NPK International Inc.

Previous wording

The following discussion of our financial condition, results of operations, liquidity, and capital resources should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2024. Our second quarter represents the three-month period ended June 30 and our first half represents the six-month period ended June 30. Unless otherwise noted, all currency amounts are stated in U.S. dollars. The reference to a “Note” herein refers to the accompanying Notes to Unaudited Condensed Consolidated Financial Statements contained in Item 1 “Financial Statements.”

Current wording

The following discussion of our financial condition, results of operations, liquidity, and capital resources should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2024. Our third quarter represents the three-month period ended September 30 and our first nine months represents the nine-month period ended September 30. Unless otherwise noted, all currency amounts are stated in U.S. dollars. The reference to a “Note” herein refers to the accompanying Notes to Unaudited Condensed Consolidated Financial Statements contained in Item 1 “Financial Statements.”

Previous wording

NPK International Inc. (“NPK,” the “Company,” “we,” “our,” or “us”) is a temporary worksite access solutions company that manufactures, sells, and rents recyclable composite matting products, along with a full suite of services, including planning, logistics, and site restoration. For the first half of 2025, 67% of our revenues were generated from the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production, pipeline, renewable energy, petrochemical, construction and other industries within the United States and United Kingdom. The remaining 33% of our revenues for the first half of 2025 were generated from the sale of our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end market.

Current wording

NPK International Inc. (“NPK,” the “Company,” “we,” “our,” or “us”) is a temporary worksite access solutions company that manufactures, sells, and rents recyclable composite matting products, along with a full suite of services, including planning, logistics, and site restoration. For the first nine months of 2025, 66% of our revenues were generated from the rental of our recyclable composite matting systems, along with related site construction and services to customers in various markets including power transmission, oil and natural gas exploration and production, pipeline, renewable energy, petrochemical, construction and other industries within the United States and United Kingdom. The remaining 34% of our revenues for the first nine months of 2025 were generated from the sale of our manufactured recyclable composite mats to customers around the world, with power transmission being the primary end market.

Previous wording

•Accelerate Organic Growth – We seek to accelerate revenue growth primarily through the expansion of our rental business, which includes a combination of geographic expansion to new growth territories, primarily within the U.S., while also expanding customer market share within currently-served markets, and/or expanding our offering into adjacent products or services that are valued by our customers and leverage our core competencies. We prioritize investment capital to support this objective, where over the past several years, we have seen the strong market adoption of our specialty rental products and differentiated service offering. During the first half of 2025, we made net investments of $16 million in the expansion of our rental fleet, expanding the rental fleet by approximately 8%. Rental and service revenues increased $18 million, or 25%, year-over-year for the first half of 2025.

Current wording

•Accelerate Organic Growth – We seek to accelerate revenue growth primarily through the expansion of our rental business, which includes a combination of geographic expansion to new growth territories, primarily within the U.S., while also expanding customer market share within currently-served markets. As part of this effort, we have placed a particular emphasis on penetrating larger-scale, longer-term (six months or longer) projects, which we believe will help drive improvements in revenue stability and operational efficiency. Due in part to the success of these efforts, rental and service revenues increased $30 million, or 29%, year-over-year for the first nine months of 2025, including a 40% increase in rental revenues. The elevated growth in rental revenues has been primarily attributable to our success on larger-scale, longer-term projects with a key utilities customer, and consequently, this customer contributed 18% of our total revenues in the first nine months of 2025 compared to less than 10% in 2024. We prioritize investment capital to support our organic growth objective, where over the past several years, we have seen the strong market adoption of our specialty rental products and differentiated service offering. During the first nine months of 2025, we made net investments of $26 million in the expansion of our rental fleet, expanding the rental fleet by approximately 13%. Further, with our revenue growth and the favorable macro-environment, we have also accelerated our manufacturing capacity expansion planning efforts. As a result, during the third quarter of 2025, cost of revenues includes $0.3 million of expense associated with these efforts, with additional total costs of up to approximately $0.5 million anticipated during the fourth quarter of 2025 and into early 2026.

Previous wording

•Pursue Inorganic Growth – We seek to accelerate our growth and enhance shareholder value through strategically-aligned inorganic actions, leveraging our scale to increase our value and relevance to customers.

Current wording

•Pursue Inorganic Growth – We seek to accelerate our growth and enhance shareholder value through strategically-aligned inorganic actions, leveraging our scale to increase our value and relevance to customers. Throughout 2025, we have continually evaluated inorganic opportunities that align with our objectives. As a result, during the third quarter of 2025, selling, general and administrative expenses expense (“SG&A”) includes $0.3 million of costs in support of this effort.

Previous wording

•Drive Operational Efficiency – We are focused on efficiency improvements and operating cost optimization across every aspect of our business. With a simplified business model, we continue to evaluate and execute actions intended to streamline the organization and our cost structure, driving improvements in profitability, with the goal of driving SG&A as a percentage of revenue to a mid-teens range by early 2026. During the first half of 2025, we incurred $0.4 million of severance expense associated with our streamlining efforts. SG&A as a percentage of revenues was 19.1% for the first half of 2025 compared to 21.0% for the first half of 2024.

Current wording

•Drive Operational Efficiency – We are focused on efficiency improvements and operating cost optimization across every aspect of our business. With a simplified business model, we continue to evaluate and execute actions intended to streamline the organization and our cost structure, driving improvements in profitability, with the goal of driving SG&A as a percentage of revenue to a mid-teens range by early 2026. During the first nine months of 2025, we incurred $0.5 million of severance expense associated with our streamlining efforts. Additionally, during the third quarter of 2025, we began the rollout of our new cloud-based enterprise resource planning (“ERP”) system, which is expected to be substantially completed in the first quarter of 2026. During the third quarter of 2025, SG&A includes

Previous wording

•Enhance Return on Capital – We are committed to maintaining a strong balance sheet, prioritizing organic investment to expand our rental business while evaluating accretive inorganic growth opportunities to accelerate growth and returning excess cash generation via programmatic share repurchases. In 2024, our share repurchase program was restricted due to the Fluids Systems sale process. In April 2025, our Board of Directors increased the remaining authorization under the repurchase program to $100.0 million. During the first half of 2025, we utilized $17.0 million to repurchase 2.6 million shares (3% of our outstanding shares) under our repurchase program.

Current wording

•Enhance Return on Capital – We are committed to maintaining a strong balance sheet, prioritizing organic investment to expand our rental business while evaluating accretive inorganic growth opportunities to accelerate growth and returning excess cash generation via programmatic share repurchases. In 2024, our share repurchase program was restricted due to the Fluids Systems sale process. During the first nine months of 2025, we utilized $20.4 million to repurchase 3.0 million shares (4% of our outstanding shares) under our repurchase program.

Previous wording

Summarized results of operations for the second quarter of 2025 compared to the second quarter of 2024 are as follows:

Current wording

Summarized results of operations for the third quarter of 2025 compared to the third quarter of 2024 are as follows:

Previous wording

Revenues increased 2% to $68.2 million for the second quarter of 2025, compared to $66.8 million for the second quarter of 2024, including a 27% increase in rental and service revenues partially offset by a 28% decrease in product sales revenues. Rental revenues increased $8.0 million (34%), primarily due to higher rental volume driven by our organic growth efforts, partially offset by lower average pricing resulting primarily from a higher mix of large-scale, longer-term rental projects. Service revenues increased $1.9 million (15%), primarily attributable to the increased level of customer rental projects. Product sales revenues decreased $8.4 million (28%), as sales volumes typically fluctuate based on the timing of customer projects and orders. The majority of the 2025 and 2024 revenues were derived from customers in the power transmission sector.

Current wording

Revenues increased 56% to $68.8 million for the third quarter of 2025, compared to $44.2 million for the third quarter of 2024, including a 37% increase in rental and service revenues and a 108% increase in product sales revenues. Rental revenues increased $10.7 million (57%), primarily due to higher rental volume driven by our organic growth efforts, partially offset by lower average pricing resulting primarily from a higher mix of larger-scale, longer-term rental projects. Service revenues increased $1.2 million (9%), primarily attributable to the increased level of customer rental projects, though at a lower rate than rental revenues, due to the lower relative service requirements on the higher mix of larger-scale, longer term rental projects. Product sales revenues increased $12.8 million (108%), reflecting continued strength in customer adoption of manufactured composite matting products relative to timber-based products that continue to be the primary solution used for temporary worksite access in the market. The majority of the 2025 and 2024 revenues were derived from customers in the power transmission sector.

Previous wording

Cost of revenues increased 3% to $43.1 million for the second quarter of 2025 (36.9% gross profit margin), compared to $42.0 million for the second quarter of 2024 (37.2% gross profit margin), primarily driven by the 2% increase in revenues described above. The slight decline in gross profit margin is primarily attributable to elevated cross-rent costs required to meet the significant surge in customer project activity in the second quarter of 2025, partially offset by the effect of an improved mix, including a higher proportion of rental revenues and a lower proportion of service revenues.

Current wording

Cost of revenues increased 46% to $46.9 million for the third quarter of 2025 (31.9% gross profit margin), compared to $32.1 million for the third quarter of 2024 (27.5% gross profit margin), primarily driven by the 56% increase in revenues described above. The improvement in gross profit margin is primarily attributable to the effects of an improved revenue mix, including a higher proportion of rental revenues and a lower proportion of service revenues. Cost of revenues in the third quarter of 2025 was negatively impacted by elevated cross-rent costs required to meet customer demand, approximately $1.0 million of elevated transportation costs required to meet customer project timelines, as well as $0.3 million of costs incurred with our manufacturing capacity planning efforts as described above. Cost of revenues for the third quarter of 2024 was negatively impacted by an unscheduled downtime event on one of the production lines at our manufacturing facility.

Previous wording

Selling, general and administrative expenses increased to $13.7 million for the second quarter of 2025, compared to $12.8 million for the second quarter of 2024. Selling, general and administrative expenses as a percentage of revenues was 20.0% for the second quarter of 2025 compared to 19.1% for the second quarter of 2024. The second quarter of 2025 includes a $1.2 million charge related to performance-based awards measured on the Company’s total shareholder return (“TSR”) as compared to the TSR of a designated peer group, while the second quarter of 2024 included a $0.8 million charge. The second quarter of 2025 and 2024 both also included $0.3 million of severance costs.

Current wording

Selling, general and administrative expenses increased to $13.3 million for the third quarter of 2025, compared to $11.0 million for the third quarter of 2024. Selling, general and administrative expenses as a percentage of revenues was 19.3% for the third quarter of 2025 compared to 24.9% for the third quarter of 2024. The increase in expense was primarily driven by higher performance-based incentives, including a $0.5 million charge related to performance-based awards measured on the Company’s total shareholder return (“TSR”) as compared to the TSR of a designated peer group. Additionally, the third quarter of 2025 includes $0.5 million of strategic planning and ERP implementation costs as described above.

Previous wording

Foreign currency exchange for the second quarter of 2025 and 2024 reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies, principally related to our U.K. operations.

Current wording

Foreign currency exchange for the third quarter of 2025 and 2024 reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies, principally related to our U.K. operations.

Previous wording

Interest income, net was minimal for the first half of 2025 compared to $1.7 million of interest expense, net for the first half of 2024. The decrease in interest expense is primarily due to interest income of $1.0 million earned in the first half of 2025 as well as a decrease in average debt outstanding. Discontinued operations in the first half of 2024 also included an allocation of interest expense of $0.9 million on corporate debt.

Current wording

Interest income, net was minimal for the third quarter of 2025 compared to $0.9 million of interest expense, net for the third quarter of 2024. The decrease in interest expense is primarily due to interest income of $0.5 million earned in the third quarter of 2025 as well as a decrease in average debt outstanding. Discontinued operations in the third quarter of 2024 also included an allocation of interest expense of $0.5 million on corporate debt.

Previous wording

Provision for income taxes from continuing operations

Current wording

The provision for income taxes from continuing operations was $3.0 million for the third quarter of 2025, reflecting an effective tax rate of 33%, compared to a benefit for income taxes from continuing operations of $14.0 million for the third quarter of 2024. The third quarter of 2024 included a $14.6 million benefit primarily related to the release of valuation allowances on U.S. net operating losses and tax credit carryforwards that are expected to be realized following the sale of the Fluids Systems business.

Previous wording

Income (loss) from discontinued operations, net of tax

Current wording

Loss from discontinued operations, net of tax

Previous wording

Income (loss) from discontinued operations, net of tax reflects the former Fluids Systems segment, which was sold in the third quarter of 2024. See Note 2 for additional information.

Current wording

Loss from discontinued operations, net of tax reflects the former Fluids Systems segment, which was sold in the third quarter of 2024. See Note 2 for additional information.

Previous wording

Summarized results of operations for the first half of 2025 compared to the first half of 2024 are as follows:

Current wording

Summarized results of operations for the first nine months of 2025 compared to the first nine months of 2024 are as follows:

Previous wording

Revenues increased 15% to $133.0 million for the first half of 2025, compared to $115.8 million for the first half of 2024, including a 25% increase in rental and service revenues partially offset by a 2% decrease in product sales revenues. Rental revenues increased $14.8 million (33%), primarily due to higher rental volume driven by our organic growth efforts, slightly offset by lower pricing. Service revenues increased $3.3 million (12%), primarily attributable to the increased level of customer rental projects. Product sales revenues decreased slightly (2%), reflecting continued strength in customer adoption of manufactured composite matting products relative to timber-based products that continue to be the primary solution used for temporary worksite access. The majority of the 2025 and 2024 revenues were derived from customers in the power transmission sector.

Current wording

Revenues increased 26% to $201.8 million for the first nine months of 2025, compared to $160.0 million for the first nine months of 2024, including a 29% increase in rental and service revenues and a 21% increase in product sales revenues. Rental revenues increased $25.6 million (40%), primarily due to higher rental volume driven by our organic growth efforts, partially offset by lower pricing resulting primarily from a higher mix of larger-scale, longer-term rental projects. Service revenues increased $4.4 million (11%), primarily attributable to the increased level of customer rental projects, though at a lower rate than rental revenues, due to the lower relative service requirements on the higher mix of larger-scale, longer-term rental projects. Product sales revenues increased $11.9 million (21%), reflecting continued strength in customer adoption of manufactured composite matting products relative to timber-based products that continue to be the primary solution used for temporary worksite access in the market. The majority of the 2025 and 2024 revenues were derived from customers in the power transmission sector.

Previous wording

Selling, general and administrative expenses increased $1.1 million to $25.4 million for the first half of 2025, compared to $24.3 million for the first half of 2024. Selling, general and administrative expenses as a percentage of revenues was 19.1% for the first half of 2025 compared to 21.0% for the first half of 2024. The first half of 2025 includes a $1.2 million charge related to performance-based awards measured on the Company’s TSR as compared to the TSR of a designated peer group, while the second half of 2024 included a $0.8 million charge. The first half of 2025 also included $0.4 million of severance costs, compared to $0.6 million in the first half of 2024.

Current wording

Selling, general and administrative expenses increased to $38.7 million for the first nine months of 2025, compared to $35.3 million for the first nine months of 2024. Selling, general and administrative expenses as a percentage of revenues was 19.2% for the first nine months of 2025 compared to 22.1% for the first nine months of 2024. The increase in expense was primarily driven by higher performance-based incentives, including $1.5 million in charges related to performance-based awards measured on the Company’s TSR as compared to the TSR of a designated peer group, while the first nine months of 2024 included a $0.8 million charge. Additionally, the third quarter of 2025 includes $0.5 million of strategic planning and ERP implementation costs as described above. The first nine months of 2025 also included $0.4 million of severance costs, compared to $0.6 million in the first nine months of 2024.

Previous wording

Other operating (income) loss, net primarily includes gains and losses on sales of non-rental assets. The first half of 2024 included a $0.6 million gain related to a legal settlement.

Current wording

Other operating (income) loss, net primarily includes gains and losses on sales of non-rental assets. In addition, the first nine months of 2024 included a $0.6 million gain related to a legal settlement.

Previous wording

Foreign currency exchange for the first half of 2025 and 2024 reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies, principally related to our U.K. operations.

Current wording

Foreign currency exchange for the first nine months of 2025 and 2024 reflects the impact of currency translation on assets and liabilities (including intercompany balances) that are denominated in currencies other than functional currencies, principally related to our U.K. operations.

Previous wording

Interest income, net was minimal for the second quarter of 2025 compared to $0.9 million of interest expense, net for the second quarter of 2024. The decrease in interest expense is primarily due to interest income of $0.6 million earned in the second quarter of 2025 as well as a decrease in average debt outstanding. In the second quarter of 2025, we recognized a charge of $0.2 million in interest expense for the write-off of debt issuance costs in connection with the termination of our Amended ABL Facility. Discontinued operations in the second quarter of 2024 also included an allocation of interest expense of $0.5 million on corporate debt.

Current wording

Interest income, net was $0.1 million for the first nine months of 2025 compared to $2.6 million of interest expense, net for the first nine months of 2024. The decrease in interest expense is primarily due to interest income of $1.5 million earned in the first nine months of 2025 as well as a decrease in average debt outstanding. Discontinued operations in the first nine months of 2024 also included an allocation of interest expense of $1.4 million on corporate debt.

Previous wording

Income (loss) from discontinued operations, net of tax reflects the former Fluids Systems segment, which was sold in the third quarter of 2024. See Note 2 for additional information.

Current wording

Loss from discontinued operations, net of tax reflects the former Fluids Systems segment, which was sold in the third quarter of 2024. See Note 2 for additional information.

Previous wording

Net cash provided by operating activities was $30.3 million for the first half of 2025 compared to $39.5 million for the first half of 2024. Net income adjusted for non-cash items provided cash of $38.2 million in the first half of 2025, compared to $30.5 million in 2024. Changes in working capital used cash of $7.9 million in the first half of 2025, compared to $9.1 million of cash provided in 2024.

Current wording

Net cash provided by operating activities was $55.0 million for the first nine months of 2025 compared to $42.3 million for the first nine months of 2024. Net income adjusted for non-cash items provided cash of $54.3 million in the first nine months of 2025, compared to $39.0 million in 2024. Changes in working capital provided cash of $0.7 million in the first nine months of 2025, compared to $3.3 million of cash provided in 2024.

Previous wording

Net cash used in investing activities was $0.8 million for the first half of 2025, which includes $21.7 million in capital expenditures partially offset by $14.5 million in additional proceeds from the sale of the Fluids Systems business. The substantial majority of our capital expenditures for the first half of 2025 and 2024 were directed to expanding our mat rental fleet. In addition, we received $3.3 million in proceeds from the sale of assets in the first half of 2025, which includes the sale of used mats from our mat rental fleet. Net cash used in investing activities was $17.0 million for the first half of 2024 primarily related to capital expenditures.

Current wording

Net cash used in investing activities was $13.0 million for the first nine months of 2025, which includes $34.4 million in capital expenditures partially offset by $14.5 million in additional proceeds from the sale of the Fluids Systems business. The substantial majority of our capital expenditures for the first nine months of 2025 and 2024 were directed to expanding our mat rental fleet. In addition, we received $3.8 million in proceeds from the sale of assets in the first nine months of 2025, primarily reflecting the sale of used mats from our mat rental fleet. Net cash provided by investing activities was $23.1 million for the first nine months of 2024, which included $48.5 million in initial net proceeds from the sale of the Fluids Systems business.

Previous wording

Net cash used in financing activities was $21.8 million for the first half of 2025, primarily reflecting $19.3 million in purchases of treasury stock, including purchases under our repurchase program and shares withheld upon vesting of employee equity awards for the settlement of tax obligations. Net cash used in financing activities was $25.0 million for the first half of 2024.

Current wording

Net cash used in financing activities was $24.6 million for the first nine months of 2025, primarily reflecting $22.7 million in purchases of treasury stock, including purchases under our repurchase program and shares withheld upon vesting of employee equity awards for the settlement of tax obligations. Net cash used in financing activities was $60.8 million for the first nine months of 2024, primarily reflecting net repayments on our Amended ABL Facility and other existing financing arrangements.

Previous wording

Substantially all of the $26.0 million of cash on hand at June 30, 2025 resides in the U.S. We primarily manage our liquidity utilizing cash on hand and availability under our Credit Facility and other existing financing arrangements.

Current wording

Substantially all of the $35.6 million of cash on hand at September 30, 2025 resides in the U.S. We primarily manage our liquidity utilizing cash on hand and availability under our Credit Facility and other existing financing arrangements.

Previous wording

We expect future working capital requirements for our operations will generally fluctuate directionally with revenues, and we expect capital expenditures in 2025 to be $35 million to $40 million, with spending primarily focused on the expansion of our mat rental fleet to further support our market penetration efforts. We also expect to use a portion of our existing liquidity to return value to our shareholders and pursue our long-term strategic initiatives. We expect cash on hand and cash generated by operations, as well as the projected availability under our Credit Facility and other existing financing arrangements, to be adequate to fund our current operations during the next 12 months.

Current wording

We expect future working capital requirements for our operations will generally fluctuate directionally with revenues, and we expect capital expenditures in 2025 to be $45 million to $50 million, with spending primarily focused on the expansion of our mat rental fleet to further support our market penetration efforts. We also expect to use a portion of our existing liquidity to return value to our shareholders and pursue our long-term strategic initiatives. We expect cash on hand and cash generated by operations, as well as the projected availability under our Credit Facility and other existing financing arrangements, to be adequate to fund our current operations during the next 12 months.

Previous wording

As of June 30, 2025, we had no outstanding borrowings and $2.0 million in outstanding letters of credit, resulting in $148.0 million of remaining availability under the Credit Facility.

Current wording

As of September 30, 2025, we had no outstanding borrowings and $5.7 million in outstanding letters of credit, resulting in $144.3 million of remaining availability under the Credit Facility.

Previous wording

Asset-Based Loan Facility. Our U.S. asset-based revolving credit agreement, as amended and restated in September 2024 (the “Amended ABL Facility”) provided financing of up to $100 million available for borrowings (inclusive of letters of credit), with a term expiring May 2027. We terminated the Amended ABL Facility in June 2025 and replaced it with the Credit Facility, as discussed above. As of the date of termination, we had no outstanding borrowings under the Amended ABL Facility. In the second quarter of 2025, we recognized a charge of $0.2 million in interest expense for the write-off of debt issuance costs in connection with the termination of the Amended ABL Facility.

Current wording

Asset-Based Loan Facility. Our U.S. asset-based revolving credit agreement, as amended and restated in September 2024 (the “Amended ABL Facility”) provided financing of up to $100 million available for borrowings (inclusive of letters of credit), with a term expiring May 2027. We terminated the Amended ABL Facility in June 2025 and replaced it with the Credit Facility, as described above. As of the date of termination, we had no outstanding borrowings under the Amended ABL Facility. In the second quarter of 2025, we recognized a charge of $0.2 million in interest expense for the write-off of debt issuance costs in connection with the termination of the Amended ABL Facility.

Previous wording

Other Financing Arrangements. We maintain finance leases primarily related to transportation equipment. During the first half of 2025, we entered into $3.3 million of new finance lease liabilities in exchange for leased assets.

Current wording

Other Financing Arrangements. We also maintain finance leases primarily related to transportation equipment. During the first nine months of 2025, we entered into $4.4 million of new finance lease liabilities in exchange for leased assets.

Previous wording

In addition, at June 30, 2025, we had $5.8 million in outstanding letters of credit (inclusive of the amount outstanding under the Credit Facility as described above), performance bonds, and other guarantees.

Current wording

In addition, at September 30, 2025, we had $9.5 million in outstanding letters of credit (inclusive of the amount outstanding under the Credit Facility as described above), performance bonds, and other guarantees.