Kirby (KEX) Q1 2026 Earnings Call Transcript

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DATE

Thursday, April 30, 2026, at 8:30 a.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — David W. Grzebinski
• Chief Financial Officer — Raj Kumar
• President, Marine Transportation — Christian O'Neil
• Vice President, Investor Relations — Matthew Kerin

TAKEAWAYS

• Earnings Per Share (EPS) -- $1.50 EPS, up 13% year over year.
• Total Revenue -- Marine Transportation segment revenue at $497.2 million, Distribution and Services segment revenue at $347 million.
• Marine Transportation Operating Margin -- 18% for the segment, with Inland and Coastal businesses both in the high-teens range.
• Inland Barge Utilization -- Averaged in the low 90% range, representing improvement versus the prior quarter.
• Coastal Barge Utilization -- Mid-to-high 90% range, with 92% of revenue from term contracts; term contract renewals averaged 20% higher year over year.
• Spot Pricing, Inland -- Low single-digit sequential increase; spot rates now at least 10% above term rates but were down mid-single-digit year over year.
• Distribution and Services Revenue Growth -- 12% increase year over year, but sequential decline of 6% primarily from lower Power Generation shipments.
• Power Generation Performance -- Revenue up 45% year over year with margins in the mid-single-digit range, representing 44% of Distribution and Services revenue.
• Commercial and Industrial Segment -- Revenue up 8% sequentially with operating margins in high single digits, driven by strong marine repair activity.
• Oil and Gas Segment -- Revenue down 25% year over year but up 13% sequentially, with operating margin in the mid-single-digit range.
• Free Cash Flow -- $49.4 million generated in the quarter.
• Share Repurchases -- $52.7 million returned to shareholders via buybacks at an average price of $123.18.
• Acquisitions -- Completed acquisition of 23 barges and three high-horsepower boats in the Inland business for $95.8 million, with $81.4 million paid in the quarter.
• Raised Full-Year EPS Guidance -- New range is up 5% to up 15%, previously flat to up 12%.
• Capital Expenditure Outlook -- Full-year guidance at $220 million to $260 million, with $170 million to $210 million allocated for marine maintenance and facility improvements, and $65 million for growth capital.
• Liquidity and Debt Position -- $58 million in cash, $983.4 million in debt, 22.3% debt-to-capitalization, and $635.4 million in available liquidity following a credit facility upsizing and extension.
• Cash Flow from Operations Guidance -- Expected full-year cash flow from operations of $575 million to $675 million, supporting strong free cash flow forecasts.
• Inland Fleet Size -- 1,124 barges representing 25.1 million barrels of capacity at quarter-end, with slight growth projected for the year.

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RISKS

• Grzebinski stated, "cost escalators and rate recovery mechanisms in our contracts will lag the near-term fuel cost increases during the second quarter," resulting in an estimated $0.05 to $0.10 EPS headwind for inland marine operations.
• Continued "OEM engine availability" constraints in Power Generation and Distribution and Services segments may shift projects and defer $0.10 to $0.15 of EPS from the second quarter to later periods.
• Ongoing "softness in conventional Oil and Gas" markets continues to pressure segment revenues and margins.
• Potential longer-term risk identified by management if Jones Act waivers extend "past a year," which could begin to impact blue water fundamentals if foreign tonnage increases.

SUMMARY

Kirby (NYSE:KEX) management moved the full-year EPS guidance range higher to reflect improved pricing and utilization in core Marine and Distribution and Services operations. Significant year-over-year revenue and earnings growth in Power Generation and high barge utilization rates in both Inland and Coastal segments contributed to this positive revision. The company executed a notable asset acquisition in the Inland business and expanded its revolving credit facility, further strengthening its liquidity position. Capital returned to shareholders through buybacks exceeded free cash flow generated during the period due to the timing of cash outflows, while guidance points to further operational and financial momentum into the second half as known cost headwinds and supply constraints moderate.

• Christian O'Neil highlighted continued "capital discipline" in the industry, noting only 66 barges built last year and an estimated 70 this year have reached "replacement capacity," supporting supply-side tightness.
• Christian O'Neil confirmed that "spot pricing is a good 10% above term pricing," and said this spread "it's probably headed to 15% in the not-too-distant future."
• David W. Grzebinski reported that "term contracts are about 65% of our revenue right now," with 40% of contract renewals weighted to the fourth quarter.
• Management expects "barge utilization was in the low 90% range" to persist, underpinned by strong refinery and petrochemical activity.
• Behind-the-meter power solutions now make up a growing portion of Power Generation backlog, supporting higher expected segment margins into the future.
• Completion of the recent acquisition allowed rapid asset deployment, with barges "working within four hours of the closing."

INDUSTRY GLOSSARY

• Behind-the-Meter Power: Onsite power generation positioned at or near end-use facilities, such as data centers or industrial sites, providing prime or backup electricity independent of the central grid.
• Contract of Affreightment: Legal agreement where a carrier agrees to transport a specified quantity of cargo for a customer over a defined period, as opposed to a single voyage.
• Spot Pricing: Short-term market rates for immediate or near-term transportation services, contrasted with fixed-rate term contracts.
• Term Contract: Longer-duration agreement, typically one year or more, setting predefined transportation rates and terms.
• Jones Act: U.S. federal statute regulating maritime commerce, requiring vessels transporting goods between U.S. ports to be U.S.-built, -owned, and -crewed.

Full Conference Call Transcript

David W. Grzebinski: Thank you, Matt, and good morning, everyone. Earlier today, we announced first quarter earnings per share of $1.50, a 13% year-over-year increase compared to 2025's first quarter earnings per share of $1.33. Our first quarter results reflected improving market fundamentals in marine transportation with utilization and pricing strengthening as the quarter progressed, alongside continued strength in underlying demand for Power Generation in Distribution and Services. While results were partially impacted by weather-related disruptions and navigational delays in our inland marine transportation operations and ongoing OEM-related supply constraints in Distribution and Services, underlying demand conditions remained strong across both segments. Overall, our combined businesses executed well and generated positive momentum entering into the second quarter.

In inland marine, market fundamentals improved throughout the quarter as customer demand strengthened, refinery utilization increased and barge availability remained limited. As expected, operations were impacted by typical seasonal weather, lock delays and other navigational disruptions. However, market conditions became increasingly constructive with barge utilization strengthening as the quarter progressed and averaged in the low 90% range for the full quarter. Spot pricing improved in the low single digits sequentially. Term contract renewals were flat to slightly up year-over-year and pricing momentum continued to build during the quarter. Overall, the inland business delivered strong operating margins in the high-teens range for the quarter, driven by improved pricing and disciplined execution.

Entering the second quarter, demand visibility has continued to improve, supported by strong refinery utilization and improving conditions across petrochemical markets, contributing to strong utilization and improved pricing. Coastal marine transportation fundamentals remained strong throughout the first quarter with barge utilization averaging in the mid-to-high 90% range, which was supported by steady customer demand and limited supply of large capacity vessels. This favorable supply-demand dynamic continued to drive pricing gains with term contract renewal rates rising in the 20% range year-over-year. Our team delivered strong operational execution and maintained a disciplined focus on cost and efficiency, and this resulted in operating margins in the high teens range.

Turning to the Distribution and Services segment results reflected mixed conditions across our end markets with Power Generation remaining a key growth driver. Segment revenues increased 12% year-over-year, but declined sequentially due to OEM engine availability and continued softness in conventional Oil and Gas activity. Operating income increased modestly year-over-year, though declined sequentially as margin performance varied across our businesses. In Power Generation, revenues grew 45% year-over-year from solid backlog execution and significant demand for behind-the-meter power solutions. However, revenues declined sequentially as OEM engine deliveries were lower in the quarter. Operating income increased year-over-year with margins remaining in the mid-single-digit range.

In Commercial and Industrial, revenues increased 8% sequentially and operating margins were in the high single-digit range, supported by strong marine repair activity and disciplined execution. In Oil and Gas, revenues improved 13% sequentially, though results continue to be pressured by softness in conventional oil and gas markets and resulted in margins in the mid-single-digit range. Overall, the segment remains well positioned with steady execution across a diverse portfolio of end markets. In summary, Kirby continues to operate from a position of strength. Marine transportation fundamentals remain constructive with high utilization and improved pricing across both inland and coastal markets.

In Distribution and Services, strong activity in Power Generation and Commercial and Industrial markets continued to offset softness in our conventional Oil and Gas business. With this backdrop, combined with solid execution and ongoing cost discipline, we announced in this morning's press release that we are increasing our EPS guidance range for the year to up 5% to up 15%, which is up from flat to up 12% previously. I will discuss our outlook in more detail on the call. But first, I will turn it over to Raj to discuss the first quarter segment results, balance sheet and capital allocation in more detail.

Raj Kumar: Thank you, David, and good morning, everyone. In the first quarter of 2026, Marine Transportation segment revenues were $497.2 million and operating income was $89.7 million with an operating margin of 18%. Compared to the first quarter of 2025, total marine transportation revenues increased $21 million or 4% and operating income increased $3 million or 4%. When compared to the fourth quarter of 2025, total marine revenues increased 3% and operating income decreased 11%. As David mentioned, typical seasonal winter weather produced a 25% sequential increase in delay days and negatively impacted operations and efficiency in the first quarter. Looking at the Inland business in more detail. The Inland business contributed approximately 79% of segment revenue.

Average barge utilization was in the low 90% range for the quarter, which was an improvement over the fourth quarter of 2025 and in line with the first quarter of 2025. Long-term inland marine transportation contracts or those contracts with a term of one year or longer contributed approximately 65% of revenue, with 56% from time charters and 44% from contracts of affreightment. Improved market conditions resulted in spot market rates moving up in the low single digits sequentially but were down in the mid-single-digit range from a year ago. Our term contracts that renewed during the first quarter were flat to slightly up.

Compared to the first quarter of 2025, inland revenues were flat but increased 4% compared to the fourth quarter of 2025 due to improved market conditions. Inland operating margins were in the high-teens range. Now moving to the Coastal business. Coastal revenues increased 23% year-over-year, driven by strong customer demand and limited availability of large capacity equipment. Overall, Coastal had an operating margin in the high-teens range, benefiting from higher pricing and effective cost management. The coastal business represented 21% of revenues for the Marine Transportation segment. Average coastal barge utilization was in the mid-to-high 90% range, which was in line with both the first quarter of 2025 and the fourth quarter of 2025.

During the quarter, the percentage of coastal revenue under term contracts was approximately 92%. Renewals of term contracts were on average approximately 20% higher year-over-year. With respect to our tank barge fleet for both the inland and coastal businesses, we have provided a reconciliation of the changes in the first quarter as well as projections for the full year. This is included in our earnings call presentation posted on our website. At the end of the first quarter, the inland fleet had 1,124 barges, representing 25.1 million barrels of capacity and is expected to be slightly up in 2026. Coastal Marine is expected to remain unchanged from the first quarter of 2026.

Now I will review the performance of the Distribution and Services segment. Revenues for the first quarter of 2026 were $347 million with operating income of $23.3 million and an operating margin of 6.7%. Compared to the first quarter of 2025, the Distribution and Services segment revenue increased by $37.4 million or 12%, with operating income increasing by approximately $1 million or 3%. This growth was primarily driven by Power Generation and strong marine repair activity.

When compared to the fourth quarter of 2025, revenues decreased by $23.2 million or 6% and operating income decreased by $7 million or 22% as a result of lower power generation shipments due to OEM engine availability, weakness from on-highway repair and continued softness in the conventional frac market. Moving through the segment in more detail. In Power Generation, we continue to see meaningful order activity for the behind-the-meter prime power and backup power solutions for data centers and other industrial applications. This has resulted in continued growth in our backlog. However, engine availability from OEMs is limiting how quickly some of that demand converts to revenue.

Overall, total Power Generation revenues were up 45% year-over-year with operating margins in the mid-single digits. Power generation represented 44% of total segment revenues. On the Commercial and Industrial side, activity was strong in marine repair. And as a result, commercial and industrial revenues increased 1% year-over-year and 8% sequentially. Commercial and industrial made up 46% of segment revenues and had operating margins in the high single digits. In the Oil and Gas market, we continue to see softness in conventional frac-related equipment as lower rig counts and fracking activity softened demand for new engines, transmissions, service and parts throughout the quarter.

Revenue in oil and gas was down 25% year-over-year, but increased 13% sequentially, while operating income was down 53% year-over-year and down 28% sequentially. Oil and Gas had operating margins in the mid-single digits in the first quarter and represented 10% of segment revenue. I will now move to the balance sheet. As of quarter end, we had $58 million of cash with total debt of $983.4 million, and our debt to capitalization ratio was 22.3%. We ended the first quarter with $635.4 million of available liquidity.

During the first quarter, we entered into an amended and restated credit agreement that extended the facility maturity date to March 26, 2031, and increased the revolving credit facility commitments to $750 million, and eliminated the term loan credit facility. During the quarter, net cash provided by operating activities was $97.7 million and capital expenditures were $48.3 million, resulting in free cash flow of $49.4 million. In the first quarter of 2026, Kirby returned $52.7 million of capital to shareholders through share repurchase at an average price of $123.18.

We continue to execute on our focused and disciplined acquisition strategy by agreeing to acquire 23 barges and three high horsepower boats from an undisclosed seller in the Inland Marine business for $95.8 million, of which $81.4 million was paid during the first quarter. With respect to CapEx, we continue to expect capital spending to range between $220 million and $260 million for the year. Approximately $170 million to $210 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and for facility improvements. Approximately $65 million is associated with growth capital spending in both our businesses.

We remain on track to generate cash flow from operations of $575 million to $675 million for the year, resulting in expectations for another year of very strong free cash flow generation. As always, we remain committed to a balanced capital allocation approach using free cash flow to return capital to shareholders while pursuing long-term value-creating investment and acquisition opportunities. I will now turn the call back to David to discuss our full 2026 outlook.

David W. Grzebinski: Thank you, Raj. We are off to a solid start in 2026. Global macro and geopolitical developments, including the Iran conflict, the Venezuelan oil situation and the broader geopolitical uncertainty continue to create near-term variability. That said, the current conditions are proving somewhat supportive for our operations. In Inland Marine, we anticipate positive market dynamics driven by limited new barge construction and strong demand from refining and petrochemical customers. Barge utilization is expected to be in the low 90% range as we move through the year. This is supported by strong -- strong refinery utilization and improving chemicals activity.

However, we do expect near-term cost headwinds in our inland marine operations during the second quarter due to rising fuel, particularly diesel costs. We currently expect the cost escalators and rate recovery mechanisms in our contracts will lag the near-term fuel cost increases during the second quarter, but will ultimately be realized in the following quarters in the second half. As most of you are aware, there is generally a 30- to 120-day delay or lag before term contracts adjust for fuel. We anticipate this timing issue could result in approximately $0.05 to $0.10 of earnings per share impact in the second quarter.

Overall, we expect inland revenues to grow in the low to mid-single digits on a year-over-year basis with margins averaging in the high-teens to low 20% range for the full year. In Coastal Marine, market conditions remain favorable with balanced supply and demand across the fleet. Steady customer demand is expected to continue through the balance of the year with barge utilization in the mid-90% range. While we anticipate elevated shipyard activity in the second quarter, we continue to expect mid-single-digit revenue growth year-over-year and operating margins in the high-teens, driven by gradual pricing improvements as term contracts renew.

In Distribution and Services segment, ongoing demand in power gen and marine repair activity is expected to help offset softness in on-highway service and repair and low levels of Oil and Gas activity with results remaining mixed overall. In Power gen, underlying demand fundamentals remain strong. Results, however, continue to be impacted by engine availability. Delayed OEM engine deliveries continue to contribute to variability. And as a result, we expect approximately $0.10 to $0.15 of earnings per share impact in the second quarter as certain projects shift into the second half of the year due to delayed engine deliveries from OEMs.

As we have discussed in the past, engine availability rather than end market demand continues to be the primary constraint in this business. Within Commercial and Industrial, marine repair demand remains healthy, while on-highway service and repair demand continues to be constrained. In Oil and Gas, results continue to be pressured by lower overall activity as the shift away from conventional frac continues and customers maintain a disciplined approach to capital spend. However, the current Oil and Gas ecosystem may become a potential upside if it persists much longer. Overall, the Distribution and Services segment continues to benefit from its diversified end market exposure and in particular, the power gen ecosystem.

Overall, the company expects segment revenues to be flat to slightly up for the full year with operating margins in the mid-to-high single digits. To conclude, we're off to a solid start in 2026 and have a favorable outlook for the remainder of the year. With a strong balance sheet and solid free cash flow, we continue to allocate capital in a disciplined manner, balancing share repurchases with opportunistic investments and acquisitions. Overall, we expect solid financial performance this year as is reflected in our decision to increase full year EPS guidance, and we see supportive fundamentals driving continued earnings growth beyond 2026 and well into '27 and '28. Operator, this concludes our prepared remarks.

Christian, Raj and I are now prepared to take questions.

Operator: [Operator Instructions] Our first question comes from the line of Greg Lewis from BTIG.

Gregory Lewis: Congrats on a good quarter. Question around the inland barge business. Clearly, it seems like things are strengthening. Like I guess what I'm kind of curious about is what is kind of driving that incremental tightness? Is it those -- it looks like Venezuelan barrels are up over the last couple of months. Crack spreads are obviously higher, so refiners are making more money. Is it -- are we seeing actual incremental volumes? Or is it just everybody else is making more money?

David W. Grzebinski: Yes. Greg, thanks for the question. Yes. No, throughout the quarter, we started January kind of a continuation of what we were seeing in the fourth quarter. the Venezuelan crude was starting to come in. We started to see that as a positive impact. So we started in January pretty strong. And then crack spreads started to gap out and refinery volumes just got really tight. So it built throughout the quarter. And so it's actually more volumes moving. Also, we're very pleased to see some more chemical activity. Some of the chemical companies' supply chains were disrupted in the Middle East, and there's more volumes moving here in the U.S. because of that. It's been very constructive.

We were happy to see it. And the good news is it's continued. We're seeing momentum actually build a little bit right now.

Gregory Lewis: Okay. Great. And then I did have a question, and you kind of called it out about engine availability to kind of keep driving the power gen market higher. Is there any kind of way to think about like Kirby's or KDS' visibility around, like what kind of lead times do you get from the OEMs about engine availability? Is it yes, I'm just trying to understand like clearly, we've raised guidance. We're confident we're going to be getting them. But I'm just kind of curious about that visibility around being able to get engines and turn around and put them in customer hands.

David W. Grzebinski: Yes. We have good visibility through '27. And I would tell you, in certain OEMs we're sold out through '27. So we have a good idea. A lot of it's in the backlog. Some of it we know we've got sales for. The good news here is the engine OEMs are flat out. They're running hard. They're all trying to increase capacity. They're sold out to '29, most of them. So we feel really good about our allocation. We're considered one of the premier system integrators out there, and we continue to get good allocation. It's just really tight. And that's the good news. They're very tight. Everybody wants the engines.

The fun thing for us is it's not just standby diesel applications anymore. It's behind-the-meter. And we love the behind-the-meter stuff. It's more sophisticated. It's highly engineered. We have a great offering in it. We stemmed. It started really with our e-frac offering, but we have a good set of engineering capabilities in behind-the-meter 24/7 power. And the great thing about that is it's going to run -- the equipment is going to run is going to have a repair and parts replacement cycle that's going to come in the outer years. So it's all about good demand that's shifting engine deliveries, and we see that lasting for quite some time.

These behind-the-meter contracts that some of our customers are having, some of them go for seven to, in one case, we know of a 15-year contract. So the co-locators and hyperscalers are not using behind-the-meter power as bridging anymore. This is becoming prime. So we're pretty excited about the way it looks. And when we look at our backlog, behind-the-meter is now eclipsing just standby diesel generation.

Gregory Lewis: Which means a lot more service.

Raj Kumar: I was just going to add, Greg, with the behind-the-meter, as we've always talked about it, the margins are better than the backup stuff, right? And David referenced the service revenue, that's going to be even better margins.

Gregory Lewis: And Raj, I mean, not to paint you in a corner, but any kind of sense you can disclose about -- I mean, when we say better, is it single basis points or tens of basis points?

Raj Kumar: So it's -- this is how I'll describe it. On the behind-the-meter on the prime side, you're probably looking at low double-digit margins. And when I talked about the service revenue, that's -- you're looking at about a couple of years out, that's probably going to be north of that.

Operator: Our next question comes from the line of Ben Mohr from Citi.

Benjamin Mohr Mok: Congrats on the great results and also the raise. Just wanted to piggyback on Greg's first question there, looking at the drivers from crack spread widening, petchem exports, Venezuela heavy crude imports that you mentioned and possibly the Valero fire, bypass moves. Just wanted to get a sense of those contributors. Can you tell us how is it that you're able to raise your EPS target range but maintain your revenue and margin targets? And maybe talk to some of those contributors on what's driving the guide raise, but maintaining the revenue and margin.

David W. Grzebinski: Yes. I mean the revenue and margin -- Ben, thanks for the question. The revenue and margin guidance is a range, and this just moved it up to the higher end of that range, in my opinion. We'll see. The good thing about pricing on the inland side is it does fall through the bottom line. So the margin side is where we'll see it. Anyway, I think the more important thing on the inland is the supply and demand dynamic. I'm going to let Christian give you some color there because that's really what's driving this, the raise and also it portends really well for '27 and '28.

Christian, why don't you give them some color on supply and demand?

Christian O'Neil: Yes, you bet. Thank you, David. Yes, what we see right now is a tremendous amount of momentum that started building in March. We've already referred to the conflict in the Middle East and what that's done to crack spreads and to an awakening in petrochemical margins and activity. Beyond that, the supply side is still in great shape. There were only 66 barges built last year. It's an inexact science. We think maybe 70 on the books for this year. That's replacement capacity. We don't see anybody measurably growing the fleet. And some of that building is for a shipper, their own internal moves, and they're going to retire some older equipment.

So we feel really good about the supply setup. Barges are still very expensive. It's still $4.5 million to build a typical plain vanilla clean 30,000-barrel tank barge. We see capital discipline in the market. And so supply is in a great spot. Beyond the petchem momentum and the refining margins, we see some other nuanced things like on the horizon, the Calcasieu lock will shut down daytime hours only in May. And that's going to be another tailwind for us. That will unfortunately cause some congestion on the Intercoastal Canal, but that is the most highest traffic lock in the inland waterway system, and we'll add a day transit either East or West when that goes down.

So it's a very constructive setup for inland as well as coastal, and we're feeling really good about the momentum we have right now.

Benjamin Mohr Mok: That sounds great. And you mentioned that it portends well for '27, '28. And maybe if I could just ask where could you see your inland and coastal roughly 20% margins and your power gen roughly 5% to 10% margins. Where could they go in a strong market?

David W. Grzebinski: Yes. Look, last really up cycle before people started building, we got to, I'd say, 27% margins for a quarter or so. I think it will be slow and steady. We won't pop there next year. It will take a couple of years, but I certainly believe that we'll go above the last cycle peaks margin on the inland side. I think on the coastal side, it probably won't get that high. The cost structure is a little different, but it certainly can move into the mid-20s in terms of margin. As Christian referenced, there's just no building. It doesn't make sense to build right now. The cost of new barges and the cost of new boats is very expensive.

Rates need to be -- if you have good capital discipline, rates need to be a good 40% above where they are right now to justify new builds. So we look at a slow and steady ramp into '27 and '28. It's hard to predict exactly when we'll get to peak margins. I would just add, in the last couple of years, we had a maintenance bubble. These barges have a 5-year maintenance cycle. So starting at the end of '27, the beginning of '28, we're going to have another maintenance cycle. So things could get pretty sporty in '28. We'll see.

On the power gen margins, as Raj talked a little bit about, behind-the-meter power systems have a higher margin than just standby diesel. So I'd like to see our KDS business get to high single digits and ultimately into the low double digits. But that's going to take some time. It is very mix sensitive. As you've seen, our margins were down a little bit sequentially because of mix. But it should be building. And then when you get to out years, as Raj said, there's the service component that's going to start kicking in. These behind-the-meter running 24/7 engines, they're going to need serious maintenance after about 3, 4 years of running heavy. So that's a long-winded answer, Ben.

I hope it gives you some color.

Benjamin Mohr Mok: Really appreciate that. Long-winded is always great. Maybe if I can squeeze one last one in. Last quarter, you gave that your power gen backlog grew 30% year-over-year. And then you guided to power gen revenue growing 10% to 20% with the bottleneck coming from the OEMs. Could you give us an update on that? Any changes up or down on both those numbers, the 30% backlog growth and the 10% to 20% revenue guide?

David W. Grzebinski: Yes. I think I gave -- I mentioned backlog. We don't want to get into the backlog announcing backlog every quarter, but I gave a range you could drive a truck through, I said $500 million to $1 billion backlog. We may have to update that because we're going to go at the top end of that range, but we're not just ready to do that just yet. But it continues to grow is what I would say. Book-to-bill is well above 1. Things look really positive in the space.

Operator: Our next question comes from the line of Ken Hoexter from Bank of America. Adam Roszkowski on for Ken Hoexter.

Adam Roszkowski: Adam Roszkowski on for Ken Hoexter. I guess to start, maybe just remind us what portion of the inland book is going to reprice in 2Q, 3Q, 4Q? And anything that you're seeing on early renewals, so flat to slightly up, trending better? Any thoughts there?

David W. Grzebinski: Yes. Sure, Adam. Christian and I'll tag team this a bit. As we've indicated in the past, term renewals are very fourth quarter heavy. About 40% of the term portfolio reprices in the fourth quarter. Just to give you some quick numbers, term contracts are about 65% of our revenue right now with the other spot. Christian, do you want to talk some more about the pricing dynamic and how term and spot roll?

Christian O'Neil: Yes. You asked about what the flow is through Q2 and Q3. Excuse as far as renewals.

David W. Grzebinski: Christian got choked up. You choked them up. So sorry, he's got a frog in his throat. Yes, the term contracts, as I said, 40% in the fourth quarter. So the remaining 60% kind of gets spread between the other three quarters. As you would expect, the third quarter is probably heavier than the first and second quarter. In our prepared remarks, we said the term pricing so far was flat to up just slightly. The good news is that spot pricing is a good 10% above term pricing, maybe even more. And that's a healthy market when the spot usually leads term, both on the way up and on the way down.

So we're very constructive about how term contracts should renew throughout the remainder of the year. But the fourth quarter is the bigger piece. I think Christian has got his voice back. Anything you want to add?

Christian O'Neil: No, I think you covered it.

Adam Roszkowski: Glad to have you back, Christian. Maybe just on the recent strength, you mentioned improved conditions in petrochem markets, stronger refinery utilization. Clearly, you called out a Venezuela kind of incremental impact. It sounds like some Middle Eastern activity or flow-through is favoring this as well. So is there any sense of what is being driven by which or how much is being driven maybe by incremental Venezuela impacts or Middle Eastern activity? Any broad thoughts there?

Christian O'Neil: It's hard to exactly kind of put a number on it. I will say we do see moves that we know of from refineries that are chomping through a lot of Venezuelan crude, creating more intermediates and more heavies. We have seen some refiners term up some equipment that has thermal capability, the ability to move the heavier residual barrel. So we definitely have seen the impact, but it's hard to sort of peg the exact amount of crude oil that's going through -- Venezuelan crude oil that's going through any refinery on any given day. So it's just sort of more of a nuance. We see more volumes. We see more intermediates, we see more heavies.

A couple of other interesting demand anecdotes. With the release of the SPR and the Venezuelan crude coming into the Gulf of Mexico, we have seen the traditional crude pipeline capacity that moves crude around the Gulf of Mexico get sort of overwhelmed. So we have seen incremental crude oil barge movements as a result of the pipeline capacity being oversubscribed at this point. Probably not something that goes on in perpetuity, but just thought I would mention it as an interesting demand driver that's sort of tied to Venezuelan crude in your question.

David W. Grzebinski: Yes. I mean shale crude, if you look at WTI, Brent, the spread has opened back up. And generally, when that -- when the spread between WTI and Brent starts to gap out, we start to see some incremental U.S. crude moves. So we watch that. I mean if you're looking for crude moves for us on the inland waterways, just look at that spread and you can pretty much get a feel for where -- what direction it's headed.

Adam Roszkowski: That's helpful. And just one last follow-up. Jones Act waiver was recently extended for another 90 days. It seems like this isn't impacting fundamentals in a major way or at all at this time. But just any thoughts on near or medium-term impacts if this is extended further?

David W. Grzebinski: Yes. I mean the near-term impacts are almost nonexistent, as you would expect, Adam, on the inland side, there's really no foreign tonnage that can come into the inland waterways. So we feel pretty good about that. And as you know, inland is about 80% of our Marine segment. The blue water side is a little different. MR tankers and foreign tonnage can come in and trade. And we have seen it come in a bit. But as you know, we're booked up. Our fleet is essentially 100% contracted on the blue water side. Those contracts run about a year. If waivers go beyond that, we could start to see some impact.

We have seen a number of non-Jones Act moves in the market. I would characterize -- well, let me back up. We know what the administration is trying to do. They're trying to deal with the war. They're worried about national security and military readiness and getting fuel where it needs to be to support their efforts, and we're all for that. But I would say the blanket waivers that are out there, we'd rather see it be a specific waiver. So we have seen some Jones Act moves that I would call arbitrage related where traders are making some money rather than actually serving military readiness. So we watch it.

We're not concerned about it if it's short term, but if it starts to extend past a year, it could have some impact. And I think Christian has some anecdotes about some mariners asking about it. Why don't you hear that?

Christian O'Neil: Yes. No, I think the "elephant in the room", I know I personally have seen no impact on the price of gasoline or I fill up my car as a result of the waiver of the Jones Act. But I have 40 captains in today that I'm going to have lunch with and looking forward to that. I caught up with one this morning, had a cup of coffee. And unintended consequences, I'm sure, is the administration has been a strong advocate for the blue-collar worker, but this captain was worried about the Jones Act Waiver, was worried about his job, was worried about his son that wants to get into the industry.

So these type of things can have a chilling effect on the merchant mariner, which is a real strength of this country and a chilling effect on our ability to recruit and retain. So I think the administration has good intentions, but we certainly don't want to do anything to disincentivize our hardworking merchant mariners. And there's units out there on the West Coast and some other places that have lost jobs to foreign flag tonnage. And I don't -- let's get back to targeted waivers, as David mentioned, if anything, rather than this blanket waiver. Sorry, I can get on a soapbox on this topic. I'm going to get off and get back to the call.

Operator: Our next question comes from the line of Scott Group from Wolfe Research.

Scott Group: So helpful color on spot. I just have a couple of follow-ups. So where is spot trending on a year-over-year basis? And that 10-point spread of spot over contract, I'm just curious, like where did that trough last -- middle of last year when things were challenging. When -- like when a couple of years ago, when things were really, really good in terms of pricing, where was that spread? I just want to put some context around this sort of double-digit spread.

David W. Grzebinski: We'll try and give you some color here. Scott, 10% is a healthy gap above spot. I think when it really gets sporty, it's more like 10% to 15%. Obviously, when it's going down, spots below term. Last year, we -- as you know, we -- third and fourth quarter were a little tighter. And I would say that, that gap was more like 5% to 10%, maybe 7.5% on average, if I had to pick a number. But right now, we're at least 10% and probably growing a bit. And I think Christian can add some more color.

Christian O'Neil: Yes. I think the recent momentum as of March and what we're seeing, the pace at which we're pushing spot rates and achieving that is clipping pretty good, and David pegged it right at 10% and it's probably headed to 15% in the not-too-distant future.

Scott Group: Okay. That's helpful. And then maybe just a little bit of an update on the M&A environment. So we did some tuck-in barge -- acquired some barges. Do you think that's going to continue? Is that more likely than doing something larger? Just any sort of overall thoughts on barge acquisition?

David W. Grzebinski: Yes. Well, Scott, as you know, we love acquisitions in our core businesses, particularly in the inland space. Our ability to integrate them is really powerful. I think Christian had this latest little tuck-in integrated within four hours.

Raj Kumar: That's right.

David W. Grzebinski: All the barges were working within four hours of the closing. So we love those inland transactions. We're always looking at them. We still have 25 or so competitors out there. We'd be happy to buy any one of them. But we remain very capital disciplined. And so there's always a bid-offer spread. Predicting a larger one is difficult at best. We certainly have the balance sheet capacity for it. You'll -- you'll see like our debt-to-EBITDA is probably 1.1, 1.2. So we have plenty of balance sheet capacity. Raj upped our revolver from $500 million to $750 million. We'd certainly -- well, we're always looking at acquisitions. We're certainly open-minded to them.

But I would just add on capital deployment, as Raj mentioned in his prepared remarks, we -- as we generate free cash flow, if we can't put it to work in a good acquisition, you'll see us buy back our stock. We like our stock where it's at, and we're happy to deploy our free cash flow back that way. That said, we always do prefer acquisitions, particularly in the inland space, but any of our core businesses, we are always looking. It's just hard to predict though, Scott.

Scott Group: Okay. And then one last thing. I apologize if I missed this during the prepared comments. So I know you said there's going to be some pressure on coastal margins in Q2, but any sort of color around like the magnitude of that or maybe just overall sort of margin expectations for the quarter?

David W. Grzebinski: Yes. We just have a -- actually, we got -- our margins in the first quarter were a little better in coastal. One of the big units moved from first quarter into second quarter. And as you know, these big units can run $60,000 a day. So when they're out, they can be impacted. I don't have good guidance for coastal on the margin. I think maybe Raj and Matt can give you some color there.

Raj Kumar: Yes. I think, Scott, I mean, it depends on the shipyard, right? How long the shipyard is going to last for. And as David mentioned, this could be quite long. What we do well is we try and manage the duration of the shipyard, working very closely with them, and we do a very good job. We had some good progress last year. I think we talked about it the last time where in the Q2, Q3 time frame, we were able to get out of the shipyard quicker than what we expected. We'll see how it goes in Q2, but that's what we're going to do. We control what we can control.

Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back to Matt Kerin for closing remarks.

Matthew Kerin: Thank you, James, and everyone on the call for participating in our call today. If you have any additional questions or comments, please feel free to contact me. Thank you, and have a good day.

Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

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