Newpark Resources, Inc. (NR) is a geographically diversified supplier providing environmentally-sensitive products, as well as rentals and services to customers across multiple industries. The company operates through two reportable segments: Industrial Solutions and Fluids Systems.

Financials

In the first quarter of 2024, Newpark Resources reported revenues of $169.1 million, a decrease of 15% compared to the prior year period. Net income for the quarter was $7.3 million, up 30% year-over-year. Operating cash flow for the quarter was $12.0 million, while free cash flow was $-1.9 million. For the full year 2023, the company reported revenues of $749.6 million, net income of $14.5 million, operating cash flow of $100.0 million, and free cash flow of $70.8 million.

Business Overview

Industrial Solutions Segment

The Industrial Solutions segment, which generated 29% of consolidated revenues and 65% of segment-level operating income in the first quarter of 2024, provides temporary worksite access solutions, including the rental of the company's manufactured recyclable composite matting systems, along with related site construction and services. This segment has been a key driver of Newpark's growth in recent years, benefiting from robust demand in the power transmission, pipeline, and renewable energy markets.

In the first quarter, Industrial Solutions revenues decreased 12% year-over-year to $49.0 million, primarily due to lower product sales. However, rental and service revenues remained relatively stable, declining only 3% compared to the prior year period. The segment's operating margin improved to 26.4% in the quarter, up from 25.9% in the prior year, driven by a more favorable sales mix and operating leverage.

Fluids Systems Segment

The Fluids Systems segment, which generated a significant portion of consolidated revenues and 35% of segment-level operating income in the first quarter, provides drilling and completion fluids products and related technical services to customers for oil, natural gas, and geothermal projects primarily in Europe, the Middle East and Africa (EMEA), North America, and certain countries in Asia Pacific. This segment has faced headwinds in recent years due to volatility in oil and gas drilling activity, particularly in the United States.

In the first quarter, Fluids Systems revenues decreased 17% year-over-year to $120.1 million, driven by a 41% decline in North America, partially offset by a 22% increase in international revenues. The segment's operating margin improved to 5.7% in the quarter, up from 2.4% in the prior year, due to a more favorable regional mix, improved pricing, and cost reduction initiatives.

Outlook

Looking ahead, Newpark Resources remains highly constructive on the long-term demand outlook for both its Industrial Solutions and Fluids Systems segments. Within Industrial Solutions, the company expects full-year 2024 revenues in the range of $230 million to $240 million, with segment adjusted EBITDA of $80 million to $85 million. For the Fluids Systems segment, the company anticipates second quarter revenues to be 15% to 20% lower year-over-year, with segment adjusted EBITDA margins in the low to mid-single digits.

Recent Developments

The company continues to prioritize investment in the growth of its Industrial Solutions rental fleet, with 95% of first quarter capital expenditures directed to this segment. Newpark also remains committed to a returns-focused capital allocation strategy that includes a combination of internal investment, inorganic growth, and return of capital to shareholders. In February 2024, the company increased its remaining share repurchase authorization to $50 million.

Conclusion

Newpark Resources' diversified business model, focus on high-growth end markets, and disciplined capital allocation strategy position the company well for continued success.

Liquidity

The company's strong liquidity, with $37.7 million in cash and $110.0 million in available borrowing capacity under its Amended ABL Facility as of March 31, 2024, further supports its ability to execute on its strategic priorities.