TETRA Technologies, Inc. 2026 Q2 Earnings Call

Please go ahead. Thank you, Dennis.

Good morning, everyone. Thank you for joining TETRA's second quarter earnings call. The speakers on today's call will be Brady Murphy, President and CEO, and Matt Sanderson, Chief Financial Officer. Before we begin, I would like to call your attention to the safe harbor statement in our Form 10-Q. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties as outlined in our SEC filings. Actual results may differ materially from those expressed or implied. In addition, we may refer to adjusted EBITDA, free cash flow, and other non-GAAP financial measures. Please refer to our press release for GAAP reconciliations and note that these reconciliations are not a substitute for GAAP financials. We encourage you to refer to our 10-Q. After Brady and Matt provide their comments, we will open the line for Q&A.

I will now turn the call over to Brady.

Thank you, Kurt. Good morning, everyone. I'm really pleased with our second quarter results across many fronts. Financially, we delivered one of the best second quarters in the first six months of the year in the past decade. We accomplished this through the strength of our deep water market share and our growing international business, despite the impact of the Middle East conflict. I'll come back to the financials shortly. We also reached some really strategic milestones in the second quarter that are setting us up very well to achieve our 2030 targets that we laid out at our Investor Day in September of last year. For our deep water markets, we expanded our patented TETRA Neptune completion fluid offering with the introduction of TETRA Neptune Z-Lite, a high-value deep water completion fluid that leverages our TETRA Neptune chemistry to achieve higher densities while significantly reducing zinc content.

We were especially pleased to be awarded a Beacon Offshore Energy contract to deploy TETRA Neptune Z-Lite in a three-well, 20,000 PSI Gulf of Mexico program. During the quarter, our board of directors approved the Final Investment Decision for our Arkansas bromine project. Proceeds of approximately $108 million from our recent completed equity offering will be used to fund a portion of the anticipated project cost with the balance of such cost to be funded by cash from operations, borrowings from our credit facilities, or alternative sources of capital. This project will provide a pathway to meet our growing deepwater Completion Fluids market, as well as our increasing electrolyte demand, while providing significant benefits for security of supply at a lower cost. The project is on schedule for completion in the fourth quarter of 2027 and startup in early 2028.

We advanced our TETRA Oasis TDS desalination solution for produced water on several fronts as our customer engagements continued to expand. At the request of our customers to meet data center requirements for larger volumes of water, we made significant progress on the engineering design of our 100,000 barrel per day desalination plant. Very importantly, we also strengthened our intellectual property position, receiving notices of allowance that expand the scope of our TETRA Oasis TDS patented portfolio to include a broad range of pre-treatment technologies critical to long-term membrane performance. As you can see, it's been a very busy and very productive second quarter for us. Coming back to our financials, overall for the company, our second quarter revenue increased 19% sequentially and 7% year-over-year to $185.7 million. Adjusted EBITDA increased 24% sequentially to $31.9 million. Income from continuing operations was $10.2 million.

Internationally and globally offshore, our revenues for both the second quarter and the first six months of the year reached 10-year highs. First half 2026 international revenue was 24% higher than the first half period over the past decade. Our international business was led by Argentina, where we're on pace to double our growth in 2026 over 2025 behind the strength of our Early Production Facilities and the TETRA SandStorm technology. For offshore, despite the delay of some fluid sales to the Middle East region due to the conflict, our international offshore revenues were 59% above the closest second quarter in the past 10 years. In Completion Fluids & Products, revenue increased 23% sequentially and 3% year-over-year, delivering the highest first half revenues again in 10 years.

Sequential growth was driven by increased sales activity from our Europe and Caspian region, which more than offset some fluid shipments that were delayed as a result of the Iran conflict. Chemicals also delivered a first half revenue record supported by seasonal demand in Europe and increased electrolyte sales. Demand for TETRA PureFlow zinc bromide electrolyte that we manufacture also continued to accelerate during the quarter, supported by expanding customer manufacturing capacity and increasing customer backlog. We believe the growing requirement for grid resiliency, reliable power infrastructure, and long duration energy storage are expanding the addressable market for zinc bromide battery technology. Adoption is also increasing cost defense and critical infrastructure markets. In Water & Flowback Services, revenue increased 12% sequentially and 13% year-over-year, led by record second quarter revenues from Argentina. From our Early Production Facilities projects and in the Permian Basin.

Our water and flowback business continued to materially outpace the year-over-year decline in U.S. frac activity, leaving us well-positioned to capture incremental upside from any recovery. Looking forward, the business outlook is very positive, and we believe we're on track with our 2030 objectives and financial targets. Our deepwater and international activity remains strong, and the U.S. is showing signs of improvement. The Middle East conflict continues to introduce some unpredictability and uncertainty, but so far, the strength of TETRA's other markets and our security of supply, particularly for bromine-based completion fluids, have more than offset delays or losses in the Middle East sales. Our patented SandStorm continues to gain market share in the U.S. and is becoming a standard technology for key customers in some international markets. As announced, we expect the first of three TETRA Neptune Z-Lite wells to be executed in 2026.

With regards to TETRA Neptune, our pipeline of project is the strongest it has ever been as deepwater offshore exploration and development activities continue to shift to deeper, higher pressure, and higher temperature reservoirs. This is creating additional opportunities for TETRA Neptune fluids, which is designed to address higher pressures while also lowering corrosion chemistry in downhole wells and flowback conditions. We're encouraged by Eos's progress with their new automated manufacturing line and their confidence in having their stated capacity of four gigawatt-hours by year-end and heading into 2027. Our calcium chloride business continues to meet new production and revenue records and finds new markets to grow at rates that exceed GDP.

For the remainder of 2026, we expect our base business to perform in line with market expectations while recognizing that the Middle East conflict introduces a level of market unpredictability, and also the timing of planned and potential Neptune jobs in our growing pipeline could make a meaningful impact to our second half 2026 results. Beyond 2026, we see multiple drivers supporting continued growth, including increased deepwater completion activity, further expansion of our long-duration energy storage electrolyte business, and the commercialization of our TETRA Oasis TDS produced water desal solution. The start-up of our Arkansas plant planned in early 2028 will have a material impact on both our supply and cost of bromine to meet our growing demands for both completion fluids and electrolytes. We continue to evaluate our next steps in Arkansas with our broader resource position providing meaningful additional strategic value.

TETRA controls 40,000-acre mineral position in southwest Arkansas with exposure to lithium and magnesium, two critical minerals benefiting from improving market fundamentals and growing U.S. supply chain priorities. Our portfolio includes lithium royalty rights on approximately 35,000 acres held by Smackover Lithium, a 65% ownership interest in an estimated 585,000 tons of lithium carbonate equivalent in our Evergreen Brine Unit, and more than two million tons of measured and indicated magnesium resources. Given the increasing focus on domestic critical mineral supply chains, energy security, and strategic resource development, as well as the significant synergies with our bromine investment, we see potential opportunities to accelerate the development and monetization of our lithium and broader critical minerals platform. While our near-term real-term execution priority remains the Arkansas bromine facility, we believe the embedded value of our lithium and magnesium resources represents an important source of optionality and potential long-term shareholder value.

With that, I'll turn the call over to Matt to discuss the financial results in more detail.