CES Energy Solutions Corp. (CEU) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of CES Energy Solutions Corp. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent the recording, transfer and use of same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtain our required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before a disclosure. During the meeting, we'll have a question-and-answer session for shareholders who have joined the meeting as a registered shareholder or proxy holder. You can submit questions or comments at any time by clicking on the Q&A tab. It is now my pleasure to turn today's meeting over to Mr. Matthew Bell, corporate secretary for CES Energy Solutions. The floor is yours.

Thank you for joining us today. My name is Matthew Bell, and I am the Corporate Secretary for CES Energy Solutions Corp., and I will act as Secretary for the meeting. Before we begin, we would like to provide a brief overview of the Computershare virtual meeting platform. You should now see the agenda on your screen. At the top right corner of the page, you will see different tabs and icons that you may click on to access different parts of the platform. If you have accessed the meeting with a control number or invite code, you may ask a question at any time by clicking the Q&A tab as well as vote in real time if you've not already done so by clicking on the vote tab. If you have already voted, there is no need to vote again unless you wish to change your vote. Any questions should be addressed 1 matter at a time, and we encourage you to submit questions as early as possible. Questions related to items of business will be addressed immediately before each item is put to a vote and questions of a general nature will be addressed at the end of the formal part of the meeting. The chair will determine whether the question or comment is relevant to the item of business and otherwise, whether it is appropriate. If the question or comment is relevant to the matters to be voted on, I will read the comment and the Chairman will respond to the question. Alternatively, the comment may be presented to the entire meeting with or without further commentary at the Chairman's discretion. The broadcast tab will not be enabled for this meeting. For convenience, we have divided today's meeting into 2 parts, which will be presented by Mr. Ken Zinger, Chief Executive Officer and Director of the Corporation. The first part of the meeting will deal solely with the legal requirements, and then Ken will provide a corporate update. In order to ensure that the meeting covers the required business in an efficient manner, we have prearranged with designated shareholders and proxy holders to move and to second the motions of business. Thank you, and I will now turn it over to our meeting chair, Mr. Ken Zinger.

Thank you, Matt. Good morning, and welcome to the Virtual Annual General and Special Meeting of the Holders of Common Shares of CES Energy Solutions Corp. My name is Ken Zinger and I will act as the Chair of the meeting. I will now call to order the Annual General and Special Meeting of Shareholders of CES Energy Solutions. Mr. Bell will act as Secretary of the meeting and Ms. Jennifer Oliver of Computershare will act as scrutineer. The notice calling this meeting of shareholders was mailed to all shareholders in advance of the meeting and is dated May 8, 2025. I would suggest that the secretary keep the proof of mailing of the notice of the meeting, information circular and form of proxy to the registered shareholders of the corporation with the records of this meeting. . The bylaws of the corporation provide that a quorum exists if at least 2 holders representing at least 5% of the shares entitled to be voted at the meeting are present in person or represented by proxy. It has been confirmed by the scrutineers that a quorum has been met and 72.13% of the issued and outstanding common shares are being represented at this meeting. Accordingly, I declare that the meeting is regularly called and properly constituted for the transaction of business. I will now explain the voting procedures to be used at today's meeting. We have received all proxy voting results for today's resolutions in advance of this meeting. Anyone in attendance today who has not yet voted and is not signed in as a guest will have an opportunity to vote online in real time using the virtual meeting platform. Rather than hold up the business of this meeting for the final tabulation of the votes cast on each motion, I will be providing the interim results received from the scrutineer in advance of this meeting on each of the motions presented. I have directed that the final combined results of the advanced poll and the votes entered through the virtual platform on all motions today be included with the minutes of this meeting. These results will also be available in the report on voting results posted on SEDAR following the termination of this meeting. The polls are now open. The first item of business is the presentation of the financial statements of the corporation for the fiscal period ended December 31, 2024, and the report of the auditors thereon. Copies of the financial statements, including the report of the auditors thereon are available at this meeting and have been posted on the corporation's website and filed on SEDAR. As no action is required to be taken by the shareholders on the financial statements, I now declare that the financial statements of the corporation for the fiscal period ended December 31, 2024, and the report of the auditors thereon have been received by the shareholders as submitted to this meeting. The next item of business is to fix the number of directors to be elected at the meeting. May I please have a motion to fix the number of directors to be elected at the meeting at 7.

I so move.

I second the motion.

Are there any questions on this motion?

No, there are no questions.

Seeing none, we will proceed to the scrutineer's report. According to the report, the results of the vote to fix the number of directors at 7 are as follows: 99.14% for, 0.86% against. I declare the motion carried. The next item of business is the election of directors. The corporation has nominated 7 directors for election and has not received any nominations from shareholders pursuant to the bylaws of the corporation. The 7 nominated directors as set out in the corporation's management information circular are Mr. Spencer Armour, III; Ms. Stella Cosby, Mr. John Hooks, Mr. Ian Hardacre; Mr. Kyle Kitagawa, Mr. Joseph Wright and myself, Mr. Ken Zinger. May I now have a motion from the floor to elect the nominees as directors of the corporation to hold office until the next election of directors or until their successors are appointed.

I so move.

I second the motion.

Are there any questions on this motion?

No, there are no questions.

Seeing none, we will proceed to the scrutineer's report. According to the report, the voting results are as follows: Mr. Spencer Armour, 95.23% for, 4.77% withheld. Ms. Stella Cosby, 73.68% for, 26.32% withheld. Mr. Ian Hardacre, 98.65% for, 1.35% withheld. Mr. John Hooks, 86.62% for, 13.38% withheld. Mr. Kyle Kitagawa, 97.95% for, 2.05% withheld. Edwin Joseph Wright, 93.5% for, 6.41% withheld. And myself, 98.96% for, 1.04% withheld. I would like to remind you that CES' majority voting policy requires that each director nominee receive 50% or more of the votes cast. I see that all directors have received more than 50%. Therefore, I declare that the 7 nominees have been duly elected as directors of CES Energy Solutions for the upcoming year. As noted previously, the final voting results for each director will be available on SEDAR subsequent to this meeting and will also be disclosed by press release. We will now proceed with the next item of business being the ratification and approval of the amended and restated shareholder rights plan as described in the information circular. May I have a motion to ratify and approve the shareholder rights plan as amended and restated.

I so move.

I second the motion.

Are there any questions on this motion?

No, there are not.

Seeing none, we will proceed to the scrutineer's report. According to the report, the results of the vote to ratify and approve the amended and restated shareholder rights plan for the corporation are as follows: 97.3% for, 2.7% withheld. I declare the motion carried. The final item of business is the appointment of auditors for the corporation. May I please have a motion that Deloitte LLP be appointed auditors of the corporation until the next Annual Meeting of Shareholders or until a successor is appointed and that the directors of the corporation be authorized to fix the remuneration.

I so move.

I second the motion.

Are there any questions on this motion?

No, there are not.

Seeing none, we will proceed to the scrutineer's report. According to the report, the results of the vote to appoint Deloitte LLP as auditors of the corporation are as follows: 92.77% for, 7.23% withheld. I declare the motion carried. As there is no further scheduled business to be brought before the meeting, this will serve as a 1-minute warning prior to the polls being closed. If you are voting through the virtual platform, please ensure that your votes are recorded. [Voting]

Okay. The polls are now closed. Unless there is any other business to be brought forward, we will now proceed to conclude the formal portion of the meeting.

Sir, there are no questions.

Seeing none, I will now entertain a motion to end the meeting.

I move that the meeting be terminated.

I second the motion.

Any objections?

None.

Then I declare the formal portion of the meeting to be terminated, and will now present the corporate update. I will now provide a brief summary of the past year at CES as well as a quick snapshot of our outlook for the future. This past year has been another constructive and transformational year for CES Energy Solutions. We have continued to grow our revenue, EBITDA and free cash flow year-over-year to all-time records, all while improving our current debt level and capital structure. Some of the highlights of this performance are another all-time record annual revenue in '24 of $2.4 billion, another all-time record annual EBITDA in 2024 of $403.2 million. During 2024, we were able to repurchase and cancel $101.5 million worth of CES shares or a little more than 15.17 million shares of CES as we once again maximize our NCIB program. We successfully worked to reduce our total debt net cash from $470 million at the beginning of 2024 to $453 million at the end of the year. This lowered our debt to trailing 12-month ratio from 1.44x at the end of 2023 to 1.2x at the end of 2024, midway into our targeted range of 1 to 1.5x. All of these impressive financial achievements led to our share price growing from $3.45 on January 2, 2024 to $9.91 on December 31, 2024. This represented an improvement of 287% during the course of the year. As a result of the strong financial performance highlighted previously, CES Energy Solutions equity was the #1 performing stock on the TSX Energy Index and the #2 performing stock on the entire S&P TSX Composite Index. This outstanding accomplishment cannot be overemphasized and speaks to the quality of the strategy, execution and culture here at CES Energy Solutions. Now to highlight some of the operational achievements in 2024. JACAM Catalyst market share continues to be the #1 in the Permian Basin and a close #2 overall on land in the United States. As well, we have now successfully proven out our product line and capabilities in the Gulf of America offshore market. Due to this, we are now actively pursuing new business in this massive market in which we have only a tiny presence to date. AES market share has continued to grow, and AES Drilling fluids remains the #1 drilling fluids provider in the U.S. land market with a market share of approximately 23% at the end of Q1 '25. As well, AES continues to be the #1 provider in the Permian Basin with a 32% market share at the end of Q1 '25. PureChem, our Canadian production chemical group continues to take market share in Canada and we believe it continues to be the largest production chemical provider to the conventional market in the WCSB as well we have continued to make progress in penetrating the heavy oil market. And finally, CES Drilling Fluids continues to be the #1 provider of drilling fluids to the Canadian market at around 35%. In addition to Canada, CES drilling fluids is also leading the efforts in some of our international objectives as well. For 2025 and beyond, our growth strategy remains the same: continue to strive to expand our business in all service lines and all areas in which we currently operate, our goal is always to be the #1 supplier by market share in each of these market segments. We are focused on expanding our position in the offshore production chemical market worldwide. This journey has started in the Gulf of America, and we'll continue to focus on evolving and expanding our position wherever the opportunity and capability exists over the coming years. We also continue to look for opportunities in the international markets to expand our drilling fluids presence. We have identified the countries where we can bring the most value to potential customers in a manner that is profitable for our shareholders and safe for our employees. Finally, I will finish by noting that we remain optimistic in our outlook for the future here at CES. We believe that all of the above approach to energy supply by the world will be the winning strategy for all. This approach should lead to more stable pricing and activity levels in our industry for years to come. Within this market, we believe we are very competitively positioned to continue to grow and excel throughout our divisional offerings. We will continue to focus our strategy on finding the best possible balance between our customers, our employees and our investors. Our accomplishments to date and this strategy would not be possible without the people and culture that are present every day here at CES. I continue to be very proud to lead this organization now and into the future. Thank you to everyone who works for us, works with us and trust their investments in us. We appreciate your vote of confidence, and we'll continue to commit to always doing our best to honor and earn it. With that, I'll now pass the call back to the operator.

This concludes the meeting. You may now disconnect.