Operator
Hello, everyone. Thank you so much for waiting, and welcome to NPK International First Quarter 2025 Earnings Conference Call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question-and-answer session. If you'd like to ask a question during that time, please press star, followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to Greg Piont. Please go ahead.
Before handing over to Matthew, due to various additional details are included in our quarterly earnings release, which can be found on our corporate. There will be a replay of today's call, and it will be available by webcast within the investor relations section. Please note that the information disclosed on today's call is current as of May 2nd. The conclusion of our prepared for our president and CEO, Matthew.
Thanks, Greg, and welcome to everything in the first quarter, which continued to validate our long-term growth strategy and the strength of our unique value proposition. to scale, geographic expansion, capabilities and rental fleet expansion continue to provide tangible benefits as demonstrated quail strong 25 the positive momentum to the new year and as the quarter progressed we saw demand on both rentals leading to a very strong percent year over year to 65 million dollars supported by meaningful growth in both rental and products reaching yet another single quarter record reflecting both continued wood to composite matched conversion by fleet operators supporting utilities in critical infrastructure and markets 15.7 million dollars in the first 59 percent investing in net 8 million scale copies of the largest critical resumed our return of capital program using 11 million dollars of cash in the first quarter this was in april reached the remaining sharing purchase authorization to 100 million dollars as secular megatrends underpinning investment in critical infrastructure uncertainties being created by the realignment of federal government priorities, including the imposition of tariffs and reassessment of the IIJ, which continues to wait and broader markets, indicating a continued, robust growth, in combination with our strong performance in Q1 and the continued strength we see early in Q2.
Thanks, Matthew. I'll begin with a more detailed discussion of our first quarter results, then provide an update on our outlook for 2025 and capital allocation priorities. As Matthew touched on, first quarter revenues benefited from continued robust rental demand along with elevated product sales. Rental and service revenues improved 4% sequentially and 23% year-over-year to $43 million in the product sales, also 55% year-over-year, coming in at $21 million for the first quarter. Year-over-year growth in rents are primarily driven by the power transmission sector and increased pipeline activity, somewhat offset by a lower contribution from the oil and gas sector while product sales continue to be heavily directed to power 12-month period through q1 our trailing 12-month revenue improved to 233 16 year-over-year growth over the previous 12 includes a 53 increase in product sales and a 15 increase in rental revenues the first quarter improved three million dollars sequentially and eight million dollars year over year largely reflecting the impact of higher revenues along with the benefits of the associated operating leverage and stronger sales mix and sales mix we delivered a 39 gross margin in the first quarter a 300 basis point increases increased by 1 million dollars from the fourth quarter to 11.7 million dollars which was slightly higher than the first and in line with our expectations as we absorbed certain fixed overhead costs with 18.1 percent of revenues reflecting a 50 basis point improvement from the prior quarter and a 550 basis point. By U.S. dollar to British, 3.5 million dollars in the first quarter. Adjusted EPS from continuing operations was 12 cents per diluted share in the first quarter, compared to 8 cents in the fourth quarter and 5 cents in the first quarter. Turning to cash flows, operating cash flow generated 9 million dollars in the first quarter, including 19 million dollars from net income adjusted for non-cash, and 10 million of net cash used to fund growth in working capital, which includes $11 million of additional proceeds from last year's divestiture, offset by $8 million of net capex, substantially all of which was invested into fleet expansion. As Matthew touched on, we resumed share repurchases under a return of capital program, using $11 million to purchase 1.8 million shares, total cash of $21 million and total debt of $8 million. Finally, we have $66 million of availability under a U.S. ABL facility, which currently has no outstanding. Roughly $7 million of net assets related to the fluid sale. With substantially all of what we discussed last quarter, we have significant U.S. federal net operating loss and other tax credit carry forwards that we expect will limit our cash tax obligations over the next few years. According to our business outlook, the certainty that Matthew touched has continued to remain highly constructive on the near-term and longer-term outlook, particularly for yesterday's press release. In light of the strong start to the year, we have increased our full-year 2025 expectations with total anticipated revenues now in the $240 to $252 million range and adjusted EBITDA of $64 to $72 million. The midpoint of our 2025 range reflects 13% revenue growth and 24% adjusted EBITDA growth. Further, we expect total rental and roughly 15% to 20% over 20% to predict are expected to remain somewhat in line with 2024 levels. Apex expectation remains unchanged at $35 to $40 million, which includes roughly $8 to $10 million. We expect to see Q2 rental volume to run at a similar level to Q1. of Q1 average monthly run rates and expected to taper off as we head into the seasonally slower summer months. We expect Q2 volumes will pull back into the mid-Q1 result. In terms of SG&A, as discussed last quarter, we expect Q1 will reflect, at this point, the majority of our post-sale administrative system completed and we are actively working to streamline our overhead structure for the simplified business. Though the meaningful improvement, We continue to prioritize investments in the organic growth, continue returning a portion of free cash flow generation to shareholders. We are currently in the process of evaluating alternative revolving credit facilities with greater liquidity.
And with that, I'd like to turn the call back over to Matthew for his... ...over the past few quarters, which we believe continues to validate our unique value focused on three foundational elements to drive long-term shareholder value for the acceleration of revenue growth through the action of geographic expansion within the U.S., We'll also expand our customer market share within our currently served markets. 2023 and 2024 to expand our sales capabilities and continues to grow meaningfully year-made in line with historical levels. Then year-over-year growth in rent-to-send year-over-year and once again achieve double-digit year-over-year rental growth in the second quarter. We expanded our composite mat rental fleet by approximately 13% in 2025 as we continue to build on our leading position within the composite rental market. We are insulated from any currently known tariff impacts and meet industry growth expectations moving forward. SG&A improving to 18.1% of revenues in the first quarter of 2025. An execute action is intended to streamline the organized target of SG&A as a percent for shareholders. Strategic inorganic opportunities that increase our value and relevant opportunities against our return of capital with 2 million shares. In closing, I want to thank our shareholders for their ongoing support and their commitment to safety and compliance.
Operator
We are now opening the floor for question and answer session. If you'd like to ask a question, please press star, followed by one on your telephone keypad. Press star, followed by one on your telephone keypad. Your first question comes from Aaron Spichala of Craig Halum. Your line is now open.
Yeah, good morning, Matthew and Greg. Thanks for taking the questions. Hello. So, you know, first for me, you talked a little bit on the sales additions and kind of quotes and order rates and positive trends there. Can you just, you know, maybe give a little more detail on just how that the pipeline, you know, growth looks kind of year over year and just how you're thinking about growth? It sounds like you're talking about continued double digit growth, but just wanted to unpack that a little bit more.
Yeah, absolutely. Thanks, Eric. And, yeah, I think it's fair to say when you look at the growth rate in our – Got it.
Thanks for that. And then maybe second, you talked about the continued shift in the market from wood to composites. Can you just give a little more detail on where that's at today, how you think that can trend in the coming years and just what that could mean for your business and just kind of the value proposition behind that shift?
Yeah, I think as we both touched on in the call.
And then just maybe one last one. Can you give an update on just M&A and, you know, how you're kind of currently thinking about this geographic expansion and kind of focused on wallet share expansion? What's the pipeline look like there? And just, yeah, how are you thinking about kind of, you know, make versus buy as you look to expand the business?
All right. That sounds good. Thanks for taking the questions.
Operator
Your next question comes from the line of Amit Dayal of HC Wainwright. Your line is now open.
Thank you. Good morning, everyone. First of all, congratulations on a really strong quarter and a very timely execution on the share repurchases. Really good to see that. Question around the rental business. It looks like that is mainly the driver for the near term. Are you potentially fully utilized? It looks like you are. you know how should we think about growth you know in 2026 you know from the rental side you know it looks like maybe majority of the capex is going towards the rental business but are there any other drivers that can support um you know um that that trend i guess you know where we're seeing a lot of demand on the rental side yeah look i think if you look at industry capex spent particularly around the utilities trying to be done and yeah in terms of the capex You know, I think it's really, you know, we're, we're, you know, so adjacent to that, I mean, it doesn't look like we are close to, you know, peaking right in terms of the investments and expansion going on with respect to, you know, just getting the power infrastructure in place. um any any color on sort of you know um where we are in that cycle um you know in terms of all of these investments and projects can you know being deployed at this point
yeah i mean depending on you talk to i think um and you mentioned you know you may have some
further cost savings from you know sort of the post divestiture um you know expenses being removed And how big would that amount be on an annual basis going forward?
Yeah, that goes back to our previous commentary in terms of the SG&A reductions. It's really in the SG&A side, the reason we talked about.
Okay, understood. That's all I have there. Thank you so much.
Operator
Your next question comes from the line of Jerry Sweeney of Roth Capital. Your line is now open.
Good morning, Matthew and Greg. Thanks for taking my call. You bet, Jerry. A lot of questions have been asked. I only have one or two sort of additional questions maybe to dig a little deeper. But it's more on sort of sales, investment, and opportunities around investment for growth. How much more of an opportunity is there? You obviously said in prepared remarks that investors and sales are happy with productivity coming out of some of the new reps, et cetera. But what should we be thinking about on sales, investment, on a go-forward basis? Is there still a pretty good opportunity out there to expand organically?
Yeah, I mean, if you look at our footprint from a sales perspective, Jerry, we think that we've got some more to go there.
Yeah, I'm just curious. and then also um any more uh any low-hanging fruits maybe some of your larger customers pushing you into regions that you're not necessarily in quite yet or are we sort of a little bit further into the game uh ball game per se maybe a little bit later innings yeah i don't know that i call it a low-hanging fruit jerry but we look at when we when we look at our share of wallet with our more established areas that we've been in you know we still have you know ground That is it for me. Great quarter, and congratulations. Thank you. Thanks, Jerry.
Operator
Your next question comes from the line of Laura Maher of B. Riley Securities. Your line is now open.
Hi, Matthew and Greg. Thanks for taking the question.
So my question is, what would influence growth more? would it be share gain growth against timber or geographic expansion? And then how would that tie into your investment in fleet growth? Okay, thank you. I'll pass it on.
Operator
Your final question comes from the line of Will Deslin of Teaching Capital. Thank you.
I have actually a group of questions, so if I go too long, just cut me off and we can take it offline. But let me follow up on the last question, please. So clearly the providers of wood matting are working to save their business. Are you seeing any opportunity or any interest from some of the wood competitors to buy mats from you so that they can then supply what's traditionally been their customer base where their salespeople have relationships?
Yeah, Bill, I'd say that's absolutely welcome.
That's helpful. And actually, I'll use that as a segue to just this week. I was driving by a site and saw matting that was in place. And it was, I could say, beat up or really well used, one of the two. So would you walk through what the replacement cycle is? I don't think I had really thought about the sales that you are making, that eventually those ultimately will be repurchased or purchased again to replace those that wear out or are broken, et cetera. What's your history and what are you anticipating the life cycle of the match to be?
Yeah, you know, we have matching athletes that are 20.
And following up on that, how often are the maps looked after versus how often are they, you know, maybe treated like dirt, if you will?
Yeah, look, I can't speak for everybody in the market, Bill. I can only speak for us. And what I'd say is we're very motivated.
All right. Let me switch to the new administration. administration, has Trump or anybody within the administration said or put any initiatives in place that are reducing the incentives that utilities had or reducing dollars that were provided to the industry for expansion?
Yes, I think I've described that as evolving. I think, obviously, Great.
Thank you. And then two additional questions, please. First of all, you had referenced in your opening remarks that rentals and sales both accelerated at the end of the quarter and therefore starting strong here early in the second quarter. Would you walk through the dynamics that are taking place there, or is that simply normal seasonality? I was sensing that you were you were highlighting something more than that yeah all right thank you and and would you please uh correct me if this is wrong but i think of the fourth quarter as the seasonally strong quarter when it comes to purchases and yet um the first quarter here was very strong on the purchase front. So first of all, is my memory correct that Q4 is seasonally the strongest? And if that's the case, then how is it that we're seeing such strength here in Q1 that's exceeding Q4?
Yeah. Additionally, the strong Q4 season, what we're seeing now is...
Matthew, does that mean that it was an industry or industries other than utilities that led to the strength in the in the fourth excuse me it was utility participants but it wasn't directly utility great thank you both and congratulations on a really excellent quarter thank you appreciate it i'd like to hand the call back to greg for final remarks all right that concludes our call today your email at thank you for attending today's call you may now disconnect goodbye
