Thank you for standing by. My name is Kate and I will be your conference operator today. At this time, I would like to welcome everyone to the NPK International First Quarter 2026 earnings. All lines have been placed on me to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Greg Piontek. Please go ahead.

Thank you, Operator. I'd like to welcome everyone to the NPK International First Quarter 2026 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 finance. Results may differ significantly in uncertainties, including the risks described in our period. Except as required by law, we undertake no obligation to update our forward-looking statements. Our comments on today's call may also include certain non-GAAP financial measures, additional details and reconciliations to the most directly comparable GAAP financial quarterly earnings release, which can be found on our call. There will be a replay of today's call, and it will be available by webcast within the investor relations section npki please note that the information disclosed on today's call 2026 conclusion of our prepared remarks we will open the line for quite to turn the call over to our president and ceo matthew lenigan thanks greg and welcome to everyone joining us on today very pleased with our strong start to 2026 which played out in line with our experience despite the typical pause in customer projects around the year and holidays rental activity is setting another

quarterly record at 52 million dollars a four percent sequential and 20 percent year-over-year increase product sales demand also remained robust contributing 23 million dollars to first of our solid execution we delivered 22 million dollars adjusted EBITDA in the quarter representing a four percent sequential and 14 year-over-year improvement we're also very pleased with our first quarter cash flow delivering 21 million of cash flow from operations and five million dollars of free cash flow while also expanding our rental fleet by facility and using three million dollars to fund once again demonstrated highlighted last quarter the key component of our organic growth strategy is our manufacturing substantially concluded our project evaluation our board of directors recently approved our plans to 45 million dollars over the with the goal of bringing the additional capacity online by mid 2027. we are confident that this expansion along with our continuing to bottlenecking initiatives will support matting market share growth for the With that, I'll turn the call to Greg for his prepared remarks.

I'll begin with a more detailed discussion of our first quarter results, then provide an update on our operational outlook and capital allocation priorities for the remainder of 2026. As Matthew touched on, the first quarter results were in line with our outlook commentary on our Q4 earnings call and reflect the continued momentum in our end markets. It's worth noting that the first quarter of 2026 also followed a similar pattern to early 2025, with a seasonal lull in project activity around the year and holidays, then picking up steam as we progress through the rental revenues grew 27% year-over-year, reflecting 12% organic growth, combined with a $4 million contribution from the grassform acquisition. Service revenues grew 7%, with substantially all of the increase coming from the acquisition. Total rental and service revenues were $52 million in the first quarter, achieving another all-time quarterly high, improving 4% sequentially and 20% year-over-year. Collectivity also remained robust, benefiting from continuing demand from utility companies, generating $23 million of revenues in the first quarter and 8%. Looking at revenues by geography and sector, our U.S. revenues increased 9% year-over-year to 16% growth in rental revenues. with the utility sector driving the substantial majority of our growth. UK revenues more than doubled year over year to $9 million in the first quarter, primarily reflecting the grass form contribution. Turning to gross profit, the first quarter gross margin was 36.2% compared to 37.7% and 39% in the first quarter of last year. The modest sequential gross margin compression, lower rental fleet utilization early in the quarter attributable to the timing of large-scale projects partially upset by improvements in pricing, while the year-over-year decline also reflects the continuing impact of the cross-rental costs discussed in previous quarters. It's important to highlight here that our cross-rental fleet provides flexibility to support our large project activity and meet our customer commitments while also helping limit ineffectual. Your SG&A expenses totaled $13.2 million, compared to $15.4 million in the fourth quarter and $11.7 million in the first quarter. The first quarter result includes 12 points, along with 7, as highlighted last quarter, $1.8 million of actual income tax. Income tax expense was $3.6 million. Adjusted EPS from continuing operations was $0.12 per diluted share. Turning to cash flows, operating activities generated $21 million of cash in the first quarter, including $22 million from net income adjusted for non-cash expenses, slightly offset by $1 million of a net increase in working capital. Net CapEx used $16 million, which includes nearly $15 million of net investment into the rental fleet. We also used $3 million to fund it. We ended the quarter with total debt of $11 million and total cash of $7 million for a net debt position of $4 million. Additionally, we have $148 million of availability under our bank facility, providing us with ample financial flexibility to continue executing on our strategic growth objectives, including our manufacturing. Now turning to our business outlook. As disclosed in yesterday's press release, our customers remain highly constructive on the near and longer-term outlook for utilities and critical infrastructure spending. With the benefits of our first quarter results and near-term expectations we have raised the range of our full year 2026 outlook now anticipating total revenues of 310 to 325 million dollars and adjusted EBITDA of 92 to 102. the midpoint of our range reflects 15 percent revenue growth and 28 percent adjusted EBITDA growth over 2025. revenue guidance continues to reflect double-digit organic rental revenue growth along with the contribution from the grassform acquisition, typically in line with 2025 levels. In terms of capex outside of the manufacturing expansion project, there are no other changes. We anticipate total net capex of $75 to $90 million for the year, along with $35 to $45 million target. This level of investment is expected to grow our DuraVeus rental fleet by a low to mid-teens percentage, supporting our organic growth and also displacing currently deployed on projects. As for the near-term outlook, we expect to deliver 20% year-over-year growth in rental and service revenues in Q2, which includes the benefit of double-digit organic growth from acquisition. On the product sales side, we expect Q2 revenues will be fairly in line with prior Q2 gross margin is also expected to be roughly in line with the prior Q2 result. They'll remain dependent on the time for a few large-scale projects. At SG&A, we expect to remain near the $13 million quarterly. For taxes, we expect to be in line with the Q1 level. We entered the year with roughly 40 million, with the accelerated to significantly limit our cash. As it relates to our capital allocation strategy, we continue to prioritize through our disciplined share. We'd like to turn the call back over to Matthew for his concluding remarks.

Thanks, Greg. With a strong start to the year, we remain committed to our strategic priorities and executing to our 2026 plan we laid out last quarter. At that end, our primary focus continues to be the scale-up of our rental platform, which generates the highest long-term returns for our business. The geographic expansion and market remain confident that the strong momentum in these markets will support our continued fleet, though the quarterly cadence remains dependent on project timings, particularly the large-scale project. To making the necessary and substantial majority of 2026 cash flows into the expansion of our durable-based composite MAT rental fleet, which we expect to grow by low to mid-teens percentage in 2026 while also advancing our manufacturing expansion project which will increase our production. Our second focus area remains on driving organisational efficiencies across the business. As we work through the significant transition to our new ARP system implemented in the first quarter, we now seek to leverage the enhanced system capabilities making the necessary. We expect our approach will help limit SG&A spending growth and drive continued improvement. With respect to the conflict in the Middle East we continue to monitor its impact on the supply chains and we have not seen any meaning they're tracking our raw material supplies closely and expect our work over the last several years to diversify our supply base will provide a useful count in addition as Greg mentioned earlier across rental fleet capacity provides some offset to our internal transport charges associated with fleet movements final priority is the allocation of capital beyond our organic requirement committed to our sharing inorganic opportunities that increase our market coverage back to markets with robust market outlooks in our serve geographies a clear strategic focus and a pristine balance sheet was strong year 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 partnership and with that we'll open the call for questions at this time I would like to remind everyone in order to ask a question press star then the number one on your

telephone keypad we request to limit yourself to one question and one follow-up we will pause for just a moment to compile the q a roster your first question comes from the line of aaron say shallow with craig holland your line is open yeah good morning matthew and greg thanks for taking the questions um good morning uh so maybe first for me just on can you talk about the pipeline uh in a little bit more detail just you know what have you been seeing um from you know kind of greenfield versus brownfield projects are you starting to see you know any pickup from some of the high voltage um you know projects that are starting to come to the market yeah um and i'll take that one i think at this point you know in answering the second

part of your question first we're not really it's still a little early for some of the uh The larger, higher-voltage projects, we're expecting to see them a little later in the year. So most of the activity with the split, you know, where we let it out here, we're seeing a C. The investment, speaking, our pipeline timing issues here in the first quarter, kind of driving that.

All right, thanks for that. And then, you know, appreciate the color and the capacity expansion. We're hearing more of your customers talking about, you know, multi-decade CapEx cycle for utility transmission. Can you talk about how long of a growth runway the expansion provides you and just, you know, potential to add additional capacity either in Louisiana or, you know, at the new location over time?

Yeah, I guess the answer to that question is going to be a function of how fast the market wants to grow. Look, we see this plant giving us plenty of capacity through the end of, I think it is worth noting. I feel pretty good about our bill.

Your next question comes from the line of Flora Mayer with V. Riley Securities. Your line is open.

Hi, Matthew and Greg. Thanks for taking the question. My first question is with the additional capex in mind, are you anticipating maintaining the same returns that you're currently generating?

Yeah, I would expect no change in the overall expectation. Obviously, that's a bit of a step change in terms of the investment, the asset base. But over time, we should continue to gain operating leverage on our asset.

Great. Thanks. And then you mentioned improved pricing. Can you frame the magnitude of rental rate increases and whether you see room for further pricing?

Yeah, I think at this point, I'd probably frame it in low single-digit, Laura. And I think what we're seeing is in the market.

So we would expect to be able to hold that and maybe add to that moving forward in the year obviously a little early for that but encouraged with what we're seeing so far your next question comes from the line of mintrew with texas capital securities your line is open hey there good morning thank you for taking my question um so it sounds like as utilization remains strong that you're going to continue to prioritize our rental fleet additions over product sales but do you feel like your capacity is sufficient right now to support both at least through this year yeah i think we touched on that last quarter i mean um we feel comfortable that we can meet both and i don't think we've been it i think it's great time that we can meet what we excellent um so how should we think about kind of revenue and ebitda progression through the rest of the year relative to the first quarter kind of given seasonality your cross rental uh i guess continued cross rental usage or displacement um as well as catfacts timing yeah i mean the the capex front loaded elements here associated with the the procurement of equipment that to be a little more loaded up and call it q2 and q3 uh as far as the revenue and

ebda cadence ebda is obviously going to follow you know we're holding a pretty consistent ebda margin uh but the revenue cadence i would say the the back half of the year still have that natural seasonality in q3 so you know obviously i framed up expectation for q2 naturally the the q3 typically pulled q2 and then rebounds and surges your next question comes from the line of brandon rogers with rough capital your line is open hi this is brandon rogers on for jerry sweeney thanks for taking my call hey brandon hello um so in terms of the wood composite matting conversion

uh would you where would you estimate the composite matting stance as a percent of the overall market and do you see the pace of conversion accelerating or remaining stable yeah thanks brand i think we've called this out we still see roughly a quarter of the market in total being composite at this point the market share shift is going to be really a function of the pace of growth if the market needs to hold um just as everybody's keeping up with maybe maybe a Thanks.

And then one more for me. So, the utility spending has accelerated your manufacturing capacity plans with the target for the 50% increase by mid-27. Is there anything that could delay this timeline or is there any likelihood that the investments required to complete the expansion or more than your estimated 40 to 45 million?

Yeah I think I think there's always some some movements in project timings and budget estimates we feel pretty good that with the range we've painted and the timing there we've been planning this for a while you know unforeseen things may happen but we feel pretty good that we're going to be able to deliver this.

Again if you would like to ask a question please press start then the number one on your telephone keypad. Your next question comes from the line of BLDZ with Titan Capital. Your line is open.

Thank you. A couple of questions. Following up on your remarks about the large high voltage projects have not yet begun, but you see them beginning later this year. Does that imply an acceleration of your growth rate in 2027 relative to 2026?

You know, a little early to piece it all together, Bill, but I think what we had called out on previous calls was these high-voltage lines are going to have a larger matting requirement to fulfill them, heavier equipment, larger equipment to get those lines installed. So we see that as a net increase in matting requirement. And so you would logically say yes. how that project activity, we'd need to look at that as we get closer to 27, but encouraging trends for sure.

Great. Thank you. And then relative to the acquisition comments, I guess I'll put two in here. When do you anticipate that grass form will be fully integrated, which I'm presuming that is the point that you would be willing to seriously entertain the next acquisition. And when that time comes, what are you structurally looking for with that next acquisition? Help us understand the characteristics that you're looking for and what you would be trying to accomplish with that acquisition.

Yeah, thanks, Bill. Look, I think we would, you know, have substantially most of the integration completed within the next. So I think the you know an erp conversion will obviously and so we didn't want to get in the way to respect of future acquisitions i think it's it's pretty clear relative to our strategy i think if there's markets where we can accelerate composite market share relative to a timber incumbent um and we think that they do organically that's on something to acquire and then from there you've got your normal pipeline factors in terms of the leverage of the company the I will now turn the call back over to Greg Piontek for closing remarks.

All right, that concludes our call today. Should you have any questions or requests, please reach out to us using our email at investors at NPKI.com. And we look forward to hosting you again next quarter.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may know disconnect.