarks.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Thanks, Greg. Despite the unexpected challenges in Q3, we are highly encouraged by the strong start to the Q4 and the robust outlook for our customers entering 2025. As previously highlighted, we have continued to invest in our commercial sales force with a targeted focus on key growth regions, markets and accounts that best position us to accelerate our organic growth strategy. We've seen early success with our expanded sales coverage model while making solid inroads with previously underserved opportunities. During the Q3, we conducted an in-depth customer survey that collected both qualitative and quantitative feedback on their business outlook.
Encouragingly, respondents highlighted an improving outlook and an expectation for increases in investment and activity moving into 2025. As market conditions further strengthen, we're confident that Newpark is well positioned to capitalize on the demand, particularly as we demonstrate the unique value proposition of our solutions offering. As we move ahead, our priorities remain unchanged. First is the execution of our plans to grow our leading pure play specialty rental business through organic expansion of our presence, while exploring inorganic opportunities that help us to deliver more value and increase revenue density with our growing customer base. 2nd, we'll drive further efficiency improvements across all corners of the organization, positioning us to realize improved operating leverage.
Finally, we remain committed to a returns focused capital allocation strategy that includes a combination of internal investment, inorganic growth and return of capital to our shareholders. With total liquidity approaching $100,000,000 we are well positioned to advance our capital allocation priorities. We have $50,000,000 of share repurchase authorization to support our return of capital program, which we are looking to resume now that the fluid sales process has been completed. In closing, I want to thank our shareholders for their ongoing support, our employees for their dedication to the business, including their commitment to safety and compliance and our customers for their ongoing partnerships. And with that, we'll open the call for questions.
Jamie, Conference Operator: Thank you. We'll go first to Aaron Spyjala with Craig Hallum. Please go ahead.
Aaron Spyjala, Analyst, Craig Hallum: Yes. Good morning, Matthew and Greg. Thanks for taking the questions. Maybe first for me on the project shifts. Can you just maybe quantify the impact of those?
And then how long does that last until those projects come back? And then kind of secondarily, just can you talk about the guidance kind of for the Q4, just some of the puts and takes there and then just overall confidence in that outlook? Sounds like you're pretty confident.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. Thanks, Aaron. Hey, on the projects, yes, I guess the best way to put them into context is they were shifted. For the most part, those projects were shifted from Q3 to a future quarter. So I think impact on the quarter in the vicinity of $1,000,000 or so within the quarter, thereabouts.
And we as of this point, we haven't got any line of sight to when they're back on the slate to be carried out. But as based on the communications with the customer, there's the projects that need to be done at some point in the future. So hopefully, that answers the first question for you. On 4th quarter, I think as Greg and I both touched on, the spring back at the end of Q3 was strong. And so we are very, very optimistic that, that will continue through the quarter and support our confidence there.
Product sales is always a bit of a swing, but what we've seen here is encouraging to date. So that's really underpinning why we think Q3 was an anomaly for the year and that we'll be back on track for Q4. If you could if I break it down and look at it, the things we've been focusing on, we've been focusing on rental growth. We feel good that at the end of the year, we'll demonstrate that by the end of the year. We feel good that our product sales will also demonstrate good growth year over year.
And the thing that we're being focused on is looking at the profitability of our service work. We touched on that last quarter. We don't want to do a lot of activity that doesn't yield a lot for us. And I think that's where you'll see the majority of the pullback in top line, but not really impacting the bottom line as much because of the product mix and the fact we've been very focused on our operational efficiency here to make up for it, which is why disappointing to revise the EBITDA guidance down slightly, but we've been managing that as actively as we can. And it's really the plant there that we don't feel like we can make up given the length of time left here in the calendar year.
Aaron Spyjala, Analyst, Craig Hallum: Right. Okay. Yes. Thanks for the color there. And then yes, on the plant, can you just talk about what work ended up being done there?
Is there any other planned maintenance to be aware of? And then just on kind of CapEx and capacity, can you just kind of remind us what capacity looks like and how you might be thinking about 2025 CapEx given the growth outlook?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. Look, I'll start on the plan for you. Effectively, what happened is it was on our original plant, which has been around for a while now. We had known that our heating system or our hot oil system was in need of some maintenance. Unfortunately, that and had planned that in future years.
And so unfortunately, that came to the 4 in the quarter. We made the call at that point that we would not only repair the system but upgrade it to the quality that we had planned on upgrading it to in future years. And so we feel good now that we have not only repaired the issue, but increased reliability through a better design of that system moving forward. As it stands now, that was in the future year upgrade maintenance upgrade there that's now off the table. We've taken care of that this year.
So feeling good about that side of the plant. And as we touched on in the call, when we got it back up and running, it's been running well and running smoothly ever since. So it seems like that worked.
Greg Biontek, Chief Financial Officer, Newpark Resources: Yes, we did take the opportunity with that Q3 downtime to pull forward some other things that were in there for Q4. So that does help with the Q4 production schedule somewhat. In terms of the utilization of the plant's running, we're back here since the start of the Q4. We're back at the level that we had been running throughout the full year. We don't disclose our specifics of our manufacturing capacity, but our production level is something below full capacity.
Aaron Spyjala, Analyst, Craig Hallum: Understood. Yes. And then just any kind of early read on CapEx for 2025?
Greg Biontek, Chief Financial Officer, Newpark Resources: I think much like this year, it's going to be all about the growth in the fleet. Here we had in the Q3, obviously, with a lower utilization, we had subdued additions there as we went through much the quarter, but we had additions late in the quarter, which was really the surge in the demand that we saw in Q4. So I think we'll continue with that. I think overall, I would say an expectation as I look out a year is not much different than what we had in 2024. So obviously, as we get into our next year planning and finalize, I would expect we would have a more concise estimate for 2025 in
Sameer Joshi, Analyst, H.C. Wainwright: next quarter's call.
Aaron Spyjala, Analyst, Craig Hallum: Understood. And then just maybe last for me. You've talked about kind of the pipeline growth in the past, mid to high teens. Can you just maybe give us an update there, just considering the fleet expansions and what the outlook sounds like as well?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. Aaron, I think encouragingly, we're still seeing the same trends. I think quoting activity is strong. I think we've touched on it before. We are seeing some slight elongation in that pipeline between quote and actual project start date, which I think is consistent with what we've been seeing and discussing in prior quarters.
But in terms of net volume, it's still encouraging the level of growth that we're seeing quarter over quarter, year over year.
Aaron Spyjala, Analyst, Craig Hallum: All right. Thanks for taking the questions. I'll turn it over. Thanks, Aaron.
Jamie, Conference Operator: We'll hear next from Sameer Joshi with H. C. Wainwright. Please go ahead.
Sameer Joshi, Analyst, H.C. Wainwright: Hey, good morning, Matthew. Good morning, Greg. Just one quick question on the shift. Okay. Will you give some color on what the move towards renewable generation projects from transmission projects entails?
Right? Is this a permanent move? Are these projects lost? I know you said that they were postponed, but just would like to understand what it means.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes, Sameer. When we went into the quarter, we were on the understanding that the yen customer is going to be prioritizing some transmission work, which is what we put in our forecast during the quarter. During the quarter, they looked at their resourcing and capital allocation and made an election to prioritize the completion or substantial completion of some solar renewable projects that they were working on, which shifted that capital and labor from the transmission project. So that's obviously the decision they chose to make during the quarter. But again, I would just reiterate that those projects were mutually exclusive and that the transmission work is still expected to go ahead.
And as I touched on in responding to Aaron's (NYSE:AAN) question, at this point, they haven't given us a definitive start date on that, but we know that's the project work that needs to be done.
Sameer Joshi, Analyst, H.C. Wainwright: Understood. So they were just your customers were just reallocating priorities at this point. They will come back to this work later.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: That's our understanding.
Greg Biontek, Chief Financial Officer, Newpark Resources: And I will say, while it was more pronounced this quarter, the shifting of projects that's not an unusual element. It's something that we regularly see with our customers as they're looking at their supply chain, their resources, etcetera, and they'll shift their scheduling around.
Sameer Joshi, Analyst, H.C. Wainwright: Understood. And then just on the $18,000,000 in receivables or notes, I should say. Is there a milestone related repayment or is this is there a certain cadence for this prepayment? Or is this like a billet prepayment at some future point?
Greg Biontek, Chief Financial Officer, Newpark Resources: Yes. The majority of it actually relates to the working capital, the final working capital conveyed at closing and that's a process that now gets finalized here in the next few months. And so the majority of it you'd think would be resolved here, call it, over the next quarter. Beyond that, there is the $5,000,000 note receivable, interest bearing note receivable that's in there. It is a longer term and that's but they have the ability to pay
Sameer Joshi, Analyst, H.C. Wainwright: it off sooner than that. Understood. And I think you laid out your capital allocation or yes, including organic growth and repurchase. You did also touch on strategic growth. Are you do you have a pipeline of potential candidates for acquisition?
And what areas are you targeting, like just a qualitative lay of the land there would help?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. Sameer, I'm not probably going to jump into a lot of detail here. Yes, there's a pipeline of things that we're working on. I will say nothing that I would describe as imminent. So I think it's important to clarify that as we build out our thesis of geographic growth priorities, if you will.
And again, we're really focused on consolidating ourselves as an access provider here. So you should expect that if and when anything happens there, it will be within that kind of swim lane.
Sameer Joshi, Analyst, H.C. Wainwright: Understood. And just one sort of accounting balance sheet question. The PP and E number has not changed much. Is this after the divestiture? Just wanted to understand, will this be updated or like how what was included in the PP and E?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: No, I
Greg Biontek, Chief Financial Officer, Newpark Resources: think that's more so a reflection that the PP and E really resides on the Industrial Solutions business. I mean when you look at the large components of we have our manufacturing facility, we have our rental fleet. I talked about the Katy facility and then you had your field equipment. The fluids business did not have a large PP and E component.
Sameer Joshi, Analyst, H.C. Wainwright: Understood. Thanks for that clarification. I'll turn it over. Thanks.
Jamie, Conference Operator: We'll hear next from Gerry Sweeney with ROTH Capital. Please go ahead.
: Good morning, Matt and Greg. Thanks for taking my call.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Hey, Gerry. I want to start with the easiest, shortest question first. Plant downtime
: for repair work, sounds as though that didn't impact revenue, but it was just unabsorbed overhead. Is that
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: very? Unabsorbed overhead and repair costs, yes.
Greg Biontek, Chief Financial Officer, Newpark Resources: Yes, you had some maintenance in there, yes, maintenance expenses, but yes, didn't impact top line.
: Got it. That's right. Getting into some meter questions. So obviously political landscape has changed this week on a bigger level than maybe connecting some solar related projects. Some of those may be in crosshairs with funding, etcetera.
That's what we're hearing, but I'm just curious if you had some puts and takes, positives, negatives on on what's going on?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. I mean, we probably know the same as you on that one, Jerry. I think the macro trend, I think, is bipartisan in terms of needing to upgrade their reliability and expand the electrical grid. Renewables have always been on the economic spectrum a little more touchy there. I think what's interesting is most of those projects are in red states.
And so to the extent that politics is going to play a role, there'll obviously be some sort of adjudication going on there. Look, we see this as a net neutral to positive on a political side at this point.
: That's what I was leaning towards, but I was just curious certainly on that front. And then here, I apologize, it's been a long week.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Also maybe just road map, you kind of touched upon it,
: the fluids business, the divestiture, that was a huge undertaking. As we go forward, it's reinvestment organic growth. I think we have some rebranding potentially and then maybe some MSCI code changes. Just roadmap, what are the short term sort of opportunities you see this continue to sort of transition and when should we keep an eye out for that?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. I mean, I think you touched on all of what I'll call the logistical items there and we're hoping to have them largely wrapped up here in Q4, Jerry. So that will complete all of those. And then, I mean, in terms of the road map, as we've called out, we still see the opportunity for more regional organic expansion. I'd say that would be the priority of our focus where we think
: we can accelerate that through a buy versus
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: build scenario, we'll be accelerate that through a buy versus build scenario, we'll be very open to considering that. And then just with the amount of activity that we see through the next few years, that will largely underpin the confidence in leaning into fleet expansion and growing through that mechanism. So hopefully that answered your question.
Greg Biontek, Chief Financial Officer, Newpark Resources: I think the one task that's a parallel path item that you didn't mention was the our efforts on the operational efficiency and driving that. And I think of all of them, that's probably the longer tail item. Again, we have to work some through some transition services. We have a cost structure that we have to adjust, but it's going to take us some quarters to get there. So I think that's really a 25 effort that, that will span.
: Perfect. Great. All my other questions have been answered, and I appreciate it. Thanks, guys.
Greg Biontek, Chief Financial Officer, Newpark Resources: Thanks, Eric.
Jamie, Conference Operator: We'll hear next from Alex Rygiel with B. Riley. Please go ahead.
Alex Rygiel, Analyst, B. Riley: Thanks. Good morning, gentlemen. Nice quarter. A couple of questions here. First, what is the market value of the Katy facility?
Greg Biontek, Chief Financial Officer, Newpark Resources: That's a great question. We don't have a clear market value on it. So the best reference point I can give you is the book value.
Alex Rygiel, Analyst, B. Riley: So does that mean that it's not an option for sale at some point?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: No, I think it would be. I think we just haven't gone to the effort of getting a market valuation on it. But I can quote you. I think what we're being focusing on is diversifying the rental base in there, making that the multi tenant facility, finding a tenant that value some of the more technical aspects of that building in the laboratory and then optimizing the office component of it, really just setting that up as a better looking rental asset for somebody that values that space, if you will.
Alex Rygiel, Analyst, B. Riley: Fair enough. And then the working capital true up at the fluids divestiture, how much was that again and when might that play out?
Greg Biontek, Chief Financial Officer, Newpark Resources: So again, that process is something that should play out here over the next couple of years. So again, that process is something that should play out here over
Sameer Joshi, Analyst, H.C. Wainwright: the next couple of months.
Greg Biontek, Chief Financial Officer, Newpark Resources: And that is, call it, the low teens of that number is made up represents the working capital Helpful. And then
Alex Rygiel, Analyst, B. Riley: when you talk about the pro form a, the election being neutral to positive, Is that sort of negative on renewables, neutral on transmission and positive in oil and gas? Is that how you think about that?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. I mean, I think that's the case. I just don't know yet how negative it would be on renewables. You would hope that that's going to be based on economics rather than politics. And as most of those renewable projects are in red states, I think, hopefully, that's the result we would see.
But yes, we think generally on traditional fuels, this would be a net positive. The transmission, we don't see any change in that. I think that's a bipartisan effort. So we would expect that to continue. And then on some of the technologies that have more marginal economics, we would expect kind of market forces to dictate that.
Alex Rygiel, Analyst, B. Riley: Perfect. Thank you very much.
Jamie, Conference Operator: We'll turn now to Bill Dezellem with Tietam Capital. Please go ahead.
Bill Dezellem, Analyst, Tietam Capital: Yes. Just to be clear on one of your answers to the last questions, working capital true up. So that is a check that you would anticipate or cash that you would anticipate receiving from the buyer. Is that correct?
Greg Biontek, Chief Financial Officer, Newpark Resources: Correct.
Bill Dezellem, Analyst, Tietam Capital: And so sometime in the next couple of quarters, we should expect low teens millions showing up in your bank account?
Greg Biontek, Chief Financial Officer, Newpark Resources: That's correct.
Bill Dezellem, Analyst, Tietam Capital: Okay, great. Thank you. And then a couple of additional questions. First of all, would you dial in a little deeper into the surge in activity here in October?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. I think what we've seen, the most of the of the pullback in Q3, Bill, was in the South. And I think what we're seeing literally almost at the end of the quarter was a resumption of activity in that region. So a lot of projects kicking off there that required matting. Also, it seemed modestly the hurricane impacts that we're seeing in those affected areas have also played a part.
So I think it's just broad based that Q3 was a pretty unusual seasonal pullback in the South. And then late September, early October, we've seen a reversion to what we see as more normal, but with some strong projects in there that are now confident in Q4.
Bill Dezellem, Analyst, Tietam Capital: All right. Thank you. And then relative to the plant, what was the you spent $9,500,000 on CapEx this quarter. How much of that was excess that was not originally planned for Q3?
Greg Biontek, Chief Financial Officer, Newpark Resources: Yes. I mean overall, that's a tough one to answer because the big piece within our CapEx in the same case this quarter was the matte additions to the fleet. And there, again, you're flexing it based upon what you see the demand, the near term demand in the project. So we that's the piece that I didn't expect to spend at that level.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: But in terms of plant bill, I'd say it's kind of less than $1,000,000 that I would say was sort of unforecast, if you will, if that was the question.
Bill Dezellem, Analyst, Tietam Capital: Right. That's what I was beating at. But I think it's something more interesting than the question, which was that you see demand picking up enough that that led to you spending extra CapEx on building new Mats?
Greg Biontek, Chief Financial Officer, Newpark Resources: Yes, deploying Mats into the fleet. And again, as you came through September, as we had talked about with the swift rebound and the level of project activity in October, we deployed the additional mats to support that October. And that's as we had touched on, October was a record volume month for us.
Bill Dezellem, Analyst, Tietam Capital: Okay, great. And then you gave guidance for the year, which essentially just allows us to do a little math for revenue and EBITDA for the quarter. And if I'm doing that math correctly, your EBITDA margin in the Q4 is going to be greater than the Q2 and the Q2 was a very strong quarter
Greg Biontek, Chief Financial Officer, Newpark Resources: for you. Yes. I think that makes sense. And the reason why is you got a mix issue. The very strong mix in Q4 as we mentioned with rental being your highest incremental margin stream that's what drives that higher margin expectation.
Bill Dezellem, Analyst, Tietam Capital: Great. Thank
Greg Biontek, Chief Financial Officer, Newpark Resources: you. And if you look back historically, I just I'll just point to one reference point Q4 of 2022 was a quarter where similarly we had very strong rental in that period and we had very strong margins as well.
Bill Dezellem, Analyst, Tietam Capital: Great. Thank you. And then one additional question, if I may. You talked about one of your priorities being organic regional expansion. And I don't think I fully understand what it takes to expand regionally.
I mean, I could be kind of loose with my comments and say, gosh, all you need to do is hire a semi, throw some mats on the truck and send them off to the hinterland wherever the new customer is at while they rent them. But I suspect there's something more to it than that. Would you talk through the practical activities of expanding regionally?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Absolutely. And I think we kind of have Bill, when you look at we're focused on our sales force expansion first. Now when you move into these regions, it's important that you have trust and confidence in your counterpart. So you tend to we tend to go in there first with our regional sales footprint, start to build the relationships, then start slowly in terms of developing confidence with our counterparties there in terms of our ability to safely and efficiently fulfill on their project requirements. And then once you've proved that out, typically those projects will increase in scale and complexity and that's when we move more assets more permanently into those markets or that project location.
So just moving the math there, maybe helps with your transportation logistics when you get the work, but you need to do the pre work there to prove yourself out.
Bill Dezellem, Analyst, Tietam Capital: And where are you at with the regional salespeople? Is that part of the work that you're in progress on now?
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: Yes. I think last quarter we touched on that we'd fully built out our national sales footprint there. So we achieved sort of people in market last quarter. Now we're just ramping up on the calling efforts, the calling planning, the various pieces of the execution of bill. So we feel good about our footprint.
Now it's just kind of starting to see the results of that play through.
Bill Dezellem, Analyst, Tietam Capital: Great. Thank you both for taking all the questions.
Matthew Lanigan, President and Chief Executive Officer, Newpark Resources: You bet, Bill. Thank you.
Jamie, Conference Operator: And ladies and gentlemen, as there are no further questions standing by at this time, I'd like to turn the floor back over to the management team for any additional or closing comments.
Greg Biontek, Chief Financial Officer, Newpark Resources: All right. Thanks for joining us on our call today. And should you have any questions or requests, please contact us at investors atnewpark.com. We look forward to hosting you again next quarter. Thanks.
Jamie, Conference Operator: Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time and have a wonderful rest of your day.
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