Ladies and gentlemen, good day. Thank you for standing by. My name is Jim and I will be your conference operator. At this time, all lines have been placed into a muted and listen-only mode to prevent any background noise. We are happy to welcome you today to this NPK International Second Quarter 2025 Earnings Conference Call. As a reminder, today's session is being recorded, and after today's prepared remarks, you will have the opportunity to ask questions. If you would like to signal for a question, simply press star and one on your telephone keypad. To remove yourself from the queue, simply press star and one as well. And now to get us started with opening remarks and introductions, I am pleased to turn the floor over to Mr. Greg Pioncek. Welcome, sir.

Thank you, Operator. I'd like to welcome everyone to the NPK International Second Quarter 2025 conference. 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, except as required by law, we undertake no obligation to update our forwards in today's call additional details and reconciliations to the most directly comparable gap finance quarterly earnings release which can be found 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 npk i note that the information disclosed on today's 2025. at the conclusion of our prepared room the call over to our president and ceo matthew lanigan continued to ballot we believe that our strong singular focus $68 million delivery.

Pleasingly, while the second quarter 2025 was relatively in line with the second quarter last year, last year's results included a record $30 million from products larger contributions from rental activities. Rental revenues came in at $32 million, representing a 34%. We believe that the increase in rental revenues provides a more consistent and stable core utilities. Last quarter, customer rental demand surged late in the first quarter including several concurrent second quarter to meet this concentrated surge in customer demand we lever structure markets investing a net eight million dollars in the second quarter strengthening our scale customer responsiveness and ability to serve the needs of the largest also consistent with our capital allocation priorities we used six million dollars of cash in the second quarter to purchase one percent of our outstanding shares as we look ahead to the second half of the year we are encouraged by the strength in market activity heading into the CPAD remarks.

Thanks, Matthew. I'll begin with a more detailed discussion of our second quarter and first half result 2025. As Matthew touched on, second quarter revenues benefited from the late Q1 broad-based service, which included several large-scale utility infrastructure projects that continued through the second quarter. Total rental and service revenues were $46 million for the second quarter, with rental revenues improving 13% sequentially and 34% year-over-year, while associated service revenues declined 15% year-over-year. Revenues from product sales remained robust at $22 million, up modestly sequentially, but down $8 million from the record result in Q2 of last year. For the first half of 2025, rental and service revenues have increased 25% year-over-year. While revenues from product sales are relatively in line with prior years, By industry, our year-over-year growth in rental pipeline and general construction continue to be heavily directed to turning to gross profit in line with the prior quarter, with the gross margin primarily impacted by the elevated cross-gross margin was 36.9% in the second quarter and 39% in the first quarter, and relatively in line with the 37.0% last year. Second quarter SG&A expenses totaled $13.7 million of 1.9% of sequential increases primarily attributable to elevated costs, performance-based incentives, including long-term incentive programs, as well as programs associated with our ongoing 28%. Adjusted EPS from continuing operation in the first quarter, and turning to cash flows, operating activities generated $21 million of cash in the second quarter, including $19 million from net income adjusted for net decrease in investing activities used six million dollars which into fleet expansion partially upset by four million dollars of additional proceeds from additionally as matthew touched on we used 6.2 million dollars to purchase 818 000 shares reflecting an average purchase in 58 cents looking at the year-to-date cash flows for the first half of 2025 we've generated a total of 30 million dollars of cash and 15 million dollars of additional using 18 million dollars to finally eight percent also using 17 million dollars to repurchase shares or reducing our outs we ended the quarter with total cash of 26 million additionally we have 148 million dollars of available at the end of the quarter we have including the five million dollar note receivable bearing interest at 12.5 percent now turning to our business outlook as disclosed in yesterday's press release in light of the continued strength in rental project activity and particularly within the utilities and pipeline sectors, we have increased our full year 2025 expectations with total anticipated revenues now in the $250 to $260 million range and adjusted EBITDA of $68 to $74 million. Our 2025 range reflects 17% revenue growth and 29% adjusted EBITDA growth over 2024. Breaking our full year revenue expectation down further, we expect total rental and service revenues to grow in the high teen to low 20s percentage range over 20. Product sales, which are more difficult to predict, are expected to grow by roughly 10 to 15 percent unchanged at 30. As for the near-term outlook, we expect to see Q3 rental activity pull back from the exceptionally strong Q2 result, including the effects of the typical summer seasonality in the utility sector. Though we expect third quarter rental and service revenues will show similar year-over-year growth, as we expect Q3 activity to remain at a similar level to the Q2 result. This margin is expected to reflect the ongoing transitory effects. In terms of SG&A, we expect Q3 expense will return to the Q1 level following the elevated incentives late in the year, as our goal of mid-teens percentage of revenue by early 2026 remains unchanged. In terms of taxes, we are still evaluating the full effects of the recent taxes. we anticipate the legislation will have a minimal impact. So we expect to see additional cash flow timing benefits through the accelerated tax deductions of certain capital investments, which coupled with our existing U.S. NOL and other should limit our cash. In terms of our capital allocation strategy, we continue to prioritize investments in the growth of our rental fleet and also expect to continue returning cash flow generation to shareholders. With the completion of our new facility in June, We now have approximately $175 million of cash and available liquidity, which provides much greater flexibility to support. And with that, I'd like to turn the call back over to Matthew for his concluding remarks.

We remain very pleased with our strong performance, which we believe continues to validate our unique value proposition, as discussed previously. On three, foundations that revenue growth through the scheme continued to grow meaningfully year over year, while our award rates remain in line with historical levels, resulting in a 33% year-over-year growth. We expanded our MAT rentals as we continue to build on our leading position within the rental market. We are driving operational efficiency. During the quarter, we had some noise associated with certain performance-based incentive costs. 26, these would increase our market. In closing, I want to thank our shareholders for their ongoing support, our employees for their dedication to...

Ladies and gentlemen, at this time, we'd like to conduct our question and answer session. As a reminder, if you're joined today and you would like to ask a question, please press the star and one on your telephone keypad. And if you find your question has been asked, you may remove yourself from the queue by pressing star and one once more. Today, we ask that you limit yourselves to a question as well as one follow-up before returning to the queue. Once again, ladies and gentlemen, that is star and one for a question. We'll take our first question today from the line of Aaron Spikala at Craig Hallam. Please go ahead.

Yeah, good morning, Matthew and Greg. Thanks for taking the questions. Maybe first for me, you noted you're seeing longer contract durations and increased visibility as a result. Can you just talk a little more about that dynamic, what it means for the business, how many days or months is this, and how that might affect margins, and do you expect this to continue as you kind of look at the pipeline and just demand over the next couple of years?

Yeah, thanks, John. This is a dynamic we've been talking about, the nature of what we're seeing coming from larger utilities or contracts. In terms of margin, I think what you're seeing is you'll see some slightly lower service revenues associated with that. At this point, our pipeline consists of a reasonable percentage of those.

All right, thanks. And then just maybe a second on the guide, it does imply a little bit more softness in the second half, I suppose. I know you have seasonality and it's been kind of hot here recently. Can you just talk a little bit about some of the puts or intakes in there between the low end and the high end and just trying to think of potential conservatism there?

Yeah, I guess the way I would frame it is on the two different revenue streams on the R&S side, obviously. There you've got the Q3 seasonality. The other element is the first half of the year was pretty strict. The piece that's not necessarily year-over-year basis.

Okay. Understood. Thanks for taking the questions. I'll turn it over.

Amit Dayal at HC Wainwright, you have our next question.

Thank you. Good morning, everyone. Hey, guys. So, with respect to the utility projects, transmission projects. I mean, from where you sit, like, where do you think we are in terms of, you know, the stage of, you know, deployment, I guess? Are we still in the early stages? Do you still see a pretty decent runway in front of you tied to, you know, those tailwinds, you know, for that sector?

Yeah, I mean, you know, we've spent a lot of the second quarter At a number of industry events and talking to our customers, we are reasonably early in reaffirming the supply chain or other things mean that's not the case, but we're pretty excited.

Thank you for that. My last one, I guess, you have a pretty solid balance sheet. Cash flows are positive. If you're going to look for potential acquisitions to drive a little bit more growth, where would that come from? And, you know, are you seriously considering any, you know, efforts on that side or are you maybe just, you know, waiting to see, you know, how the market develops? Just trying to see, you know, what the level of urgency you might have in terms of, you know, using the balance sheet and the tailwinds, you know, you are seeing in the sector to maybe drive additional growth.

Yeah, I mean, I think we're in a good position and we can be very, you know, we are considered and associated with our core.

As you said, we're in a good position. all right guys that's all i have thank you thank you we'll go next to alex rigel at texas capital thank you very nice quarter matt and greg a couple quick questions here first um as it relates to your fleet expansion year to date is that on track with your plan and you know are there some scenarios and what are the scenarios where you might actually accelerate that this year or into next year yeah i i would say that overall our capex plan we're running very much on plan.

You know, we have been able to generate a higher level of rental revenue growth really coming from the utilization, a higher utilization run rate. So that's really helped the efficiency. I would say the, in terms of the evaluation or the increase to that, that would really be dependent on what we're seeing here in the second half. It's maintaining your inventory, your finished good inventory to allow you to respond to the market needs and will deploy assets into the fleet.

That's helpful. And then geographically, can you talk about some of the markets that you're investing more into your fleet right now?

Yeah, I think if you break it down, definitely the south, I think that's pretty good.

Excellent. Thank you very much.

Our next question will come from Jerry Sweeney with roth capital your line is open uh good morning matt greg thanks for taking my call um just uh maybe one more question i'll go a couple pops up but uh maybe slightly different tact um is there any place that you are not in that you think would offer good opportunity for growth and if not how do you move into that area organically or or otherwise yeah jerry i think we've touched on on a couple of calls in the past, you know, obviously our presence has been historically our...

Gotcha.

I mean, is some of this just balancing the growth opportunity and managing the income statement? Or, I mean, could you speed it up and take a little bit of hit the margins for a short term and then get faster growth a couple quarters out? Or just curious if that would place into what the opportunity.

Yeah, I mean, I think, you know, at any, at any given point in time, we're assessing, you know, concept here is it's one of the have to get too far. We can carry the inventory and either put it to sales or fleet build. But, you know, what you just described.

Okay. I appreciate it.

Thanks, Jerry. Thanks. Laura Maher at B Riley Securities. Your line is open. Please go ahead with your question. Hello, Laura.

There's a chance you may have us on mute hi can you hear me yes sorry about that um good morning thank you for taking my question my first question is what is the current utilization rate across your map fleet and how does this compare to your target range well we do not you know we don't disclose the our specific utilization at any given time i think the way i would i would frame this is You know, we've talked in the past of our typical range of utilization being between 60% and 80% and averaging out around 70% over the course of a year. We've been running around that high end, around that 80% mark.

Okay, thank you. That's helpful. And then another one, I guess, just with the new administration's infrastructure priorities still evolving, are there any new end markets you guys see picking up?

Yeah, Laura, we'll continue to look at things, but as we talked about in the opportunity that we see in the pipelines and other markets where we're still making sure we're there, we have a national sales network.

Okay, great. Thanks.

And Bill DeZellum at Tieton Capital, please go ahead and state your question.

Thank you. Two questions. First of all, the pipeline is an area that you have as having strength, and that is what we're hearing about, just pipeline build-out taking place. We've heard that is quite slow. Would you walk us through why you think your activity is not matching the industry where you're seeing strength with the industry being slow?

Yeah, Bill, I'm interested in where you're at.

Great. Thank you. I appreciate that, Matthew. And then in the past, you all have talked about wood to composites. Do you have any examples or case studies of large-scale conversions from wood to composite that you can share with us?

Yeah, you know, we talked about it in large volumes of composite, recognizing the longer-term economic benefits. You know, this quarter, as we touched on, a lot of our direct sale utilities, those utilities.

Thank you, and congratulations on another solid quarter.

And, ladies and gentlemen, at this time, I'm pleased to turn the floor back to our leadership team for any additional or closing remarks.

All right. Well, thanks for joining us on the call today. If you have any questions, please email us at investors at NPKI.com. And we look forward to speaking with you again next quarter.

Ladies and gentlemen, this does conclude today's conference, and we thank you all for your participation. You may now disconnect your lines.