The H.C. Wainwright 27th Annual Global Investment Conference. My name is Sarah, and I'm an Investment Banking Analyst at H.C. Wainwright. We're very excited you could all join us for a productive day of one-on-one meetings, corporate presentations, and panels. For this session, we are thrilled to welcome Elijio Serrano, Senior Vice President and CFO of TETRA Technologies, Inc, trading under the symbol TTI. Thank you. Good afternoon for those in the room, and good morning for those that are participating by webcast. I'm going to take a few minutes and walk you through TETRA and the performance of the base business that we have today, and then give you a preview of some of the initiatives that we have ongoing that we're going to further discuss at an Investor Day that we have planned on September 25th at the New York Stock Exchange. The forward-looking statements are available on our website. TETRA, as you know, is a publicly traded company. We have been in business over 40 years. Market cap slightly over $600 million. Enterprise value slightly over $700 million. Our two core businesses are the water and flowback businesses. That's essentially managing water logistics and water chemistry on the onshore around fracking operations. Then we also have oil and gas deepwater completion fluids business, and an industrial calcium chloride business. As you see from the graph on this slide, our margin performance has improved steadily over the past several years, including the 2021 COVID period when many in the oilfield services sector struggled significantly with lower volumes. Our margins even during those two difficult years continued to improve, and that reflects the structure and the competitive advantage of our business. We've got two core segments that we focus on. The first one on the left side is our completion fluids and products business. We manufacture a product that's known as a completion fluid to sell to deepwater oil and gas operators. That fluid is used to complete a well. It goes after the drilling mud is pulled out of the formation, and we insert our completion fluid into the wellbore. Imagine drilling a deep water well that's one to two miles below the waterline, and then one to two miles into the earth. The weight of all that water and the weight of all that earth on top of gas pockets, and when you drill a hole with a drill bit into that gas pocket, will rise uncontrolled to the surface and create a BP Macondo type exposure. Oil and gas operators cannot frack the well with the drilling mud that's in the wellbore at the time that they finish the drilling, as that drilling mud will clog up the formation. So what they do is they remove the drilling mud and insert our completion fluid, which is a heavy salt brine solution, double the weight of water in many cases, soluble. It allows them to frack into the formation. Then, as they produce the well, the oil will come out and pushes up our fluid. We take that fluid, we clean it up, and then we sell it to the next operator. We're vertically integrated. We have a cost advantage. We compete against Schlumberger, Halliburton, and Baker. We believe that our market share on the high-end fluids is as high as 30%, and competing against those large well-capitalized OFS companies tells you that the chemistry knowledge that we have, the technology that we've developed, so for some high-end fluids such as Neptune, and the cost advantage that we have by being vertically integrated has allowed us to achieve some very strong margins. You can see that even on the most recent trailing 12 month, our EBITDA margins are 34%. As activity has slowed down for the oilfield service companies, a lot of those margins are under pressure, yet our margins continue to perform. On the right side is our water and flowback business, and this is where I mentioned that we manage the logistics and the chemistry around water. We'll move water to the oil and gas operators so that they can feed that water to the frack companies that are fracking their wells. After the water comes back out of the well, we'll take that water, treat it, clean it to a certain degree, give it back to the operator so that they can frack subsequent wells. We're using this business to now develop a technology to completely clean up that water, desalinate it, and use it for surface discharge that I'll talk about later. We are seeing a little bit of a slow back in this business as fracking activity slows down, but you can see that we are maintaining our margins to be in the low teens. The sum of these two segments in the last year has given us EBITDA of around $100 million, revenue of around $600 million, and free cash flow of around $50 million, and we've got these two segments that we have focused upon that we believe we've got competitive advantages with some barriers to entry and have allowed us to use the know-how and the technology to expand into adjacent markets. The opportunity that we believe that TETRA presents to shareholders is that how do we use our two core businesses that are performing well, generating free cash flow, take the chemistry know-how from those segments, and expand into adjacent areas. On the bromine side, I mentioned that we're vertically integrated. We have a long-term supply agreement to source elemental bromine, and we're using that to feed other businesses. One of those areas is battery storage. There's a publicly traded company called Eos Energy Enterprises that have developed the technology to be able to capture wind and solar power and be able to augment the grid during peak hours of operation. We have developed the chemistry, the electrolyte that goes into that battery. That is the same chemistry that we're using in the oil and gas sector with zinc bromide solutions. We have been able to plan a process to further purify purity levels of parts per billion instead of parts per million and have that zinc bromide be the key electrolyte. As Eos grows, their demand for the electrolyte will grow substantially. Eos has communicated that they are expecting to achieve 8 GW of battery storage production in the coming years, and we represent a significant part of that. That could represent revenue to TETRA of as much as $250 million. Compare that against the existing revenue that we have for the total company of $600 million. That is the energy story, the energy stories that come from the completion fluids. On the right side, we've mentioned that we're treating water. We treat it to a certain degree to be able to frack subsequent wells. We have now licensed technology, and we have evolved that technology to be able to take that water and completely clean it up so that it can be used for crop irrigation, for surface discharge, and can be sold to operators running data centers to cool those data centers, and in addition to that, we've got critical minerals that we can extract from brine, products such as manganese and magnesium and lithium, for example, that will also represent. The opportunity for TETRA from these new growth opportunities is what we will lay out at the Investor Day on September 25th when we host investors at the New York Stock Exchange. Let me go through each of those a little bit in more detail. So right now, TETRA is the only known U.S. producer of high purity zinc bromide in the United States. This is the same zinc bromide that we're using for offshore oil and gas wells, using our patented process to further refine that purity level and then sell it into the battery storage market. Eos, we've been working with them since 2020. We've got an agreement in place with them that we supply a minimum of 75% of the full electrolyte and 100% of the zinc bromide solution. We believe that for every kilowatt-hour of battery storage that Eos sells, that it represents $25-$40 per kilowatt. That works out to between 10%-15% of Eos revenue is revenue to TETRA. Consensus for Eos is this year somewhere in the $150 million range, which would represent revenue to TETRA somewhere in the $20 million range. Next year is around $500 million, moving to about $1 billion. So by 2027, if Eos hits their targets, you're talking $100-$150 million of revenue to TETRA coming from the Eos opportunity. We work very closely with Eos. We're in collaboration with them in terms of keeping up with their demand. In this picture you see here, we've been shipping the electrolyte to them in totes. They take that electrolyte, insert it into a battery, then they put 672 of those batteries into a container. Then they'll put as many as 20, 30 of those containers next to a grid to be able to augment the grid requirements from wind and solar power. This works better versus a lithium battery as an example because lithium batteries are short charge discharge, two-to-four-hour duration. Zinc bromide batteries are 8 hour-12 hour charge discharge duration. Zinc bromide batteries are not flammable. You would never put a lithium bank of lithium batteries next to an infrastructure or next to a grid for the fear of the fire hazards that lithium brings to them. From the produced water perspective, if you're familiar with the oil and gas industry, in the Permian Basin, for every barrel of oil that you produce, you're getting 4 bbl-6 bbl of water coming out. There's more water being produced in the Permian Basin by a factor of 4x-6x than there is oil. That water has historically been injected into empty caverns and reservoirs that previously held oil. But because of the four to six ratio to one of oil, the industry is running out of space to dispose of that salt water. Now they're having to move to adjacent counties and build pipelines to take it further and further away. And those counties are now running out of space. If you keep injecting that water to where there's minimal space available, you start to see seismic events, and it's causing structural damage. You're starting to see the regulatory bodies start to step in and ask the operators to find a solution to that. The market, we believe, is as much as 6 billion bbl of water that is being disposed. We have come up with a solution to where we can take that water, continue to treat it like we are today, marry it up with desalination technology that we have licensed, and be able to get water that's purer than what you can find in glasses such as the following. In fact, we completed a test in December, and we passed what is known as the WET test. The WET test is the gold standard of the purity of water. You can take that water, bring living organisms to it, and see that it does not impact those living organisms. In fact, the water was so pure that we removed all the minerals from it that we had to remineralize some of the water and put some calcium chloride back in the water so that the living organisms can survive with it. When we have our Investor Day at the New York Stock Exchange on the 25th, we'll lay out the goals as to how many plants we think we can build, what the economics are of that plant, and the revenue that we can generate from that one. We'll also preview some of the feedback from the regulatory bodies in terms of how they're encouraging the oil and gas industry to embrace the technologies to solve this problem. This schematic shows how you go from the left side of water coming out of those wells, how we continue to pretreat the water comparable to what we've been doing for many years, and then bring in technologies that we've licensed to completely desalinate the water, and you can take as much as 50%-70% of that water, clean it up, and do surface discharge, crop irrigation as an example. The remaining water is now concentrated with a lot of minerals in there, and we can begin extracting minerals from that concentration level of water, including iodine, magnesium, boron, lithium, etc. The advantage to the operators is that they no longer have to dispose of the water. Now they can create a revenue stream by selling that water to data centers, for example, for cooling. They can sell it to landowners. And then we work with them to extract the minerals from that. Our business model is that we charge them on a per barrel fee. We'll charge them anywhere from $1.50-$2 to treat that water. On the critical mineral side, I mentioned that in addition to extracting bromine from brine, which we've been doing now going on 40 years, in addition to being able to work with minerals and produce water, now we've got technologies that can extract the iodine molecule, the lithium molecule from brine, and it opens up a new avenue of opportunity for us to create a new revenue stream. We own acreage. We own the mineral rights to 40,000 acres in the Smackover Formation in Arkansas. To the right of us in pink is Albemarle. South of us is Exxon. West of us is Chevron, and north of us is Equinor. You've got four large well-capitalized companies completely surrounding the acreage that we've had. We've owned the mineral rights to that acreage for over 20 years. There was acreage previously owned by Dow Chemical. When Dow Chemical decided to exit the bromine sector, the U.S. Department of Justice prohibited them from selling it to one of the three large chemical bromine producers in the world: Israel Chemical, Albemarle, and LANXESS, because there was already concentration. TETRA bought those mineral rights. We've been sitting on them for over 20 years. This was our safety net in case we could not find adequate volumes of bromine to keep feeding the oil and gas sector. Now that there's a new market demand for battery storage, we believe that it's the right time to tap into that acreage, extract more bromine, and by the way, that bromine is also incredibly rich with lithium, some of the highest concentrations of lithium in these 40,000 acres that exist in the world. That is a reason that Exxon came in and bought acreage south of us. Chevron bought acreage west of us, and Equinor teamed up with Standard Lithium to take a position in some of the acreage that we have in the northern part of us. TETRA financial performance, you can see the quarterly trends. We've been performing and just delivered a record first half of the year. So despite a slowdown in the oil and gas sector and people reporting lower fracking activity, tighter margins, declines in revenue, you've seen that our revenue continues to increase. In the first and the second quarter, we reported EBITDA margins for our fluid segment between 36%-37%, record highs for us. Again, that's driven by the strong demand for the deep water market. Over the past several years, we've been preparing our balance sheet so that we can expand into the two segments that I mentioned, water desalination and battery storage. We've been dropping debt. We've been improving our leverage ratio. Currently, our net leverage ratio is 1.2x. We're sitting on $68 million of cash so that we got that cash available to invest into those two growth opportunities. And we're building liquidity to where today our liquidity is over $200 million, setting us up to continue our transition. So if you summarize what we've covered, we've got a business that's performing well, generating free cash flow, generating strong margins, maintaining a strong position despite uncertainty in the oil and gas sector. We're ramping up two segments: battery storage, leveraging what we do in the oil and gas fluids business. We're expanding into the water treatment business, leveraging what we've been doing in treating water. We believe that those are going to be on the back of long-term multi-year agreements, contract durations of 10 years- 20 years with counterparties such as Exxon, Chevron, Oxy, EOG, that we can do them project-level financing to build those water treatment facilities. As part of that, we've also been advancing and increasing the exposure that our board of directors has. We've added board members with chemical experience, with specialty materials experience, with clean technology experience. Historically, our board was essentially oil and gas executives with significant experience. Now we've got a board that has and matches the expertise of the areas that we're moving into. In terms of performance last year versus this year, many in the energy sector are guiding to weaker numbers, 2025 versus 2024. That's because of the slowdown in the U.S. onshore activity. We provided guidance for the first half of the year. We exceeded that guidance. We provided guidance for the balance of the year, and we're guiding revenue to be above what it was in 2024 despite the slowdown that's occurring. We've provided EBITDA guidance that's also above 2024 despite the slowdown in the oil and gas sector. We think that we have positioned TETRA to not only continue to execute and deliver with its existing base, but now expand into the new markets that we think are going to create a growth opportunity for TETRA into the future. When we have our investor day at the New York Stock Exchange on the 25th, we're going to lay out goals in terms of how much revenue and EBITDA that we believe we can generate from those two growth initiatives. We had said that not until we felt comfortable that we had the customers, the market acceptance to be able to deliver on those goals, we schedule the investor day. This year, we've attained those, and now we're ready to communicate what those targets are in terms of revenue, EBITDA, cash flow, and earnings per share for the future of TETRA. Again, appreciate the invitation from Wainw right. Look forward to visiting with you as we advance our initiatives, and you can on our website register and attend the Investor Day at the New York Stock Exchange. I'll open it up for questions from the audience if I can address any of the questions that you guys might have. On the 25th, you're going to update your financial model, so those numbers are going to change. When we begin laying out our targets for beyond 2025, we will lay out the goals. T his is 2025. Yeah, it's at the New York Stock Exchange. We'll lay out what the targets are as we advance each of those initiatives. And the revenue and the EBITDA are going to be materially greater than what we're seeing today with those growth initiatives. I noticed in the first or second slide a margin comparison between the two businesses. Correct. There was a dramatic difference. Correct. Could you address the difference in that margin and whether, in fact, there is an opportunity to increase the water margin up closer to the other? So the two segments have very different margins. The fluids margins are in the high 20s to mid 30s, depending on how much work and which type of product that we sell. The onshore business, the water margins are in the teens, low teens. The lower margins from the onshore business is essentially our water treatment and water transfer business. Today, that is cash flow positive. We're using that business to generate cash and fund the transition into water treatment. As that business gains traction, and we expect that those margins are going to be closer to 30 than they are closer to 10, we'll revisit those segments within that business and rationalize them. Our objective is to get all our businesses up into the high 20%-low 30%-type EBITDA margins. But today, we're using that business to generate cash flow to fund the transition and expansion into the new businesses. There's lower barriers to entry on the water transfer side, but we've got the chemistry know-how on the water treatment side that works in our favor.