Core Viewpoint - PHX Energy achieved record quarterly revenue and strong profitability in Q1 2025, driven by growth in high-margin services and effective capital management [3][10][11]. Financial Highlights - Consolidated revenue reached $193.7 million, a 17% increase from $166.1 million in Q1 2024 [2][3]. - Earnings rose to $20.2 million, or $0.44 per share, up 15% from $17.5 million, or $0.37 per share, in the same period last year [2][4]. - Adjusted EBITDA was $40.7 million, a 16% increase from $35 million in Q1 2024, representing 21% of consolidated revenue [2][4][10]. Operational Performance - The US division generated record revenue of $136.1 million, a 19% increase from $114.2 million in Q1 2024 [12][48]. - The Canadian division reported revenue of $57.6 million, an 11% increase from $52 million in the same quarter last year, marking the highest level since 2014 [13][56]. - The Corporation generated excess cash flow of $18.2 million after net capital expenditures of $13.8 million [3][4]. Capital Expenditures - The capital expenditure budget for 2025 was increased to $65 million, focusing on expanding the Rotary Steerable Systems (RSS) fleet and Real Time RSS Communications technology [24][7]. - In Q1 2025, capital expenditures totaled $24.7 million, with $15.6 million allocated for growth and $7.8 million for maintenance [21][61]. Shareholder Returns - A dividend of $0.20 per share was declared, totaling $9.1 million, which is 4% lower than the previous year due to share repurchases [15][16]. - The Return of Capital Strategy (ROCS) aims to utilize up to 70% of annual excess cash flow for shareholder returns, with $3.6 million remaining distributable under ROCS for Q1 2025 [16][17]. Market Outlook - The company anticipates continued strong demand for RSS despite potential industry disruptions from global economic conditions and fluctuating oil prices [5][6]. - The strategic focus remains on advancing technology and maintaining a strong balance sheet to navigate market uncertainties [7][8].

Financial Performance - Q1 2025 revenue reached $391 million, and Adjusted EBITDA was $76 million, representing 20% of revenue[12, 14] - Full-year 2025 revenue is expected to be over $1,700 million, with Adjusted EBITDA exceeding $350 million[50] - Q2 2025 revenue is projected to be between $400 million and $410 million, a sequential increase of approximately 4% from Q1[51] - Q2 2025 Adjusted EBITDA is expected to range from $80 million to $90 million, with an Adjusted EBITDA margin increase of +100 basis points sequentially[52] Regional Performance (Q1 2025) - North & Latin America (NLA) revenue was $134 million[16] - Europe & Sub-Saharan Africa (ESSA) revenue was $112 million[16] - Middle East & North Africa (MENA) revenue was $94 million[16] - Asia Pacific (APAC) revenue was $51 million[16] Business Strategy and Operations - The company has a robust backlog of $22 billion[13] - The company is implementing the Drive25 cost optimization program, with over 50% of cost improvement initiatives completed[12] - The company is targeting over $30 million in run-rate savings through Drive25, with approximately 50% expected to be reflected in 2025 financial results[57, 64]

Financial Data and Key Metrics Changes - Revenue for the first quarter of 2025 was $977 million, a sequential increase of 4% from $944 million in the prior quarter [30] - Net income decreased to $20 million from $52 million in the prior quarter, while adjusted net income fell to $7 million from $17 million [31] - Adjusted EBITDA increased by 8% to $168 million from $156 million in the prior quarter [31] - General and administrative expenses rose to $66 million from $56 million in the prior quarter, primarily due to stock-based compensation [31][32] - Cash balance at the end of the quarter was $24 million, with net debt increasing to $186 million [33] Business Line Data and Key Metrics Changes - High utilization of track and wireline fleets contributed to improved performance across all business lines [30] - Permian sand mines were fully utilized despite adverse weather conditions and oversupplied market conditions [31] - Growth in CNG fuel delivery was noted, indicating diversification in service offerings [31] Market Data and Key Metrics Changes - The oil and gas industry remains cyclical, with current market conditions influenced by tariff negotiations and OPEC plus production strategies [11][14] - North American producers are evaluating macroeconomic scenarios, but no significant changes in oily customer activity have been observed [16][19] - Natural gas fundamentals are favorable due to rising LNG export capacity demand, which may benefit gas producers [15] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet while navigating market uncertainties through greater scale, vertical integration, and technological advancements [12][23] - Strategic investments in equipment technology and digitization are aimed at enhancing operational efficiency and safety [21] - The acquisition of IMG is expected to accelerate entry into the PJM market and expand power services beyond the oil field [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate market uncertainties and maintain profitability amid tariff impacts and geopolitical tensions [11][38] - The outlook for the second quarter is strong, with expectations for sequential growth in revenue and profitability [23][36] - Management is closely monitoring market conditions and evaluating macroeconomic scenarios to stay ahead of potential changes in activity [36] Other Important Information - The company launched the Hive, a digital intelligence hub for monitoring frac operations, enhancing real-time decision-making [22] - The average life expectancy of equipment components has significantly increased, demonstrating the effectiveness of predictive maintenance strategies [22] Q&A Session Summary Question: Demand for high-quality assets and pricing discussions - Management noted that while there was a downward trend in pricing, current utilization is based on pricing set during the RFP season, and additional inquiries are coming from existing customers [44][45] Question: Impact of raw material costs on maintenance CAPEX - Management indicated that they do not expect significant changes in raw material pricing, with some costs offset by volume discounts [48][49] Question: Updates on the PowerGen business pipeline - Management expressed excitement about the pipeline of opportunities, which exceeds current capacity, and highlighted advanced conversations with E&P partners [55][56] Question: Full-year guidance and CAPEX - Management confirmed that full-year guidance remains intact, with strong visibility into Q2 performance [59][60] Question: Activity trends with WTI at $60 per barrel - Management suggested that a stable oil price around $60 would lead to modest activity changes, with larger producers likely to maintain their announced CAPEX budgets [110] Question: Flexibility in CAPEX and Digi fleet deliveries - Management confirmed flexibility in adjusting deliveries and capital expenditures based on market conditions [121][102] Question: Attrition rate and reinvestment requirements - Management stated that the company uses a 10% attrition rate and could pause new builds without significantly impacting deployable horsepower [142][143]

Financial Data and Key Metrics Changes - The fourth quarter adjusted EBITDA margins improved to 17% from 16.6% in the third quarter and 15.8% in the fourth quarter of 2023, despite lower revenue quarter on quarter and year on year [6][5] - For the full year, the Completion Fluids and Products segment revenue was down 1%, but EBITDA grew by 2% year over year, with total revenue of $311 million, the second highest since 2015 [7][8] - The Industrial Chemicals business achieved record revenue and adjusted EBITDA for the fourth quarter, with a revenue growth of over 9% in 2024 compared to 2023, representing 22% of TETRA's total revenue [8][9] Business Line Data and Key Metrics Changes - The Water and Flowback segment achieved EBITDA margins of 13.8%, impacted by a year-end completion slowdown, with rig count and frac fleet count down more than double digits from last year [6][10] - The Industrial Chemicals segment is expected to ramp up meaningful volumes of zinc bromide-based electrolyte, contributing to future revenue growth [8][9] - The Water and Flowback Services segment is expected to maintain flat revenue in 2025 while increasing margins through operational efficiencies [11] Market Data and Key Metrics Changes - The company achieved a record volume of 89 million barrels of treated and recycled produced water for frac reuse in the fourth quarter [7] - The company is focusing on expanding its market presence in Northern Europe and the U.S., which provides stable markets with predictable revenue and earnings [9] Company Strategy and Development Direction - The company is making strategic investments in Brazil to support a large Deepwater Completion Fluids Award starting in Q2 2025, and is also increasing deepwater activity in the Gulf of America [9][10] - The company is prioritizing desalination solutions for produced water treatment and recycling, aiming to position itself as an industry leader in this area [11][12] - The company is exploring capital-efficient alternatives for its bromine project and lithium opportunities, focusing on cash flow generation and minimizing debt [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the U.S. business performance, driven by strong activity in the Gulf of America and the calcium chloride business [21] - The company projects 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, indicating a strong start to the year [14][24] - Management highlighted the importance of automation and desalination in improving margins and cash flow generation in the Water and Flowback segment [11][13] Other Important Information - The company eliminated the valuation allowance for deferred taxes, reflecting confidence in utilizing net operating loss carryforwards, potentially saving approximately $97.5 million in cash taxes [20][21] - The company reported cash on hand of $37 million and total liquidity of nearly $27 million as of December [26] Q&A Session Summary Question: Insights on growth opportunities for 2025 - Management indicated that the first half of 2025 will benefit from long-term projects, with expectations for increased volumes from Eos Energy and pilot operations in desalination [32][33] Question: Variances in EBITDA projections for the second half of 2025 - Management noted that while visibility is limited for the second half, they expect continued performance improvement driven by deepwater projects and electrolyte sales [38] Question: Capacity for pilot projects in desalination - Management confirmed high confidence in multiple pilot projects for 2025, with ongoing discussions and potential orders for additional pilot units [43][61] Question: Revenue recognition timeline for shipments to Eos - Revenue is recognized when the product leaves the facility, with a short timeframe for the product to be used in batteries [78] Question: Future structure of the company - Management anticipates a continued focus on industrial chemicals and deepwater services, with potential evolution of the water and flowback business towards desalination [75][76]