NPK International Announces Second Quarter 2026 Results Conference Call and Webcast Date

Hello, everyone.

Thank you for joining us, and welcome to NPK International 2Q26 Earnings. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Greg Piontek, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you, Operator. second quarter. Joining me today is Matthew Lanigan, our president and chief. Before handing over to Matthew, I'd like to highlight that today's discussion contains forward-looking statements regarding future business and financial. Actual results may differ significantly from those projected in today's forward-looking statements due to including the risks. Except as required by law, we undertake no obligation. Comments on today's call may also include certain non-aditional details and reconciliation are included in our, which can be found. There will be a replay of today is that the information disclosed at the conclusion of our prepared remarks and CEO Matthew Lennigan and the operating leverage in during the quarter

we made me at the quarter we delivered 82 million dollars of revenue by the anticipated completion timing of multiple large-scale projects which ultimately respite the accelerator operably in the quarter was along with internet as a result of this continued quarterly growth combined with solid operating leverage we delivered 26 million dollars of adjusted EBITDA in in the quarter, representing a 37% year-over-year improvement for the EBITDA margin. As I mentioned earlier, we are investing $4 million in the quarter, capacity by approximately 50%, as well as our continuing to bottlenecking initiatives will support our long-term growth and composite matting market share through reduced UC. We're also very pleased with our second quarter cash flow, delivering $22 million of cash from operations, ending our mat rental.

We maintained our strong financial position, ending the quarter with net debt of just $2 million dollars providing ample financial flexibility to keep you to once again demonstrated our consistent commitment to turn the call over to greg for his thanks matthew i'll begin with a more detailed discussion of our second quarter and first half results then provide an update on our operational outlook and capital allocation priorities for the remainder of 20. the second quarter results were highlighted by strength in product sales and continued growth in rental revenues which reflect the momentum in our end markets as matthew touched on and 28 year-over-year primarily benefiting from continued strong along with l of rental and service revenues grew three percent sequential quarterly record 54 million dollars despite the accelerate breaking the revenue down further rental revenues grew 18 year-over-year reflect a four million dollar contribution the organic growth reflects the impact of a fleet utilization attribute turning to gross profit and in line with prior sequential gross margin while the year-over-year comparison is an increase made by lower rentals 14.2 million dollars compared to 13.2 as noted in yesterday's press release income tax expense adjusted eps from continuing operations for the first half of 2026 total revenues have increased 18 percent year-over-year while adjusted ebitda and adjusted EPS grew by 25%. Looking at first-half revenues by geography and sector, our U.S. revenues increased 11% year-over-year to $138 million, with the utilities' U.K. revenues more than doubled year-over-year, relatively in line with prior quarter. Operating activities generated $22 million of cash, including 25% net increase. We ended the quarter with total debt of $11 million, 48 million dollars of a continue executing now turning to our business outlook overall our customers remain highly constructive on the near and longer term outlook for utilities and for the near-term outlook despite q3 being our typical seasonal low point in customer project activity and the effects of the early in line with q2 year-over-year improvement of more than 20 product sales are expected to revert back to levels more the gross margin is also our full year 2026 adjusted EBITDA to a range of 97 and 32% adjusted EBITDA growth. Our revenue guidance continues to reflect double-digit organic growth, along with the constant not impact, are expected to be $65 to $80 million for the year, including $20 to $25 million of investment is expected mid-teens percentage, supporting our organic growth and also displacing a portion of SG&A expectations, while tax rate is expected to remain relatively in line with the first half rate for the remainder of the year. As highlighted previously, we end $40 million of NOF in line with the accelerated significantly allocation strategy. We continue to prioritize rental fleet and our manufacturing strategic acquisitions while also remaining committed to returning a portion of free cash flow generation to share to Matthew for his...

As we close out the first half of the year, we remain confident in our double-digit growth outlook and commitment to the execution of our strategic priorities in 2020. Geographic exploding pipeline continues to support our confidence with roughly 20 percent year-over-year increase in quoted volumes with we remain confident that the strong momentum in these markets will support strategy we remain committed to making the necessary investments for growth investing in the expansion of our jura-based compass advancing our manufacturing expansion project our decision to expand our Louisiana facility was driven by superior economics relative to other alternate locations as this location maintains our proximity to strategic raw material supply, captures operational benefits and efficiencies through co-location with our existing infrastructure and skilled workforce, and continues our decades-long investment in and support all the local communities. Our second focus area remains on driving organizational efficiencies across the business. We continue to see this play out in both gross margins and SG&As of percent of revenues, use, as we are on pace to exceed 30% EBITDA margin in 2026. As we continue to grow, we see opportunity to continue to expand our EBITDA margins and returns on investor capital while also making targeted and as Greg touched on our sheet and discipline approach, we remain active in the evaluation of core strategic and organic opportunities that increase our market coverage and critical infrastructure markets, as well as the continuation of our inorganic execution. I wanted to call out our recent UK for integrating our two UK platform results. The combined UK entity provides the large scale robust market outlooks in our serve geographies, a clear strategic focus and a robust balance and a strong year of profit. In closing, I want to thank our shareholders and our employees for their...

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Aaron Spakala with Craig Hallam. Aaron, you please go ahead.

Good morning, Matthew and Greg. Greg, first, can you maybe talk about, you know, visibility and confidence into the guidance? You know, you talked a little bit about project timing, the 20 percent growth in the pipeline. Just curious if you're seeing any impacts from, you know, any data center slowing or just secondary impacts on customer spend.

Yeah, thanks, Aaron. And I think the short answer to that is, you know, that we're not seeing any impact of, I think, what's been affecting participants in the space over the last few days. You know, our pipeline is, you know, fairly advanced and locked in, so we're not here or there.

Great, thanks. And then just second, I mean, obviously, really good margin performance. Can you just talk about some of the drivers there, you know, again, confidence and kind of the outlook, And then just the impact from cross-rentals on the business, you know, what has that been, and just how might that, you know, reverse or see a benefit next year as you bring on capacity?

Yeah, so the – I guess I'll start with that one first. You know, the cross-rentals, the cost has been fairly stable. It's about three points a headwind, basically, on the R&S margins overall. Time will be reducing that, so you'll see some lift from that. But, you know, in terms of the improvement, you get a little bit of mix, you know, the rental versus service continues to trend in, you know, more toward the rental, which is the higher margin. But then within that, it's a lot of operating leverage and cost, both on the rental operations side, as well as on the manufacturing side, the increasing, the increase in the manufacturing volume and just the leverage that you're getting there. And that's really what's driving it. And as we look ahead, we don't see as great.

Great. Thank you for taking the questions. I'll turn it over.

Your next question is from the line of Laura Mayer with B. Reilly Securities. Laura, please go ahead.

Hi, good morning, Matthew and Greg. So for my first question, the release site's strong demand from key customer accounts. Could you give some color on how concentrated rental growth was this quarter? And then can you like some more color on the customer base broadening among your topics?

Yeah, I think this quarter, a lot of, you know, one of our lives, if anything, that would have.

Do you see the customer base broadening among your top accounts?

Yeah, thank you. Yeah, we do, actually. I think, you know, I touched on it and, you know, build up.

I think going back to the good news with one particular customer, 2025 and here in 26, to get their bug word.

Thanks, I guess a follow-up on that then. How much of the fleet is deployed on transmission and distribution work versus data center site development and other end markets? Could you give a little color there on if there's any update on the change in the mix?

Yeah, Laura, I'll start by saying we have no mats to put. The majority of our products, you know, the rental distribution largely reflects largely domestically on our oil and gas footprint.

Great, thanks.

Your next question comes from Bill DeZellum with Titan Capital Management.

Bill, please go ahead. Thank you. Two questions. The first one is, how are you thinking about additional acquisitions at this point relative to where you're at with the integration of Grasform?

Yeah, Bill, I think we've been consistent with this. We'll continue to look at opportunities that will accelerate the integration with Grasform. recall when we purchased that business, we said there wasn't a lot of integration we wanted to do. It was a business that ran itself very well, had a great team around it. We weren't looking to change that in a material way. And I think the alluding to in the question.

That's exactly right. So you're prepared to move to the next acquisition if it were to present itself, essentially, is what you're saying. And then my second question is relative to the project completions. If we heard you correctly, there were several that were accelerated. Would you walk us through what the dynamics were behind the scenes with that customer and what's happening within them that led to those accelerated completions of projects? If it's just that they have so much work that they're trying to get through things more quickly than originally planned, or if they have priorities that have shifted, help with that would be appreciated.

Yeah, I think putting it into some sort of relativity is important here, Bill. These are projects that have been down almost a year, so we're talking days at the end of several. The ability to accurately call when they're coming up is always dependent on the supply chain labor product. They give us their best, and we just saw days here or there.

Yeah, and I think why it's so critical that you're able – you have the scale and the flexibility to respond because these project timings, you know, both starts and the ends shift around. Some of these projects had been extended previously beyond what they were originally scheduled for, but ultimately you get very limited notice on when that decision is made and you have to respond, you know, the acceleration.

That's helpful. So essentially I have – I've over-indexed to that comment, it sounds like.

Yeah, there was certainly no – it was business as normal, but at that scale.

Great. That's fine. And I'm going to break the rules on the number of questions and ask one more, if I may. Relative to data centers, you said you're currently not deployed on any data centers. Given the amount of electricity that these consume, do you see any burgeoning opportunity to essentially, I guess I'll call them, mini-distribution lines or maybe even mini-transmission lines going from a main trunk off to a data center that's going to lead to any meaningful work for you or are those really too short of distances to be needle movers for you?

Yeah, I mean, I think the way I'd basically connectivity to loads, which I think we need to remind ourselves of the public narrative at this point, but we're also on-shoring manufacturers of load demand on the grid. These large load cases will have to be tied into the grid versus some of behind-the-metre temporary that will accelerate their start-up, and all of that is opportunity.

As it pertains to their cadencing and everything, we'll have to see the way that plays out, but I'd say every large load is going to need to be supplied by a line unless it's sitting right beside it great thank you your next question is from the line of mincho with texas capital securities please go ahead thank you matthew and greg um quick questions here are you um are you trying to lay down mats for greenfield projects or are you still working mostly on brownfield and what could change if that transition starts to occur like do you need more

mass longer rentals or any commentary there please yeah i'd say men the majority of what we're doing is still on existing lines and right-of-ways versus greenfields uh you know i think the major driver for that you know roughly speaking one yeah thank you um and just can you

talk a little bit about what you're seeing in the uk obviously you had some increased product sales there and it looks like the grassworm revenues were pretty much in line with um the first quarter Just anything to note in terms of demand, just overall demand in the U.K. and opportunities?

Yeah, I think that market is playing exactly the way we thought it was. I feel like the demand is still strong there. Our businesses had a slightly softer start to the year than we had planned ourselves, which is largely just the customers getting themselves organized and getting back to work well for us. So the one thing I will say is we did not have...

Perfect. Thank you. Thanks for that clarification. All right. Thank you.

This concludes the Q&A session. I will now turn the call back to management for closing remarks.

Thanks again for joining us on today's call. Should you have any questions or requests, please reach out to us at investors at NPKI.com. And we look forward to hosting you again next quarter.

That concludes today's call. Thank you for attending. You may now disconnect.