Good morning, and welcome to TETRA Technologies Fourth Quarter 2024 Results Conference Call. All participants are in listen-only mode. If you require operator assistance, please press star zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star one on your touch-tone phone. To withdraw your question, please press star two. Please note that this event is being recorded and I would now like to turn the conference over to Julian Higuera. Please go ahead, sir.

Good morning, and thank you for joining TETRA's fourth quarter and full year 2024 results call. For today's call are Brady Murphy, Chief Executive Officer, and Elijio Serrano, Chief Financial Officer. I would like to remind you that this conference call may contain statements that are or may be deemed to be forward-looking, including projections, financial guidance, profitability, and estimated earnings. These statements are based on certain assumptions and analysis made by TETRA and are based on several factors. These statements are subject to several risks and uncertainties, many of which are beyond the control of the company. You are cautioned that such statements are not guarantees of future performance and that actual results may differ materially from those projected in the forward-looking statement. In addition, in the course of the call, you may hear references to EBITDA, adjusted EBITDA, adjusted EBITDA margins, free cash flow, net debt, net leverage ratio, liquidity, returns on net capital employed, or other non-GAAP financial measures. Please refer to yesterday's press release or to our public website for reconciliations of non-GAAP financial measures to the nearest GAAP measures. These reconciliations are not substitutes for financial information prepared in accordance with GAAP and should be considered within the context of our complete financial results for the period. In addition to our press release announcement, we encourage you to refer to our 10-K that we filed yesterday. I'll now turn it over to Brady.

Thank you, Julian. Good morning, everyone, and welcome to TETRA's fourth quarter and full year 2024 earnings call. I'll summarize some highlights from our fourth quarter and full year results, discuss the current outlook, and provide an update on our strategic initiatives before turning the call over to Elijio to discuss more details on the fourth quarter and some views on 2025. Our fourth quarter results were overall in line with our expectations as strong offshore and industrial chemicals performance mostly offset a weaker-than-expected year-end slowdown for our U.S. land operations. Adjusted EBITDA margins of 17% improved from 16.6% in the third quarter and from 15.8% in the fourth quarter of 2023, despite lower revenue quarter on quarter and year on year. Contributing to our strong offshore performance in the fourth quarter, we executed thirteen deepwater completion jobs compared to eleven in the third quarter, while our industrial chemicals business achieved a record revenue and adjusted EBITDA for the fourth quarter. Our Water and Flowback segment achieved EBITDA margins of 13.8% and was impacted by a more severe than normal year-end completion slowdown. Although both rig count and frac fleet count are down more than double digits from last year, the volume of produced water continues to increase. In the fourth quarter, we achieved a record volume of 89 million barrels of treated and recycled produced water for frac reuse. Our primary focus and capital allocation for this segment will continue to be on solutions for produced water treatment and recycle, including desalination for beneficial reuse. For the full year, our Completion Fluids and Products segment revenue was down 1% but grew EBITDA by 2% year over year, driven by a strong performance in our industrial chemicals business. Total year completion fluids and products revenue of $311 million was the second highest since 2015 when we completed two large CS Neptune projects in the Gulf of America. Our industrial chemicals business had an excellent year achieving its highest revenue and adjusted EBITDA in our company's history, with 2024 revenue growth over 2023 of over 9%. Our industrial chemicals business represents 22% of TETRA's total revenue. This year and into the future, we expect to ramp up meaningful volumes of zinc bromide-based electrolyte and so we expect this percentage to continue to increase. Our diversification of calcium chloride markets continues to increase, including grades for food, agriculture, paper, industrial applications, the more seasonal demand for deicing and dust binding plus a growing demand for technology, including chip manufacturing. The superior purity level of our zinc bromide allows us to participate in the long-duration energy storage electrolyte market as evidenced by our first batch of PureFlow-based electrolyte shipments to Eos Energy Enterprises in the fourth quarter. Our leading market positions in Northern Europe and the US give us stable markets in which to operate, with predictable revenue and earnings and strong free cash flow, allowing us to reinvest in our new high-growth business opportunities. Looking back on 2024, we made some strategic investments that are paying off as we head into 2025. Capital investments and expansion of our capacity in Brazil are supporting a large deepwater completion fluids award, which starts in the second quarter of 2025. Investments in the Gulf of America have led to increased deepwater activity for us, including a three-well TETRA CS Neptune project currently ongoing. We just completed the first of the three wells and will begin the second well shortly. Inventory ramp-up for both of these projects contributed to a year-on-year working capital increase of $21 million, but the combined CapEx and working capital investments are expected to be earned back more than dollar for dollar in the first six months of 2025. Turning to our Water and Flowback Services segment, 2024 proved to be a challenging year. Operator consolidation as well as low natural gas prices contributed to a decline in the rig count and frac fleets by 17% and 30%, respectively, over the past two years. Our water and flowback focus remains in two areas. First is deploying relatively low-dollar capital to automate our existing fleet of water management and flowback assets, including Sandstorm, to lower labor costs and increase margins and, second, focusing on recycling treatment and desalination of produced water for beneficial reuse. We believe that we are industry leaders in both of these areas, which we expect over time will improve margins and give us a significant path to grow through desalination. Looking ahead to 2025 for water and flowback, expect revenue to remain flattish while increasing margins by enhancing operational efficiencies, including automation enabling us to maximize capital returns and generate substantial cash flow. Earlier this month, I had the pleasure of being a keynote speaker at the well-attended 35th Annual Produced Water Society Conference in Houston. The main topic of focus for the conference is the industry challenge dealing with over 23 million barrels per day of produced water in the Permian Basin. It is clear that downhole pore pressure and water disposal wells are filling up. Disposal well pressures are increasing, and potentially more regulatory restrictions are coming. The best long-term solution for this problem is reducing the volumes of water for disposal and desalinating the water for beneficial reuse, including industrial, agriculture, and irrigation purposes. I discussed TETRA's commercial offering, TETRA OASIS Total Desalination Solution or TDS, as a comprehensive end-to-end desalination solution for beneficial reuse and emphasized the added benefit of recovering essential minerals from produced water as part of the process. Our recent announcement of TETRA OASIS TDS has been very well received and our blue-chip customer engagement continues to grow broader and deeper. Although we expect favorable gas prices will contribute to pockets of increased activity in 2025, we will limit our capital investment to automating our current business assets and expect to deploy multiple pilot projects for desalination. In total, we're expecting a very strong start to the year in 2025. The combination of a strong Gulf of Mexico market, three-well Neptune project, the start of the Brazil Deepwater work, increased Eos electrolyte deliveries, and our seasonal second-quarter European peak has us projecting a significant year-over-year increase in both revenue and EBITDA in the first half of 2025, as detailed in our Q4 press release. We project net income before taxes between $19 million and $34 million and adjusted EBITDA between $55 million and $65 million for the first half of 2025, levels approaching or exceeding a ten-year record high for the company. Moving on to our strategic initiatives. Regarding our bromine Arkansas project, we have secured power for the project. We've completed the plus or minus ten percent front-end engineering design and prepared the plant site for the next phase of construction. As communicated previously, we're in discussions with multiple elemental bromine suppliers for a bridging supply agreement. The purpose of the bridging supply would give us more flexibility on timing for capital spend, give us more opportunity to accumulate cash from operations, and allow us to execute a staged approach. Target initial bromine production of approximately two-thirds of the published definitive feasibility study volumes. To ensure that we find the most capital-efficient alternative, we're also exploring scenarios where we could dovetail our upstream operations and investments with our lithium neighbors, which could significantly reduce our overall project capital investment. We will continue to communicate our progress and actions with this critical long-term low-cost bromine supply investment as we achieve various milestones. For our lithium opportunity and project, we and our partners have completed the plus or minus ten percent FEED studies as well. We believe the lithium OPEX from the plant could be more competitive than current hard rock mining operations. But as owners of 65% of lithium resources in our evergreen unit, we're waiting for the royalty decision and a firm review of future lithium prices before publishing financial studies. Longer term, we anticipate a rebound in lithium prices that will support our increased investment in supply, particularly from the US. Our team along with our evergreen unit partners remain focused on completing all necessary engineering studies to fully define the economics of this opportunity. In the meantime, we're prioritizing strategic initiatives that can immediately impact our near-term results. These initiatives include deploying CS Neptune in the Gulf of America, shipping TetraPure to Eos Energy Enterprises, and further advancing our water desalination commercial pilot unit initiatives that we expect to evolve into longer-term contracts for commercial desalination plants. Now I'll turn it over to Elijio to provide some additional commentary on the financing and our financial results, then we'll open it up for questions.

Valuation allowance for our deferred taxes. We've mentioned in the past that we have tax loss carryforwards that can offset taxable income in the United States. We had previously established a reserve against that asset given our prior uncertainty in the timing of using those NOLs, or net operating loss carryforwards. Our taxable income in the United States over the past three years has been almost $100 million following the recovery from COVID and strong performance of our US business. Without the NOL, we would have likely paid over $20 million in US cash income taxes in the past three years. Given the three-year cumulative profits, we performed an analysis and reviewed our projections with our auditors and came to the conclusion that there's a high likelihood that we will be using our NOLs in the coming years. Therefore, we eliminated the valuation allowance we have previously established. Our NOLs can offset approximately $345 million of US taxable income in the coming years and save us approximately $97.5 million of cash taxes in the United States. This assessment and adjustment reflect our confidence in the performance of our US business driven by the strong activity in the Gulf of Mexico, strong US calcium chloride business, profitability results from our US oil and gas business, and the growing long-duration battery electrolyte business. On a go-forward basis, when modeling our projections, one should assume a tax rate of between 31% to 33% in computing TETRA net income and earnings per share. However, our cash taxes will only be around $6 to $7 million per year for taxes we pay overseas. We'll provide periodic updates on how rapidly we are using our deferred tax assets to offset the $345 million of NOLs. The more profitable we become in the United States, the higher the fall-through is to cash flow from utilizing our NOL. For example, we mentioned that we sold our investment in Kodiak in the first quarter for approximately $19 million. The tax basis for our shares in Kodiak was quite low. Therefore, we realized the entire $19 million in cash proceeds by partially using our NOL without any taxes due to that capital gain. On cash flow, we made significant investments in fixed assets and inventory for our offshore business. Those CapEx and working capital investments were higher than what we would normally have made. That contributed to a slightly negative base business free cash flow in 2024. Those investments were to prepare us for the CS Neptune three-well project and the Brazil multi-well multi-year project that are expected to contribute to strong free cash flow in the first half of 2025. For 2025, we expect interest expense of approximately $20 million, capital expenditures for the base business of between $30 and $35 million, which are below the amounts of 2024, and as I mentioned, cash taxes of approximately $6 to $7 million. Depending on your assumptions for a total year 2025 EBITDA, we have the opportunity to generate over $50 million of free cash flow in 2025 from the base business. We provided guidance for the first half of 2025 as we believe that when others in the industry are looking at weaker first half 2025 results versus a second half of 2024, we are showing a strong sequential improvement in our adjusted EBITDA. Our first half projections are underpinned by the three-well Neptune project, the start of the Brazil deepwater project, our seasonally strong European calcium chloride business, and the continued improvement in the other businesses. On the Neptune project, the first well has been completed and will soon ship fluids to the second well. The timing of the projects between the first quarter and the second quarter is uncertain, that's why we gave first half of the year guidance instead of guidance individually for the first and second quarters. With respect to Arkansas, we reduced our investments in Arkansas in the fourth quarter to less than $1 million. From the free cash flow being generated from the base business, then we will make a determination of how much of that we will spend in Arkansas in 2025. As Brady mentioned, we're looking for the most capital-light solution to source additional cost-effective bromine volumes to meet our deepwater demands and to meet the ramp-up in electrolytes required by Eos. If we source adequate volumes in the immediate years, we will delay or defer building a bromine plant in Arkansas or we'll space it out over multiple years, allowing us to fund it from the base business free cash flow without taking on any debt. Our objective is to keep our leverage ratio below two times and invest with base business free cash flow. As we make progress in our bromine bridging agreements, we'll communicate what firm arrangements have been agreed upon. In the meantime, we'll continue to negotiate for the best alternatives. At the end of December, cash on hand was $37 million, and total liquidity as of yesterday was almost $207 million. We sold our Kodiak shares at a near-record high for Kodiak share price and above yesterday's closing price. This is the second time that we've been able to appropriately time the sale of shares that we sell in publicly traded companies. I'll turn this back over to Brady for closing comments before we open it up for questions.

Thank you, Elijio. As you can see, we're very excited about what we have in front of us. As we enter 2025, we're pleased with the decisions that we've made for the business in the past few years. Sometimes these decisions take patience, but they are paying off in a big way. Expanding our deepwater presence and market share in key markets, staying diligent on the Neptune pipeline of projects that slowed during COVID but are now moving forward, expanding our core aqueous chemistry in the long-duration energy storage electrolyte, and focusing on produced water treatment and recycling. All of these are paying off in the first half of 2025 and beyond. Still to come is the benefit of expanding our water recycling offering for desalinating produced water, positioning ourselves for a high volume, low-cost supply of bromine to meet our growing opportunities, and developing partnerships for future lithium production. With that, we'll open the call for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, please press star one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing any key. To withdraw your question, please press star two. Once again, star and one if you wish to ask a question. At this time, we'll pause momentarily to assemble our roster. And we will now take the first question. This comes from the line of Kurt Hallead from Benchmark Company. Please go ahead. Your line is now open.

Good morning, guys. Thanks for that summary. Brady, question for you. There's been a lot of fits and starts and maybe some frustrations with respect to timing on some of these emerging growth opportunities over the past year or so. As you look into 2025 and after discussions with potential customers for water, desalination, and electrolytes, how do you think about the evolution of those businesses for this year? Which one do you think has the opportunity to have some element of a meaningful contribution to 2025?

Thanks, Kurt. In the first half of 2025, we're seeing benefits from the longer-term projects we've been pursuing. CS Neptune is something we've done in the past, and the pipeline we've been tracking is now coming into focus and fruition. Regarding Eos, I don't want to speak for them, but if you look at their investor presentation in January, they're projecting to meaningfully ramp up volumes of their batteries, which is material for us in 2025. On water desalination, this is a long-term venture. We are encouraged by the blue-chip customers we are in discussions with. We will be operating several pilots in 2025. We expect to be one of several providers operating pilot operations in 2025, but we do not expect commercial-scale desalination for beneficial reuse until 2026. That's our current expectation. We've broadened our engagement beyond the original NDAs with major operators in the Permian to include a major midstream player that is evaluating beneficial reuse as part of their future offering. Regarding the bromine plant, we intend to construct it when the timing is right. As Elijio mentioned, we are looking at alternatives to fund it through our own cash flow. That may mean deferring or staging the build and securing bridging supply agreements to provide bromine volumes in the near term. Once in operation, a bromine plant will provide a significant benefit through volume and low-cost bromine supply, and lithium follows after that. Overall, we're pleased with the cadence and see a bright future ahead.

Appreciate that color, Brady. For Elijio, if you take the numbers you provided in terms of free cash flow and back that up into EBITDA, getting to at least $100 million of EBITDA on a full-year basis with something around $60 million in the first half, that would suggest at least $40 million in the back half. What gives you conviction in at least $40 million in the back half, and what could be the variances that could push you higher than that?

We don't traditionally provide full-year guidance unless we're moving in a direction different from the rest of the industry. For the first half, we clearly have visibility with the best offshore backlog in the company's history, and we're very comfortable with the projects occurring in the first half. It's difficult for anyone in the industry to have full visibility into the second half. However, with our deepwater initiatives, including the Brazil multi-year program, the ramp-up of electrolyte sales, and the other initiatives we've taken, we have a high degree of confidence we will continue to perform better than the industry. For the full year, we expect high single-digit to low double-digit top-line growth, and we think our margins will continue to hold in the current range, if not slightly above.

Appreciate that. Thank you, guys.

John, can you bring on the next question?

Yes, sir. Thank you. I will now take the next question. And this comes from the line of Tim Moore from Clear Street. Please go ahead.

Thanks. I like the branding of your desalination Oasis solution. I've done a lot of analysis on it. Brady mentioned maybe seven NDAs and a potential midstream customer. What is your capacity for pilot count this year? Can you do four or five pilots? Are there any constraints on the supplier side from the membrane systems?

Good morning, Tim. The lead time for pilots is predominantly driven by the membrane systems. We are in close communication with membrane suppliers and are confident enough to place orders for additional pilot units for 2025. If we had to start from scratch in midyear, it might be a stretch to get additional pilots into 2025, but we have room between now and then to add capacity. We are planning multiple pilots and are coordinating closely with suppliers to ensure availability.

That's helpful. Regarding Brazil, you have a deepwater multiyear program. Do you think the revenue contribution next year could be as large as this year or larger than the North Sea usually?

The Brazil market is typically not a heavyweight brine market, but the contract we have is significant and we are effectively the only heavy brine completion fluid provider in Brazil for this work. We're well positioned based on the investments we've made. The contract spans two years with several wells to be executed this year and next, and we expect revenues to be relatively evenly spaced over the two years. We're encouraged by a trend toward potentially heavier brine completion projects in Brazil and will monitor how they develop.

On the potential bromine development project, you mentioned proximity to supply agreements. How long would lead time be between a board FID and plant start-up construction? Three, four, or five months?

The lead time for a full bromine project is longer than a few months. We've completed significant work already: engineering, securing and preparing the plant site, and sourcing power. We have made considerable progress advancing the project, but we're not at a point to say when the board will approve a final investment decision. We're evaluating timing and alternatives, and we prefer to fund it through our own free cash flow. We'll keep the market posted as we reach a final decision.

Great, Brady. Thanks for the color. That's it for my question.

Thank you. And the next question comes from the line of Bobby Brooks from Northland Capital Markets. Please go ahead.

Good morning, guys. Thanks for taking my question. On the beneficial reuse project Oasis, turning a waste stream into a scarce resource in a water-constrained region, I assume demand for recycled water that meets testing standards is very high, especially with potential data center uses near wellheads. How are discussions with potential customers going compared to last year? Has the mid-December commercial launch of Oasis created more traction? Also, do you have any updates on customer engagement?

Momentum is building for the Oasis solution. Discussions with operators are progressing. This is a complex problem given regulatory issues and logistics. Once water is desalinated for beneficial reuse, there must be logistics to deliver it to end users. We're working through quality, commercial terms, regulatory frameworks, and end-use destinations. The Produced Water Society Conference highlighted this as an industry priority. While these projects take time to work through the details, the level of engagement and quality of potential partners is increasing and we believe the market is moving toward practical solutions.

You mentioned expecting a couple of pilots to kick off this year. Are any of those pilots locked in, or are they still under discussion?

Our confidence level is highest that pilots will start in the first half of 2025. We're actively progressing agreements and preparing to deploy pilot units.

You completed three Neptune jobs in 2024. Internally, how many Neptune opportunities are you mapping out for 2025? Does the first half guide bake in any additional wins?

The first half guidance primarily includes the three-well project currently ongoing in the Gulf of America. We have a pipeline of opportunities we track and engage with customers, but we do not announce awards until they're definitive with drill timing. The pipeline is more visible and clear than it has been for a long time, certainly since COVID.

As a high-level question about the Neptune pipeline, would you say opportunities in 2025 are double last year or about the same pace? Trying to get a sense of pipeline size.

I wouldn't say timing will double year on year, but we expect the cadence to increase. Overall, we expect more Neptune activity in 2025 compared to recent years.

Appreciate it. Congrats on the 2024 results.

Thank you. And the next question comes from the line of Stephen Gengaro. Your line is now open. Please go ahead.

Thanks. Good morning, everybody. Over the last five to seven years, CS Neptune work has been episodic and not a core part of the model. That seems to be changing. For 2025, 2026, and 2027, can we think about that business being a more consistent contributor on a quarterly or half-year basis? How should we think about it at a higher level?

Absolutely. The last CS Neptune job we executed in the Gulf of America prior to the current jobs was Q4 2019, and COVID halted the pipeline in 2020 and 2021. It started moving again in 2022 and 2023, and now the pipeline is progressing. As more Gulf of America wells go into the lower tertiary, which is the high-pressure, high-temperature sweet spot for CS Neptune, we expect more consistent activity. We're also seeing interest in deepwater markets outside the Gulf of Mexico. We have been successful in the UK and Norway on smaller jobs, and now we're getting visibility on larger-scale projects outside the Gulf. I fully expect CS Neptune projects to increase cadence compared to the past.

Thanks. Another question: in two to three years, do you see material changes to the structure of the company to fund operations in bromine and other initiatives, or will the structure be similar? How do you envision the company's segments evolving?

Looking several years out, our industrial chemicals business, including electrolyte, should become a larger portion of the company, particularly when we bring on bromine supply and future lithium. Together, these will make chemicals and industrial products a material part of our business. Deepwater completion fluids will remain a core part of our energy services business, with legs for several years. Our water and flowback business is likely to morph into a desalination-focused business; some traditional water transfer services may change. So I see three future segments: completion fluids, industrial chemicals including electrolytes and associated upstream inputs, and desalination/water reuse.

Final question: for shipments to Eos, what's the time frame between when you ship and when the product is put into batteries? When do you recognize revenue versus when they can ship batteries?

We ship PureFlow electrolyte from West Memphis to Turtle Creek, about a six to eight-hour drive. We book revenue when the product leaves our facility and is sold to Eos. One of the benefits of our arrangement with Eos is that we can produce just-in-time for them. They provide a rolling forecast and visibility, and they're likely using product within a few weeks of purchase. So we have good insight into their needs and timing; within a month after shipment, the fluid is likely going into batteries.

Okay, great. Thanks, Elijio and Brady.

Thank you.

No further questions at this time. I'll hand the call back over to Brady Murphy. Please go ahead, sir.

Thank you very much for your interest. As you can see, we're very excited about our 2025 future and beyond. Thank you for joining us this morning for our call.

Thank you. This concludes our conference for today. Thank you all for participating. You may now disconnect.