NPKI Q1 2026 Earnings Call Transcript

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DATE

Friday, May 1, 2026 at 9:30 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Matthew S. Lanigan
• Senior Vice President and Chief Financial Officer — Gregg S. Piontek

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TAKEAWAYS

• Total Rental and Service Revenues -- $52 million, representing a 4% sequential increase and 20% year-over-year growth, setting a new quarterly record.
• Rental Revenue Breakdown -- 27% year-over-year increase, with 12% attributable to organic growth and $4 million from the Grassform acquisition.
• Service Revenue Growth -- 7% year over year, mainly driven by the Grassform acquisition contribution.
• Product Sales Revenue -- $23 million in the quarter, reflecting an 8% increase over the same period last year and sustained demand from utility customers.
• U.S. Revenue -- $66 million, a 9% year-over-year increase, with utility sector activity accounting for most of the growth and rental revenues up 17%.
• U.K. Revenue -- $9 million, more than doubling year over year, primarily from Grassform.
• Gross Margin -- 36.2%, down from 37.7% sequentially and 39% year over year, with compression mainly due to lower early-quarter rental fleet utilization and, year over year, the ongoing impact of cross-rental costs.
• SG&A Expenses -- $13.2 million, lower than the $15.4 million in the prior quarter and up from $11.7 million a year ago, with $12.5 million from the legacy business and $700 thousand from Grassform.
• Adjusted EBITDA -- $22 million, a 4% sequential and 14% year-over-year increase.
• Adjusted EPS from Continuing Operations -- $0.12 per diluted share, versus $0.13 in Q4 and $0.12 a year ago.
• Cash Flow from Operations -- $21 million, with free cash flow of $5 million and $3 million allocated to share repurchases.
• Rental Fleet Expansion -- Fleet increased by 4% in the quarter, with nearly $15 million of net CapEx invested into rental assets.
• Net Debt Position -- $4 million, comprised of $11 million total debt and $7 million cash at quarter end.
• Available Liquidity -- $148 million under the bank facility for planned strategic and operational investments.
• Manufacturing Capacity Expansion -- Board-approved project to increase production capacity by approximately 50%, requiring $40 million to $45 million of investment over five quarters, with completion targeted by mid-2027.
• Full-Year 2026 Guidance -- Total revenues expected between $310 million and $325 million, and adjusted EBITDA between $92 million and $102 million, reflecting midpoint growth of 15% for revenue and 28% for EBITDA over 2025.
• CapEx Plans -- 2026 net CapEx projected at $75 million to $90 million, including $30 million to $35 million for the manufacturing expansion and $35 million to $45 million for rental fleet growth.
• Q2 Outlook -- Anticipated 20% year-over-year growth in rental and service revenues, with Q2 product sales and gross margin expected to be similar to the prior year’s second quarter.
• Tax Rate and Position -- Q1 effective tax rate of 26%; $40 million in NOLs and credits at year start, expected to constrain cash tax payments over several years.
• Share Repurchase Activity -- $3 million spent on repurchases in the quarter, aligned with commitment to return a portion of free cash flow to shareholders.

SUMMARY

NPK International (NYSE:NPKI) formally raised full-year guidance based on strong underlying customer demand and positive Q1 cash generation. Leadership highlighted continued double-digit rental revenue growth, underpinned by organic expansion and contributions from the Grassform acquisition. The approved manufacturing expansion project is expected to be completed by mid-2027, targeting a 50% increase in production capacity to address anticipated long-term market demand. The cross-rental strategy and ERP system implementation were presented as key operational levers to improve fleet flexibility and enhance efficiency. Company leaders stated that ongoing investment in fleet growth and manufacturing capacity, as well as disciplined share repurchases, remain top capital allocation priorities for the year.

• Matthew S. Lanigan said, "We see this plan giving us plenty of capacity through the end of the decade," when discussing the manufacturing expansion’s expected longevity.
• Lanigan described low single-digit rental rate increases, stating, "we would expect to be able to hold that and maybe add to it moving forward in the year."
• Management attributed expanded U.K. revenues to the acquired Grassform business, with integration expected to be "completed within the next three to six months."
• Lanigan clarified that composite matting represents "roughly a quarter of the market in total" and anticipates only small share shifts as the overall market grows.
• Leadership confirmed monitoring Middle East volatility, but noted, "we have not seen any meaningful impacts to date." in supply chains from conflict-related disruption.

INDUSTRY GLOSSARY

• Cross-rental: The practice of renting assets from third parties to supplement an owned fleet, allowing project flexibility and managing transportation logistics or short-term demand spikes.
• DuraBase: NPK International's proprietary composite matting system used for temporary worksite access, central to rental fleet growth strategy.
• Grassform acquisition: NPK International's 2025 acquisition of Grassform, a provider of access solutions in the U.K., contributing significantly to year-over-year revenue growth and segment expansion.
• NOLs: Net operating loss carryforwards, which can be used to offset future taxable income, reducing cash tax obligations.
• ERP system: Enterprise Resource Planning system, a company-wide software platform for data management and process integration, implemented in Q1 2026 to drive operational efficiency.

Full Conference Call Transcript

Matthew S. Lanigan, our President and Chief Executive Officer. Before handing over to Matthew, I would like to highlight that today’s discussion contains forward-looking statements regarding future business and financial expectations. Actual results may differ significantly from those projected in today’s forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. Our comments on today’s call may also include certain non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our quarterly earnings release, which can be found on our corporate website at npki.com.

There will be a replay of today’s call available by webcast within the Investor Relations section of our website at npki.com. Please note that the information disclosed on today’s call is current as of 05/01/2026. At the conclusion of our prepared remarks, we will open the line for questions. And with that, I would like to turn the call over to our President and CEO, Matthew S. Lanigan.

Matthew S. Lanigan: Thanks, Gregg, and welcome to everyone joining us on today’s call. We are very pleased with our strong start to 2026, which played out in line with our expectations discussed on last quarter’s call. Despite the typical pause in customer projects around the year-end holidays, rental activity accelerated throughout the quarter, with total rental and service revenues setting another quarterly record at $52 million, a 4% sequential and 20% year-over-year increase. Product sales demand also remained robust, contributing $23 million to first quarter revenue. Off the back of our solid execution, we delivered $22 million of adjusted EBITDA in the quarter, representing a 4% sequential and 14% year-over-year improvement.

We are also very pleased with our first quarter cash flow, delivering $21 million of cash flow from operations and $5 million of free cash flow while also expanding our rental fleet by 4%, repaying our revolving credit facility, and using $3 million to fund share repurchases. Overall, Q1 once again demonstrated our consistent strong execution, which we believe is a direct reflection of our commitment to our key strategic priorities. As highlighted last quarter, a key component of our organic growth strategy is our manufacturing capacity expansion effort. Having substantially concluded our project evaluation, our board of directors recently approved our plans to increase our production capacity by approximately 50% from current levels.

We expect to invest $40 million to $45 million over the next five quarters to complete this project, with the goal of bringing the additional capacity online by mid-2027. We are confident that this expansion, along with our continuing debottlenecking initiatives, will support our growth and composite matting market share gains for the foreseeable future. With that, I will turn the call to Gregg for his prepared remarks.

Gregg S. Piontek: Thanks, Matthew. I will begin with a more detailed discussion of our first quarter results, then provide an update on our operational outlook and capital allocation priorities for the remainder of 2026. As Matthew touched on, the first quarter results were in line with our outlook commentary on our Q4 earnings call and reflect the continued momentum in our end markets. It is worth noting that 2026 followed a similar pattern to early 2025, with a seasonal lull in project activity around the year-end holidays, then picking up steam as we progressed through the first quarter. Rental revenues grew 27% year-over-year, reflecting 12% organic growth combined with a $4 million contribution from the Grassform acquisition.

Service revenues grew 7%, with substantially all of the increase coming from the acquisition. Total rental and service revenues were $52 million in the first quarter, achieving another all-time quarterly high, improving 4% sequentially and 20% year-over-year. Product sales activity also remained robust, benefiting from continuing demand from utility companies, generating $23 million of revenues in the first quarter, an 8% improvement from the first quarter of last year. Looking at revenues by geography and sector, our U.S. revenues increased 9% year-over-year to $66 million, including 17% growth in rental revenues, with the utility sector driving the substantial majority of our growth. U.K. revenues more than doubled year-over-year to $9 million in the first quarter, primarily reflecting the Grassform contribution.

Turning to gross profit, the first quarter gross margin was 36.2% compared to 37.7% in the fourth quarter and 39% in the first quarter of last year. The modest sequential gross margin compression primarily reflects the effect of lower rental fleet utilization early in the quarter attributable to the timing of large-scale projects, partially offset by improvements in pricing, while the year-over-year decline also reflects the continuing impact of the cross-rental costs discussed in previous quarters. It is important to highlight here that our cross-rental fleet provides flexibility to support our large project activity and meet our customer commitments, while also helping limit inefficient transportation.

First quarter SG&A expenses totaled $13.2 million compared to $15.4 million in the fourth quarter and $11.7 million in the first quarter of last year. The first quarter result includes $12.5 million from our legacy business along with $700 thousand associated with the Grassform business. As highlighted last quarter, the fourth quarter results included $1.8 million of acquisition-related transaction costs and severance. Income tax expense was $3.6 million in the first quarter, reflecting an effective tax rate of 26%. Adjusted EPS from continuing operations was $0.12 per diluted share in the first quarter compared to $0.13 per share in the fourth quarter and $0.12 per share in the first quarter of last year.

Turning to cash flows, operating activities generated $21 million of cash in the first quarter, including $22 million from net income adjusted for noncash expenses, slightly offset by $1 million of cash used by a net increase in working capital. Net CapEx used $16 million, which includes nearly $15 million of net investment into the rental fleet expansion. We also used $3 million to fund share repurchases. We ended the quarter with total debt of $11 million and total cash of $7 million, for a net debt position of $4 million. Additionally, we have $148 million of availability under our bank facility, providing us with ample financial flexibility to continue executing on our strategic growth objectives, including our manufacturing expansion.

Now turning to our business outlook, as disclosed in yesterday’s press release, our customers remain highly constructive on the near- and longer-term outlook for utilities and critical infrastructure spending. With the benefits of our first quarter results and near-term expectations, we have raised the range of our full year 2026 outlook, now anticipating total revenues of $310 million to $325 million and adjusted EBITDA of $92 million to $102 million. The midpoint of our range reflects 15% revenue growth and 28% adjusted EBITDA growth over 2025. Our revenue guidance continues to reflect double-digit organic rental revenue growth along with the contribution from the Grassform acquisition, while product sales remain relatively in line with 2025 levels.

In terms of CapEx, outside of the manufacturing expansion project, there are no other changes to our investment expectations for 2026. We anticipate total net CapEx of $75 million to $90 million for the year, including $30 million to $35 million of current year spending for the manufacturing expansion project along with $35 million to $45 million targeted for rental fleet expansion. This level of investment is expected to grow our DuraBase rental fleet by a low- to mid-teens percentage, supporting our organic growth and also displacing a portion of cross-rent assets currently deployed on projects.

As for the near-term outlook, we expect to deliver 20% year-over-year growth in rental and service revenues in Q2, which includes the benefit of double-digit organic growth combined with the effect of the Grassform acquisition. On the product sales side, we expect Q2 revenues will be fairly in line with prior Q2 levels. Q2 gross margin is also expected to be roughly in line with the prior Q2 result, though it remains dependent on the timing of project completions and fleet redeployments for a few large-scale projects. In terms of SG&A, we expect to remain near the $13 million quarterly level in the near term.

For taxes, we expect our effective tax rate will remain relatively in line with the Q1 level for the full year 2026. We entered the year with roughly $40 million of NOLs and other tax credit carryforwards, which, when combined with the accelerated deductions for capital investments, are expected to significantly limit our cash tax obligations for the next several years. As it relates to our capital allocation strategy, we continue to prioritize investments in the growth of our rental fleet and our manufacturing capacity expansion, as well as strategic acquisitions, while also remaining committed to returning a portion of free cash flow generation to shareholders through our disciplined share repurchase program.

And with that, I would like to turn the call back over to Matthew for his concluding remarks.

Matthew S. Lanigan: Thanks, Gregg. With a strong start to the year, we remain committed to our strategic priorities and executing to our 2026 plan we laid out last quarter. To that end, our primary focus continues to be the scale-up of our rental platform, which generates the highest long-term returns for our business. Our strategy includes a combination of geographic expansion and market share growth in the U.S. and U.K. We remain confident that the strong momentum in these markets will support our continued fleet and operational expansion throughout the year, though the quarterly cadence remains dependent on project timings, particularly the large-scale projects.

We remain committed to making the necessary investments to support our growth, investing a substantial majority of 2026 cash flows into the expansion of our DuraBase composite mat rental fleet, which we expect to grow by a low- to mid-teens percentage in 2026, while also advancing our manufacturing expansion project, which will increase our production capacity by roughly 50%. Our second focus area remains on driving organizational efficiencies across the business. As we work through the significant transition to our new ERP system implemented in the first quarter, we now seek to leverage the enhanced system capabilities to drive further improvements while also making the necessary investments to drive sustainable long-term revenue growth for the company.

On balance, we expect our approach will help limit SG&A spending growth and drive continued improvement in our SG&A as a percentage of revenues. With respect to the conflict in the Middle East, we continue to monitor its impact on both our own and our customers’ supply chains, and we have not seen any meaningful impacts to date. We are tracking our raw material supplies closely and expect our work over the last several years to diversify our supply base will provide a useful counterbalance to any short-term cost movements.

In addition, as Gregg mentioned earlier, our cross-rental fleet capacity provides some offset to our internal transport charges associated with fleet movements between projects, and we are ensuring our direct sales pipeline maintains commercial flexibility to pass through impacts where practical. And our final priority is the allocation of capital beyond our organic requirements. With a strong balance sheet and a disciplined approach, we remain committed to our share repurchase program while also continuing to evaluate core strategic and organic opportunities that increase our market coverage, value, and relevance to customers in key critical infrastructure markets.

With robust market outlooks in our served geographies, a clear strategic focus, and a pristine balance sheet, we are confident in our ability to deliver another strong year of profitable growth in 2026. In closing, I want to thank our shareholders for their ongoing support, our employees for their dedication to the business, including their commitment to safety and compliance, and our customers for their ongoing partnership. We will now open the call for questions.

Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We request you limit yourselves to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Aaron Michael Spychalla with Craig-Hallum. Your line is open.

Aaron Michael Spychalla: Good morning, Matthew and Gregg. Thanks for taking the questions. Maybe first from me, can you talk about the pipeline in a little bit more detail? What have you been seeing from greenfield versus brownfield projects? Are you starting to see any pickup from some of the high-voltage projects that are starting to come to the market?

Matthew S. Lanigan: Aaron, I will take that one. I think at this point, answering the second part of your question first, it is still a little early for some of the larger, higher-voltage projects. We are expecting to see them a little later in the year, so most of the activity we are seeing right now is outside of that range. When I look at the split, where we left it last year in terms of pipeline build year-on-year, I think that is holding pretty well. We are seeing very slight growth in our emerging territory quoting activity, which is great to see the investments in that commercial front end starting to pay off.

So I would say, generally speaking, our pipeline remains as robust as where we left it last quarter. Some timing issues here in the first quarter that we touched on the call really kind of driving that first quarter, but still very optimistic for the rest of the year.

Aaron Michael Spychalla: Alright, thanks for that. And then color on the capacity expansion. As we are hearing more of your customers talking about multi-decade CapEx cycles for utility transmission, can you talk about how long of a growth runway the expansion provides you and the potential to add additional capacity either in Louisiana or at a new location over time?

Matthew S. Lanigan: The answer is going to be a function of how fast the market wants to grow. We see this plan giving us plenty of capacity through the end of the decade, and then beyond that, it is worth noting we have plenty of room in our Louisiana facility if we wanted to colocate everything there, and we also have the ability to look for alternate sites. So I feel pretty good about our ability to grow our capacity in a timely fashion to meet market demand, Aaron.

Operator: Your next question comes from the line of Laura Maher with B. Riley Securities. Your line is open.

Laura Maher: Hi, Matthew and Gregg. Thanks for taking the question. My first question is, with the additional CapEx in mind, are you anticipating maintaining the same returns that you are currently generating?

Matthew S. Lanigan: I would expect no change in the overall expectation. Obviously there is a bit of a step change in terms of the investment in the asset base, but over time we should continue to gain operating leverage on our asset base and provide a tailwind to our return on invested capital.

Laura Maher: Great, thanks. And then you mentioned improved pricing. Can you frame the magnitude of rental rate increases and whether you see room for further pricing?

Matthew S. Lanigan: I would frame it in low single digits, Laura, and I think what we are seeing is a little bit of tightness in the market, so we would expect to be able to hold that and maybe add to it moving forward in the year. It is a little early for that, but we are encouraged with what we are seeing so far.

Operator: Your next question comes from the line of Min Cho with Texas Capital Securities. Your line is open.

Min Cho: Good morning. Thank you for taking my question. It sounds like as utilization remains strong that you are going to continue to prioritize rental fleet additions over product sales. Do you feel like your capacity is sufficient right now to support both at least through this year?

Matthew S. Lanigan: I think we touched on that last quarter. We feel comfortable that we can meet both, and I do not think we have been in a position yet where we have had to prioritize one over the other. We have been able to meet both. As Gregg touched on, we have a cross-rental fleet that we can utilize, which has been helpful in offsetting any transportation inefficiencies, and with the price of diesel now rising with the conflict in the Middle East, we are using that to help offset it, but we feel comfortable that we can meet what we see in the foreseeable future.

Min Cho: Excellent. So how should we think about revenue and EBITDA progression through the rest of the year relative to the first quarter, given seasonality, continued cross-rental usage or displacement, as well as CapEx timing?

Matthew S. Lanigan: I would expect there will be some front-loaded elements associated with the procurement of equipment for the manufacturing expansion, so that will be a little more loaded up than Q2 and Q3. As far as the revenue and EBITDA cadence, EBITDA will follow revenue as we are holding a pretty consistent EBITDA margin. For revenue cadence, the back half of the year still has that natural seasonality in Q3. We framed up expectations for Q2. Q3 typically pulls back a bit from Q2, and then rebounds and surges from there into Q4.

Operator: Your next question comes from the line of Analyst. Your line is open.

Analyst: Hi. This is Brandon Rogers on for Gerard J. Sweeney. Thanks for taking my questions. In terms of the wood-to-composite matting conversion, where would you estimate composite matting stands as a percent of the overall market, and do you see the pace of conversion accelerating or remaining stable?

Matthew S. Lanigan: Thanks. We still see roughly a quarter of the market in total being composite at this point based on our analysis. The market share shift is going to be a function of the pace of growth. If the market keeps growing as strongly as it is now, we would expect that percentage to hold, as everybody is keeping up with the growth rate, with maybe a point or two of relative share shifts.

Analyst: Thanks. And then one more for me. Utility spending has accelerated. Your manufacturing capacity plans target a 50% increase by mid-2027. Is there anything that could delay this timeline, or is there any likelihood that the investments required to complete the expansion are more than your estimated $40 million to $45 million?

Matthew S. Lanigan: There are always some movements in project timings and budget estimates. We feel pretty good about the range we have provided and the timing. We have been planning this for a while. Unforeseen things may happen, but we feel confident that we are going to be able to deliver this within the timeframe and the budget that we have put forward.

Operator: Again, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of William Joseph Dezellem with Titan Capital. Your line is open.

William Joseph Dezellem: Thank you. A couple of questions. Following up on your remarks about the large high-voltage projects, they have not yet begun, but you see them beginning later this year. Does that imply an acceleration of your growth rate in 2027 relative to 2026?

Matthew S. Lanigan: It is a little early to piece it all together, but what we have called out on previous calls is these high-voltage lines are going to have a large amount of requirement to fulfill them—heavier equipment, larger equipment to get those lines installed. We see that as a net increase in matting requirement. Logically you would say yes. How that fits in with the rest of the project activity and what we can service, we will need to look at as we get closer to 2027, but these are encouraging trends for sure.

William Joseph Dezellem: Great, thank you. And then relative to the acquisition comments, when do you anticipate that Grassform will be fully integrated, which I am presuming is the point that you would be willing to seriously entertain the next acquisition? And when that time comes, what are you structurally looking for with that next acquisition? Help us understand the characteristics that you are looking for and what you would be trying to accomplish.

Matthew S. Lanigan: Thanks. We would expect to have substantially most of the integration completed within the next three to six months. An ERP conversion—we will look to roll them onto our ERP system—may put a little bit longer tail on that. When we bought the business, our focus was not to distract them with a lot of integration activity; it was to let them run. They are a very well-run business, and we did not want to get in the way with integration activities, which is why that timeline may seem a little longer than you might have expected. So far that is going well for us.

With respect to future acquisitions, it is pretty clear relative to our strategy: if there are markets where we can accelerate composite market share relative to a timber incumbent, and we think that an acquisition will accelerate that relative to what we could do organically, that is when we would look to seriously kick the tires on something to acquire. From there, you have your normal structural pipeline factors in terms of the leverage of the company, the strength of the management team, the quality of the contracts that they have, etcetera—all of those normal diligence items that you would expect. I hope that addressed your question.

Operator: I will now turn the call back over to Gregg S. Piontek for closing remarks.

Gregg S. Piontek: Alright. That concludes our call today. Should you have any questions or requests, please reach out to us using our email at investors@npki.com. We look forward to hosting you again next quarter.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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