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NR

NEWPARK RESOURCES INC (NR)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered consolidated revenue of $179.0M, GAAP diluted EPS of $0.09, and adjusted diluted EPS of $0.12; adjusted EBITDA rose to $23.4M (13.1% margin), up both sequentially and year-over-year .
  • Industrial Solutions was the standout: revenue $66.8M (+36% QoQ, +39% YoY) driven by a record $30M in product sales and stronger rental revenue; segment adjusted EBITDA margin was 37.1% .
  • Fluids Systems revenue was $112.2M with adjusted EBITDA margin of 4.6%; Eastern Hemisphere and Canada remained strong, while U.S. activity stayed soft; management reiterated commitment to complete the Fluids sale and continues to incur related transaction costs .
  • Guidance for FY 2024 Industrial Solutions was reiterated (revenue $230–$240M, adjusted EBITDA $80–$85M, CapEx $30–$35M); Q3 rental/service expected seasonally softer with modest YoY growth; free cash flow was strong ($21.9M) and net leverage fell to 0.3x—key catalysts included the record product sale and returns-focused capital allocation .

What Went Well and What Went Wrong

What Went Well

  • Industrial Solutions delivered a record $30M in product sales (utility sector–led) and strong rental revenue, lifting segment margins to 37.1%; management highlighted a continued customer shift from timber to composite DURA-BASE mats .
  • Consolidated adjusted EBITDA rose 18% YoY and 10% QoQ, with free cash flow of $21.9M and operating cash flow of $27.6M, supporting reduced net debt and 0.3x net leverage .
  • Strategic positioning: CEO emphasized multiyear demand tailwinds from grid hardening, onshoring, and AI data centers, underpinning long-term worksite access demand; reinforced capital allocation priorities including $50M remaining repurchase authorization .

What Went Wrong

  • Fluids Systems U.S. operations remained soft with lower market share and reduced average rig revenue contribution; segment adjusted EBITDA margin fell to 4.6% amid lower volume .
  • Service revenues declined due to mix and deliberate deprioritization of low-margin service-heavy projects; rental/service combined revs posted only 3% sequential growth and -9% YoY .
  • Project timing delays (permitting and non-matting supply chain issues) impacted utilization late in the quarter; management expects seasonally softer Q3 rental/service activity due to summer grid dynamics .

Financial Results

Consolidated Results vs Prior Quarter and Prior Year

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$183.3 $169.1 $179.0
GAAP Diluted EPS ($USD)$0.02 $0.08 $0.09
Adjusted Diluted EPS ($USD)$0.08 $0.10 $0.12
Adjusted EBITDA ($USD Millions)$19.8 $21.3 $23.4
Adjusted EBITDA Margin (%)10.8% 12.6% 13.1%

Segment Breakdown

Segment MetricQ2 2023Q1 2024Q2 2024
Fluids Systems - Revenues ($USD Millions)$135.2 $120.1 $112.2
Fluids Systems - Operating Income ($USD Millions)$2.0 $6.8 $2.3
Fluids Systems - Adjusted EBITDA ($USD Millions)$8.8 $8.6 $5.2
Fluids Systems - Operating Margin (%)1.5% 5.7% 2.1%
Fluids Systems - Adjusted EBITDA Margin (%)6.5% 7.2% 4.6%
Industrial Solutions - Revenues ($USD Millions)$48.1 $49.0 $66.8
Industrial Solutions - Operating Income ($USD Millions)$12.8 $12.9 $19.4
Industrial Solutions - Adjusted EBITDA ($USD Millions)$18.1 $18.0 $24.8
Industrial Solutions - Operating Margin (%)26.6% 26.4% 29.0%
Industrial Solutions - Adjusted EBITDA Margin (%)37.7% 36.8% 37.1%

Cash Flow and Balance Sheet KPIs

KPIQ2 2023Q1 2024Q2 2024
Operating Cash Flow ($USD Millions)$7.4 $12.0 $27.6
Free Cash Flow ($USD Millions)$0.6 ($0.8) $21.9
Balance Sheet KPIQ1 2024Q2 2024
Total Debt ($USD Millions)$77.4 $58.0
Cash and Equivalents ($USD Millions)$37.7 $35.1
Net Debt ($USD Millions)$39.7 $22.9
Net Leverage (x)0.5x 0.3x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Industrial Solutions Revenue ($USD Millions)FY 2024$230–$240 $230–$240 Maintained
Industrial Solutions Adjusted EBITDA ($USD Millions)FY 2024$80–$85 $80–$85 Maintained
Industrial Solutions CapEx ($USD Millions)FY 2024$30–$35 $30–$35 Maintained
Rental & Service ActivityQ3 2024N/ASeasonally softer; modest YoY growth expected New quarterly color
Fluids Systems Revenues/ProfitabilityQ3 2024N/AMore in line with Q1; Canada rebound, modest U.S. share gains New quarterly color

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023 and Q1 2024)Current Period (Q2 2024)Trend
AI/data centers & grid investment tailwindEmphasis on utilities transmission spend and multi-year tailwinds Continues to underpin long-term Industrial Solutions demand strategy Positive/Stable
Permitting & supply chain impactsProject delays due to steel supply and permitting in late 2023; timing swings noted Time from close to commencement elongating; 1–2 projects delayed; overall pipeline building Mixed: demand strong, timing elongated
Product vs rental/service mixQ1: rental strength; product sales timing; margins expanded Record product sales ($30M); rental up; service lower intensity by design Product mix elevated this quarter
Regional Fluids trendsEastern Hemisphere and Canada strength; U.S. softness Eastern Hemisphere near-record, Canada seasonal drop (still best Q2), U.S. modest sequential improvement but -46% YoY International strong; U.S. weak
Capital allocation & repurchases2023: $32M repurchases; 0.5x leverage; focus on rental fleet $50M remaining authorization; net leverage 0.3x; FCF building liquidity for inorganic growth or buybacks after Fluids sale Flexibility improving
Geographic expansion (U.S./U.K.)Midwest/Northwest expansion plans; 12–18 month ramp examples $5M deployed to U.K. fleet expansion; continued U.S. coverage build-out Execution underway
Pipeline/backlog visibilityQuote rates up mid/high teens; backlog/pipeline driven outlook Strong quoting; larger projects building; some timing elongation Growing, with longer duration

Management Commentary

  • “Our second quarter results were very pleasing with sequential 6% improvement in revenues and a 10% improvement in adjusted EBITDA…record $30 million of product sales” (CEO Lanigan) .
  • “We believe…onshoring…and growth in AI data centers will provide a significant and sustained investment cycle in the electrical grid…creating long-term demand for our worksite access solutions” .
  • “We are reiterating our full-year 2024 financial guidance for our Industrial Solutions segment…generated free cash flow of $22 million…net leverage declined to 0.3x” .
  • “We have $50 million remaining on our share repurchase authorization…which we expect to resume following the completion of the fluids sales process” .

Q&A Highlights

  • Product sales sustainability: $30M sale was primarily to a large customer historically using wood mats, signaling broader timber-to-composite conversion momentum .
  • Service intensity: Lower service revenues reflect deliberate deprioritization of low-margin, service-heavy projects and partner-led service contributions in rentals, not pressure in core service mix .
  • Fluids sale costs: Transaction-related expenses will continue until process concludes; timeline extended beyond mid-year due to global complexities .
  • CapEx cadence: ~$19M Industrial Solutions CapEx in H1, >$17M into mat fleet; FY range $30–$35M maintained .
  • Market growth vs share gain: Mat market growth viewed at 8–10%; anything above implies share gains from timber; product sales mix spike this quarter seen as non-structural .

Estimates Context

  • Wall Street consensus (S&P Global/CIQ) for Q2 2024 revenue and EPS was unavailable at time of analysis due to missing CIQ mapping for NR; therefore, estimate comparisons could not be included [SpgiEstimatesError: Missing CIQ mapping for ticker 'NR'].
  • Given strong actuals (adjusted EPS $0.12; revenue $179.0M), estimate revisions may skew upward in Industrial Solutions and remain cautious in Fluids U.S. until activity rebounds .

Key Takeaways for Investors

  • Industrial Solutions is the engine: record product sales, rising rental revenues, and resilient 37.1% adjusted EBITDA margin support the pure-play specialty rental strategy; pipeline and larger projects are building despite timing elongation .
  • Fluids Systems is a drag in U.S. but strong internationally; management expects Q3 segment results closer to Q1 with Canada’s seasonal rebound and modest U.S. share gains—watch for sale completion timing and associated costs .
  • Cash generation and balance sheet strength are improving: Q2 FCF $21.9M, net leverage 0.3x, providing optionality for inorganic growth and share repurchases post-Fluids sale .
  • Near-term setup: Q3 seasonality implies softer rental/service activity; stock catalysts include Fluids sale milestones, continued timber-to-composite conversion wins, and execution on U.S./U.K. fleet expansion .
  • Medium-term thesis: multiyear grid investment (including AI/data centers) and utility T&D spend underpin demand for worksite access solutions; vertically integrated DURA-BASE and recycling economics enhance returns .
  • Risk watch: permitting/supply chain timing, U.S. Fluids activity softness, and service mix normalization could introduce quarterly lumpiness; management is prioritizing margins and return on capital over low-quality revenue .
  • Actionable: favor Industrial Solutions exposure, monitor Q3 seasonal dynamics and Fluids sale updates; re-rate potential on sustained margin performance and capital returns post-divestiture .