Kirby Corporation (KEX) Q3 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Kirby Corporation 26 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Donny Chia, Vice President of Finance and Investor Relations. Please go ahead.

Good morning, and thank you for joining the Kirby Corporation 26 Third Quarter Earnings Call. With me today are David Grzebinski, Kirby's Chief Executive Officer Christian O'Neil, Kirby's president and chief operating officer and Raj Kumar, Kirby's executive vice president and chief Financial Officer. Slide presentation for today's call, as well as the earnings release which was issued earlier today, can be found on our website. During this conference call, we may refer to certain non GAAP or adjusted financial measures. Reconciliations of the non GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings press release. And are also available on our website in the Investor Relations section under Financials. As a reminder, statements contained in this conference call with respect to the future are forward looking statements. These statements reflect management's reasonable judgment with respect to future events. Forward looking statements involve risks and uncertainties, and our actual results could differ materially from those anticipated as a result of various factors. A list of these risk factors can be found in Kirby's latest form 10 k filing and in our other filings made with the SEC. From time to time. I will now turn the call over to David.

Thank you, Donny, and good morning, everyone. Earlier today, we announced record third quarter earnings per share of $2.09 up 27% year over year. Our results reflected strong continued momentum across both businesses and solid execution throughout the organization. In marine transportation, strong barge utilization and favorable pricing trends supported performance during the quarter. In distribution and services, results benefited from robust demand in power generation and strong growth in behind-the-meter power solutions. Overall, the company executed well during the quarter and delivered solid financial and operating results, reflecting our continued focus on safety and operational excellence. In inland marine, market fundamentals remain constructive during the quarter. Strong refinery operating rates healthy petrochemical activity, and limited new industry capacity supported barge utilization in the low 90% range. Spot market rates improved sequentially in the low to mid single digit range, while term contract renewals increased in the low single digit range compared with the prior year. Increased levels of Venezuelan crude imports resulted in heavier refinery feed slates and more byproduct moves. However, rising fuel costs remained a near term headwind as higher cost were only partially mitigated by cost escalators and rate recovery mechanisms during the quarter. The inland business delivered margins in the 20% range, driven by a combination of steady demand, disciplined execution, and limited industry capacity addition. In coastal marine, customer demand remained stable with barge utilization in the high 90% range. In third quarter coastal revenues increased 3% year over year while operating margins were in the mid teens range. There was only 1 contract renewal in the third quarter which increased in the low double digit range. Turning to distribution and services. Our performance reflected favorable market conditions for power generation and strong execution by our commercial and operations team. Segment revenues increased 6% year over year driven by strong demand for behind-the-meter and backup power solutions in a healthy environment for commercial and industrial. For the quarter, operating margins were in the low double digits and up 200 basis points sequentially, reflecting the growing share of behind the meter power solutions in our power generation business as well as operational improvements throughout the segment. Overall, the segment delivered solid results across the portfolio, demonstrating the strength of the company's positions across multiple end markets. In summary, Kirby delivered a strong quarter, underscoring the strength of our portfolio and the disciplined approach that we bring to our operations every day. In marine transportation, inland delivered strong revenue growth year over year and coastal utilization remained high. In distribution and services, power generation remained a key growth driver Commercial and industrial activity performed well. And oil and gas remained stable. Taken together, these trends reinforce our confidence in the outlook for the remainder of the year which I will discuss in more detail later in the call. But first, I will turn it over to Raj to walk through the segment results, balance sheet, and capital allocation.

Thank you, David, and good morning, everyone. In the third quarter of 26, Marine Transportation segment revenues were $569 million and operating income was $112 million with an operating margin of 20%. Compared to the third quarter of 25 total marine transportation revenues increased $84 million or 17% while operating income increased $23 million or 26%. The operating margin improvement came from strong utilization and improved pricing despite continuing inflationary pressures. Compared to the second quarter of 26, total marine revenues increased 6% while operating income increased 27%. Looking at the inland business in more detail, inland contributed 81% of marine transportation segment revenue with average barge utilization in the low 90% range for the quarter. Long term contracts or those with a term of 1 year or longer contributed approximately 65% of inland revenue with 56% from time charters and 44% from contracts of affreightment. Improved market conditions resulted in average spot market rates increasing in the low to mid single digit range sequentially and increasing in the mid single digit range year over year. Term contracts that renewed during the during the third quarter increased in the low single digit range year over year. Compared to the third quarter of 25, inland revenues increased 21% while operating margins were in the 20% range. Moving to the Coastal business. Coastal represented 19% of revenues for the Marine Transportation segment with average barge utilization in the high 90% range. In line with the second quarter of 26 and the third quarter of 25. For the quarter, the percentage of coastal revenue under term contracts was approximately 95% of which approximately 100% were time charters. Coastal had 1 term contract renewal during the third quarter, which increased in the low double digit range year over year. Wholesale revenues increased 3% year over year with operating margins in the mid teens range driven by fewer shipyard days compared to the second quarter of 26. With respect to our tank barge fleet for both the inland and coastal businesses, we have provided a reconciliation of the changes during the quarter as well as projections for the full year. This is included in our earnings call presentation posted on our website. At the end of the third quarter, the inland fleet had 1.15 thousand barges representing 25.7 million barrels of capacity and is expected to be flat in the fourth quarter of 26. Coastal marine expected to remain unchanged from the third quarter of 26. Now I will review the performance of the distribution and services segment. Revenue for the third quarter of 26 was $408 million with operating income of $48 million and operating margin of 12%. Compared to the third quarter of 25 the D&S segment revenues increased by $22 million or 6% with operating income increasing by $6 million or 13%. This growth was driven primarily by continued strength in the power generation business especially in our behind-the-meter applications and higher marine repair activity. Compared to the second quarter of 26, revenue increased by $23 million or 6% and operating income increased by $10 million or 27%, reflecting improved activity levels favorable mix, and stronger performance across several end markets. Moving through the segment in more detail, In power generation, we continue to see strong demand for behind the meter and backup power solutions. Our backlog increasingly reflects a greater share of behind the meter power solutions which will be a tailwind for margins going forward. However, OEM engine availability remains constrained and limits the rate at which we can convert backlog into revenue. Overall, power generation revenues increased 8% year over year, with operating margins in the low double digit range. Power generation represented approximately 46% of total segment revenues. In Commercial and Industrial, strong Marine repair activity contributed to an 8% year over year increase in revenues and a 23% increase in operating income. The business represented approximately 44% of segment revenues and generated operating margins in the low double digit range. In Oil and Gas, activity remained stable during the quarter. Revenues were flat sequentially and operating income increased by 54% sequentially driven by higher margin parts and service activity and ongoing cost management efforts. Oil and gas represented approximately 10% of segment revenues and generated operating margins in the low double digit range. Now I will move on to the balance sheet. As of quarter end, we had $38 million of cash and a total. and total debt of $1.07 billion with a debt to capitalization ratio of 23.7%. We ended the third quarter with $530 million of available liquidity. During the quarter, net cash provided by operating activities was $143.5 million and capital expenditures were $69.5 million. Resulting in free cash flow of $74 million Working capital remained elevated during the quarter. Reflecting higher revenues in both segments timing of collections and higher fuel related receivables in marine transportation. We expect these working capital requirements to normalize during the remain remainder of the year supporting meaningful improvement in free cash flow in Q4. In the third quarter, Kirby entered into an agreement to acquire certain inland marine assets from undisclosed sellers for approximately $115 million The acquisition includes 9 inland towboats, 14 inland tank barges, 9 valve thrusters, and the Rockport, Texas, fleeting operation. The acquired assets are expected to enhance Kirby's inland marine network in South Texas and further highlight our focus and disciplined acquisition strategy. With respect to capital expenditures, we continue to expect full year capital spending to range between $220 million to $260 million Approximately, $170 million to $210 million is associated with marine maintenance capital. Including improvements to existing inland and coastal marine equipment and facilities. Approximately $65 million is associated with growth capital spending across both businesses. For the full year, we remain on track to generate cash flow from operations of $575 million to $675 million Our capital allocation strategy remains focused on maximizing long term shareholder value balancing disciplined investment in our businesses, with consistent return of capital to shareholders. In the third quarter of 26, we returned $112 million to shareholders through share repurchases at an average price of $137 These repurchases reflect our confidence in the long term earnings power of the business and our view that at recent levels share repurchases represent an attractive use of free cash flow. Having said that, we continue to prioritize and evaluate acquisition opportunities within our core businesses. Particularly in marine, where we see the potential to further enhance our service capability drive fleet efficiency and generate attractive long term returns. Taken together, our balanced approach allows us to invest in high-return opportunities across our portfolio while consistently returning capital to shareholders. With that, I will turn the call back to David to discuss our outlook for the remainder of the year.

Thank you, Raj. As we look at the balance of the year, we remain encouraged by the direction of the businesses. Across our portfolio, we are seeing the continuation of many of the same tailwinds that supported our third quarter results, including healthy demand solid asset utilization, and continued inland pricing improvement. While the broader operating environment remains dynamic, we believe our market leading businesses disciplined approach position us well in the fourth quarter of 26 and for a good 2027. As a result, we have narrowed our 2026 full year earnings growth guidance to 10% to 15% and currently expect results toward the upper end of that range. Our confidence is supported by continued inland pricing momentum the expected recovery of fuel cost timing impacts, healthy utilization across marine transportation, and solid execution on our growing power generation backlog. In inland marine, we continue to see favorable operating environment. Demand from refining and petrochemical customers remains healthy while barge availability across the industry remains relatively tight and pricing momentum continues to build. With spot pricing continuing to lead term pricing, we believe the setup remains constructive as additional contracts renew in the seasonally heavy fourth quarter renewal period. Overall, inland revenues are expected to grow in the low double digit range operating margins in the high teens to low 20% range for the full year. In coastal marine, underlying market conditions remain supportive with healthy customer demand and strong barge utilization. Overall, revenues are expected to increase in the mid to high single digit range for the full year with operating margins in the mid teens range. The margin is reflective of elevated shipyard activity in the fourth quarter and the market specific pricing dynamics we mentioned last quarter, as well as ongoing cost pressures. In distribution and services, strengthened power generation and marine repair is expected to continue driving segment results. In power gen, customer demand remains exceptionally strong, particularly for behind the meter power solutions, serving data centers and other industrial applications. While OEM engine availability continues to affect the timing of customer deliveries, our backlog and customer conversations continue to support a strong multiyear outlook. Importantly, growth in the behind-the-meter power application that operate continuously creates longer term aftermarket parts and service opportunities. As our growing installed base continues to expand. Within commercial and industrial, marine repair demand is expected to remain healthy, while on highway activity remains constrained. In oil and gas, activity is expected to remain stable subject to changes in the market environment. Overall, we expect segment revenues to increase in the high single digit range for the full year operating margins in the high single digit range. To conclude, we delivered solid third quarter results and remain well positioned for the remainder of the year. Marine transportation fundamentals remain favorable, supported by strong utilization, improving inland pricing, and limited new capacity. In distribution and services, power generation continues to be a key growth driver while commercial and industrial activity remains healthy. Supported by our market leading positions, enhanced service capabilities, fleet efficiency, and disciplines approach, we remain confident in our outlook and our ability to deliver our narrowed EPS growth guidance range. Operator, this concludes our prepared remarks. Christian, Raj and I are now ready to take questions.

As a reminder, to ask a question, please press In the interest of time, we ask that you please limit yourself to 1 question and 1 follow-up. Please stand by while we compile the Q and A roster. Our first question comes from Tomo Sato with JPMorgan. Your line is open.

Good morning, everyone.

Hey, good morning.

Good morning, Tomo.

Hey, good morning, Tomo. Tomo.

And thanks for having us, and congrats on a strong quarter. Maybe starting with Marine, how are you thinking about pricing over the next 12 months, and how sustainable is that pricing power over the medium term for this?

Yeah. Sure, Tom. I will let. This is David. I will start and turn it over to for some more detail. Look. In the third quarter, we had a low single to mid single digit spot pricing increases. But it was, you know, it was a small portfolio that replaced in the third quarter. Term pricing was up low single digits, but importantly, momentum's building into the fourth quarter here, and, you know, we think, the pricing should be north of what we saw in the third quarter, which is really important because it sets up a good 2027. And you know, longer term, we still see supply and demand in really good balance right now. Nobody's really building new equipment. And the retirements continue So we do not see much in terms of net new adds to the industry fleet, over the next several years. But let me turn it over to Christian who is got a lot more color on particularly the fourth quarter renewal season that is that is ongoing right now.

Yeah. Thank you, David. I think you characterized it well as we have a lot of momentum going into the fourth quarter and going into next year. It was a very small sample set in Q3. Single digit, term contracts had actually renewed We will definitely see stronger momentum you know, improvement in everything, all things inland Supply remains tight. there is only 65 ish barges being delivered this year. Feels like most of that is replacement capacity. Our utilization remains high, low 90% range to exit the quarter. We actually touched 95 plus percent utility a couple times in the last few weeks. Refinery utilization is near record levels. And you know, the spread between spot and term pricing when you bake all this together remains about 10% to 15%, and I will tell you it is on the higher end of that on the 15% range. When spot is outpacing term at those levels, we really get the opportunity to get some good bites term pricing Chemical volumes are also improving. Supported by global rationalization. The golf Coast pad 3 chemical plants are busy. Middle East infrastructure is taking a lot of damage. A lot of capital discipline out there from our competitors. New build Econs remain a challenge. We do not see supply growing in the near term, as David said. And, again, to restate it, contract pricing continues to improve. I will stop there.

Thank you, David and Christian. Christian. Follow-up on D&S as power generation scales. How quickly can service and parts become a more meaningful part of the mix? And how much margin upside could that create over time, please?

Yeah. No. Greg question. Again, Christian, I will tag team this here a bit. Look. The pace of orders has been great. And particularly for behind the meter or bring your own power, which is what everybody's talking about now, because, you know, with the NIMBY or not my backyard, the concerns that a lot of the data center pushback is talking about is about power. So they are this bring your own power move is real. As we look at our order inbound and even our backlog right now, which is probably 2 thirds, behind the meter of power or bring your own power, that is really good for us because those are natural gas systems. They are complex. They have a lot of what we call balance of plant equipment. Which we are the OEM for. You know? We do not make the engine, but we put everything around the engine whether it is a cooling system, a, you know, air intake system, sound attenuation system. As well as, you know, power distribution systems that link it all together. You know, all that is our equipment, and we are the OEM. And importantly, as the OEM, we end up getting the service and parts there. Now Christian will describe a little more on how long you know, that takes to start converting service.

Yeah. Thank you, David. And, Tomo, thanks for the question. We are highly focused on the aftermarket opportunities here. Our data center customers our power service customers, they demand uptime They demand turnkey solutions. The aftermarket opportunity will provide a nice stability for us after this CapEx cycle starts to fade a little bit or slow down a little bit. We think the aftermarket opportunity can exceed the original product value. And so we are aggressively going after that. We have built a new part of our team led by Chad Jones, who leads our power service team. To chase this aftermarket opportunity vigorously. As David said, we have the right to win on a lot of the behind the meter that we are producing. And we are highly focused on it, highly excited about it. Know, we think in 3 to 4 years, you will begin to see the maintenance cycle. We describe it internally as the new car effect. You know, you buy a new car. It works great. It smells great. It operates smoothly in about year 4. Mechanic down the street is licking his chops. You know, we see that big ramp up in aftermarket about, you know, 3, 4 years out. You know, it will be a 100 million plus dollar business for us You know? Again, do not hold me to that, but that is what we are scoping it out and budgeting it out to be today. As we build the team and build techs. Very excited about the aftermarket opportunity.

Thank you very much.

I would just add. You asked about margins. Obviously, aftermarket has higher margins. Think everybody realized that You know? And the behind the meter bring your own power equipment has higher margin than just backup diesel. So the margin profile should continue to approve improve. You know, just a little caution on quarterly progression. We do know, have lumpiness in our. In both manufacturing and shipments, and that swings around the margin a bit quarter to quarter. So you. Really, the focus on margin should be on an annual basis, what is the average annual. Our view is, you know, that is gonna improve and continue We will be in the double digit margin range in a in a year or 2, if not before. Thanks again. Thanks, Phil. Thanks, Phil.

Thank you. Our next question comes from Bascome Majors with Stephens. Your line is open.

Hey, guys. This is Reed Seay on for Bascome.

Hey, Reed. This is Reed. If we could start on the marine side, just some wording in the release around coastal and kinda on the call as well. If we look at the margins, I understand there is some heightened shipyards and there is some pricing dynamics. 1, if you could give us an update on the pricing dynamics with those specific size ships that you called out last quarter. And then you also called out some, I believe, it was ongoing cost pressures. Is that just the shipyards, or are there some other dynamics that we should be aware of? Yeah. We will we will we will handle this together again, Reed. Look. The fourth quarter, we have got some larger units coming into the shipyard. And as you have heard us describe before, these large units you know, they have high day rates and when they are out of service, we still have all the cost that goes with it and, we just do not have the revenue. But that is just part of the business. You know, you saw our margin in the second quarter was lower than what we saw in the third quarter. The fourth quarter will be more like the second quarter in terms of margin. You know, principally be because of the of the shipyard cadence. that is just a normal part of the business. I will let Christian talk about the rest of the cost structure and the contracts.

Thank you, David. Thank you, Bascome. Yeah. You asked about you know, the market dynamic piece of that we alluded to in spoke about last quarter. You do see a bit of that flow through of the net effect of what was European barrels that imported into the North And our smaller barges are 80s and 100s, get the opportunity to move those European barrels and redistribute them on the East Coast. With the you know, low amounts of European imported refined products, you know, we have seen that impact those margins on those contracts that service that piece. And so what you see now is just a little bit of that flow through that we talked about last quarter as those 80s and 100s. You know, felt a little bit of the pricing pressure. The good news is the bigger units the thermal oil units, the chemical units, you know, those other pieces of the business, we are very, very bullish about. There is high demand for them. The rates are very good. We do see improving rates as you saw the single contract that renewed this quarter in the I think it was in the double digit range. You also asked about know, cost pressures. Know, inflation is real. We see it across various buckets in the marine companies. In general, skilled labor, not just for us, but even in the D&S companies when it comes to engineers, and others. there is a lot of pressure on skilled labor particularly around the Mariner and the inflation there. And the other piece is the price of steel. A lot of the other inputs that go into a major yard period or shipyard period you see inflationary pressures around those. And you know, maybe those are eating to the margin a little bit here.

Got it. That makes a lot of sense. And then if I could just ask on power gen as well. Could you provide an update on what that backlog like in terms of on a quarter over quarter basis, what it looks like versus 1Q? And when we should start to see some backlog harvesting or if. How much that is going on right now. Just any color there would be helpful.

Sure. I think in the first quarter, I said our backlog was 500 to a billion. In the second quarter, I said $1 billion to $1.5 billion. I would just tell you right now, we are north of $1.5 billion in terms of backlog. The important thing is book to bill. Book to bill is well above 1 right now. We are we are continuing to take orders The inquiry level is still very high. You know, you hear about all the delays and stuff and ups and downs and in the daily news, but I would just tell you the demand is still there. it is it is it is robust. Everybody needs the power. I mean, if you are gonna build a data center, particularly with the political pressure nowadays, that you are seeing across The United States. You know, they are they are calling it bring your own power. And, you know, if you are gonna build a data center, you better bring your own power, which is music to our ears, frankly. You know, that is the low cost of natural gas, that is that is perfect for our natural gas recip systems that we build. So we are we are excited about it, Reed. You know, we do not wanna really get into telling our backlog every quarter because you guys know what that game's like. But we are trying to give you direction. Makes sense. And, we appreciate that.

If I could sneak in a bigger picture 1 just on inland, I. You have had some demand. Headwinds in the past year or more. Can you talk about some of what you expect on the come in terms of demand, like, particularly on the chem side, which we saw struggle a little more last year?

Yeah. Again, Christian and I can give you a lot more detail than I can, but, like, you know, that is that third quarter of last year, the feedstocks leak got really light. There was not a lot of heavy coming in. Part of that was tariff driven. Part of it was just some of the global political dynamics. But now that Venezuelan crude's coming back in, the feedstock slate's heavy, Other heavy feedstocks are getting discounted because of the competition from Venezuelan. Is really good for you know, for our refinery customers. Similarly, in the chemical side, we have seen some strength. I do not know if Christian can give you a lot more detail.

Yeah. No. I think when you compound record refinery utilization, with what is finally for us. We are beginning to see some strengthening you know, chemical markets, particularly in the Gulf Of Gulf Of America. That we service. Know, in part driven by global rationalization I think you are finally seeing the European less efficient you know, PE and chemical producers. They are they are closing the doors on some of those less efficient plants. You. You have seen the Middle East infrastructure, taking a lot of damage, frankly, in the in the conflict over there. And then you just have the natural competitive. Competitiveness of PADD 3 its proximity to cheap natural gas and its feedstock advantage. I think when you compound all those together, you know, we are we are beginning to see our chemical customers more optimistic. We are beginning to see the opportunity to move some pricing on the chemical side, And in general, chemical volumes are improving. We definitely see that. So when you compound that with record refinery utilization, hey. that is that is a great cake to bake over here at Kirby.

Greg to hear. Thanks for taking my questions, guys.

Thanks, Reed.

Thank you. Our next question comes from Scott Group with Wolfe Research. Your line is open.

Hey, good morning, guys. This is Ivan Yee on for Scott. First on margins, both inland and coastal margins seem to be down this year. Can margins in both segments start growing again in 2027? Thank you.

Yeah. The short answer is absolutely. Yeah. You know, we just talked about the weakness we saw in 2025. That had set up the fourth quarter when those term. That heavy term contract renewals came in. And that puts some headwind on margins. We are definitely crawling out of that. That hole, and making real progress now. You know, inland margins were in the 20% range this quarter. As you heard Christian describe the fourth quarter renewal cycle, it is gonna be really strong So it you know, margins should definitely improve from here.

Exactly.

Great. Thank you. And then you seem bullish on pricing next year, but what about the cadence of cost? Can the price cost spread accelerate from 2026 to 2027, especially if fuel prices start moderating? Next year. Just wanna get an update on the cost side as well. Thank you.

Yeah. We should have real price increases over inflation here. Know, fuel has been a headwind as I am sure everybody's aware of it. Anybody that is using diesel nowadays is probably talking about that headwind. We work really hard, Christian and his team. Make sure we have fuel adjustment clauses in all our contracts. But there is a lag. Some of some of them have a hundred and 20 day lag. Others are very short. We saw a pretty big headwind in the second quarter on fuel. We thought we have recovered all and third, but, you know, fuel did another tick up. You know, I think we got north of $4 a gallon. So you know, there is a little bit of a headwind in our margins on fuel this quarter as well. You know, assuming fuel does not take another leg up, you know, that should start to roll through here as we as all our contract clauses adjust here in the fourth quarter. Some of some of that will roll into the first, but, you know, that fuel headwind should mitigate You know? But fuel moves around. You know, our goal, again, with our customers is to not take any risk on fuel or make any money on fuel. You know, they are they are best able to bear that. In terms of other inflation, you heard Christian talk about the Mariners and Mariner inflation. Wage inflation for any skilled, worker these days is real. And then steel is definitely a headwind. You know, we use a lot of steel. All our boats and barges use steel. And even on the D&S side, you know, there is a heavy steel component. That said, again, we think pricing will definitely be north of inflation. You know, the good news is some of the other inflationary items that we had seen over the years has mitigated some. But it. it is still it is still real But the upshot is. Will be overinflation. In terms of rate adjustments. Thank you, guys.

Thanks.

Thanks.

Thank you. Our next question comes from Ken Hecht with Bank of America. Your line is now open.

Hey, Ken.

Hey, David, Raj and team, morning.

This is Adam Roszkowski on for Ken Hoexter. Maybe just into the Q4 repricing, season, could you just remind us what percentage of the book reprices in Q4? And maybe clarifying, you had noted inland term renewals were up low single digits in 3Q. Is that above the inflationary pressures you are seeing? Was that behind It sounds like you expect the price cost to get better into next year. So just thoughts there.

Yeah. No. Usually, the fourth quarter is probably 35 to 40% of the portfolio. Third quarter was, as you heard Christian mention, you know, a handful of contracts, so it was low. But you know, it was in line with inflation, maybe a little better than inflation. But I would tell you, you know, with what we are seeing in terms of term spot spread and the way fourth quarter is lining up. It will it 'll easily be over inflationary levels, and it needs to be. Look. Know, the big picture here, terms of supply and demand is pricing still 40% below new build economics. So you know, the there is some building for replacement, but nobody's really building equipment to expand. So you know, as demand continues to grow, and you know, demand generally grows with GDP, Right now, obviously, with what is going on in the refinery world, in terms of refined products globally. You know, we are very busy But if new equipment's gonna get built, prices have to go up in a meaningful way. So it is it is a good backdrop for the next 3 to 5 years, for sure. And know, we are we are pretty excited about it. And you know, I know Ken has asked in the past about peak margins. You know? We are gonna in my view, with this cycle, we will we will be setting new peak margin records. It may take a little bit, but it. This is set up for a good long run.

For the color there. And then just last 1. You know, following the recent or upcoming inland asset acquisition, are you seeing more opportunities like this you know, from smaller operators or private fleets?

Yeah. And it is not just the smaller operators as well. I mean, we are in more active discussions than we have been in the long time. But, look, we are very disciplined. We do not overpay. We stay disciplined. We always look at everything on a DCF point and, acquisitions are hard to predict. You know, there is a bid offer spread process. But we stay disciplined. The good news is there is there is enough conversations happening that we are excited about, and you know, this is just another little tuck in that Christian was able to get done. You know, we do not we do not talk about it, but, this had a big fleeting operation, which is really important for our customer service. You know, these fleets, we do not talk about them much, but they add tremendous customer service value. And, that was the key with this 1 acquisition We got some great equipment but it is also that fleet that really can make a big difference.

I do not know if you wanna add anything, Christian. No. It was well said. Yeah. Tight. Yeah. The acquisition is great. Modern fleet. Good mariners. Well run company. As David mentioned, the infrastructure in Corpus Christi area is very strategic, 65 acres of fleeting. Ability to fuel our vessels, ability to get potable water. We got craneage to do topside repairs. It checks a lot of boxes. And, additionally, this was unique in that it. Know, it is a fleet that operated with valve thrusters, which adds to the efficiency of unit tows operating on the West End, particularly in the high the high winds. It see down there. So all in all, a great acquisition that we are very excited about. And if any of that new team is listening, well, welcome to Kirby.

Thanks for the time.

Thanks, Ed.

Thank you. Our next question comes from Benjamin Moore with Citi. Your line is open.

Hi, good morning. Thanks, David, Christian, Raj and Donny for Congrats on the beat and raise. Wanted to ask a question maybe to get your thoughts on timing. I see that, you raised your inland revenue growth to low double digits from the Mid To High Single Digits On Some Of The Ken Drivers. Greg To See It Looks Like there is A Pretty Good Long Tail If You Combine Each Of These Drivers That I Think We have Talked About In The Past. The Venezuela imports, Chevron, this past quarter, in a public forum estimates around, you know, lasting around 10 to 15 years, for the for the Venezuela heavy coming in. You have got Iran where even if the war ends, we could be another court. Several quarters or a couple of years of benefit for you in crack spread widening beyond the eventual end of the war. You have got Calcasieu that benefited Q3 and Q4. Maintenance bump, late 27, early 28. And then kind of beyond all this, the risk of returning to the chems recession. Just wanted to get your thoughts on sort of I have laid out there in timing. Would you agree? Would you adjust some of these numbers? It does seem like the long tail is very supportive.

You know, I think you summarized it really well. We. We have got some really good tailwinds here. We are we are very excited about where we are in this cycle. it is almost feel like a super cycle here. The. Everything you mentioned is true. Calcasieu, Did Help A Little Bit, But, I Will Tell You On Calcasieu, in particular, the corps of engineers manage that very well. We did not see the industry back up that we normally see. So with our utilization as 40 as it is, it could have been even tighter with Calcasieu, but they managed it well. That. Those short term lock disruptions and weather disruptions are gonna happen. But systemically, the stuff you outlined is pretty bullish for us. We know a maintenance cycle is coming in 28, It will start you know, we will we will see it with our fleet and then the whole industry fleet, and it will it will be significant again. We see our refinery customers Look. The US refinery complex is the best in the world. It is the most efficient They can they are running flat out too, and given what is on. In our brand and we did not I do not know if you mentioned Russia, but Russia, Ukraine situation is not good either. So know, that does not look like it is gonna change in the near term for sure. Right? You know, there is some talk of peace with Russia and Ukraine, but you know, it is that could be midterm election driven. So we will we will see. We are very excited about the outlook here for the marine companies. Not even to mention the distribution services power gen stuff as well, but it is it is a good time for Kirby. We are very excited about the outlook for the next several years.

Yeah. I think you described all those macro items very, very well, Benjamin. Think when you compound that with the industry capital discipline that we see now post COVID, you know, really what could what could derail all those great things you mentioned. You know, it would be the undisciplined overbuilding of the market and we do not see that type of behavior at all. And the pricing of inland tank barges prevent that. You know, you are you are looking at $4.6 million to $4.7 million for a clean 30. $5.8 million to $6.0 million for black oil, $2.5 million for a 10 thousand. So you just do not see that undisciplined overbuilding risk in the short run, longer run. So combined with your macro description, things look really good.

Thanks, Benjamin.

Great. Really, really appreciate that, David and Christian. My next question, I wanted to get a sense of sort of maybe discerning between benefiting from mix versus core rate. You have mentioned the low single digits, low mid single digits contract and spot, gains in inland this quarter from some of the small contracts renewed in the quarter. And, and so, you know, when we look back at 22, when Russia invaded Ukraine, we saw some very, very strong contract and spot rate for you guys during that time. As we calculate our model, look at your implied inland revenue per utilized barge per day, we estimate. It looks like it was up 7.5% in 2Q. And it is accelerated to up 8% here in 3Q even though your contract. Your contracted spot rate kinda mixes low single digits or so, Would you say you are seeing good strength in mix as well as some rate gain, maybe more in mix? Versus rate gain kind of versus what you experienced in 2022?

it is a comp. Greg question. The interesting thing is these are portfolio of contracts we have you know, literally hundreds of contracts, and a lot depend on when they were last renewed. So it is difficult to answer your question. I think in terms of revenue per ton mile maybe is what you are looking at and I would just be careful because ton miles move around a lot. Depending on what moves we are doing. So just to give you an example, if it is if it is crude oil from West Virginia goes all the way down the Ohio to the Mississippi down to the Gulf Coast refineries. Those are a lot of ton miles. May not be as much revenue as, say, a chemical cross channel move here in the Houston Ship Channel, which would be very low revenue, or excuse me, high revenue, but low ton miles. So, I am not sure what you are looking at. You know, I think maybe Donny and Raj can follow-up with you and make sure we understand fully what you are looking at.

Think, Benjamin, I will just add and just say that, you know, as we look into Q4, everything is set up really nicely for the marine companies. You know, inland marine, you know, as you know, and we have talked about this, you know, 35% to 40% of our term book gets renewed in Q4. And given the dynamics that we are seeing with the supply situation being in such a favorable position, We are set up to have a really good renewal cycle. I will I will let I will let Christian add some color to that because I think it is important for that message to come across.

No. We are we are very bullish in going. Finishing our Q4 renewals. John Hallmark and the commercial team are doing a great job. We have already had some nice wins as we sit here today at the end of October. And we look forward to continuing that momentum I mean, momentum is the word I would use it is a mix of high utility and you know, you combine that with the winter weather that always, you know, helps tighten things up. That will add to the to the ability to you know, push rates here in the fourth quarter. But we feel very positive about it, very encouraged. We are in a great spot, and momentum is the work.

You know, I will just add on Q3. As we entered Q3, I mean, we saw fuel was actually quite favorable. And as we were as Q3 progressed, fuel started to be a headwind for us. Right? So and even in that situation, given the, you know, the few contracts that we renewed you know, and these are not a large number of contracts that we renewed in from a term perspective in Q3. We still got that price increase. And it helped mitigate a lot of that fuel impact as you can see in the results.

Really appreciate the insights as always.

Thank you.

Thanks, Benjamin.

Thank you. Again, that is star 1 to ask a question. Our next question comes from Gregory Wasikowski with Weber Research. Your line is open.

Good Hey, morning. How are you doing?

Hey, Gregory.

Yeah. Thanks.

I am just gonna combine mine into 1, so a 2 parter here going back to chemicals. Firstly, what is what is driving some of that strength that you are seeing? You know, last year, I think you talked about some European plants starting to shut down. Are we starting to see some of the effects of that now? And then secondly, can we extend some of that optimism to the 10 k market? Or any other notable differences that you are seeing between the 10 ks and 30 ks market either on demand or supply side?

Yeah. Thank you, Gregory. Yes. You are seeing the rationalization of the chemical capacity in Europe closing and shutting down combined with The US Gulf chemical manufacturers filling that gap globally. And so when we talk to our chemical customers, they are. The. Their pricing has improved. Their exports have improved, and they are they are exporting to markets, you know, historically that might have been supported. By Middle East chemical manufacturing capacity. So the combination of the damage from the war in The Middle East, Gulf Coast being super competitive, cheap natural gas, and being, you know, the highest new. The highest tech best assets in the manufacturing space and the global rationalization of capacity have all compounded to strengthen our chemical book. Probably some room to go still to get back to sort of peak you know, chemical demand, but we feel really good about it. it is definitely stronger than it was a year ago. I am very glad you asked about the 10 k market In recent weeks, we have seen our 10 thousand barrel barge utility reach I am gonna say, you know, near record near record levels, We are very busy. The 10 k's are nearly fully deployed. And, the team is doing a great job of, marketing those barges. You know, we have we have won some new contracts and grown our book, and you know, all in all, we are just. We just got a lot of momentum there, and it is nice to see the chemical volumes back. And, again, when you combine that with record refinery utilization, you begin to have the perfect storm for curbing.

Yeah. that is great to hear.

Alright. Appreciate the color, guys. I will turn it over.

Thanks, Gregory.

Thank you. Our next question comes from Benjamin Moore with Citi. Your line is open.

Hey, guys. Thanks for bringing me back in. Just 1 last question on PowerGen. Revenue is up 8% this quarter, and you mentioned OEM availability being constrained still, but your backlog growth is still very strong. You mentioned in the past, up 10% to 20% is sort of your longer term outlook. For power gen revenue growth. How do you see that trending into that? Do maintain that outlook? Or are we maybe kind of looking at a lower end of that outlook given, sort of OEM capacity build constraints. So I wanna just get your thoughts on that, please.

No. I would say we. We are gonna maintain that outlook. You know, 10 to 20% growth is I mean, that is a big range. So, yeah, we will maintain that. I would say, you know, the OEM stretching out is okay. That just kinda means that the there is more time to absorb and produce this equipment And for us to ramp up our capabilities. You know, good news is you know, Christian started an expansion at 1 of our plants a year and a half ago. And we have got a new, what we call, generator assembly building, which has increased our capacity and you know, right now, we are we are hiring probably 200 to 300 people. So you know, you can imagine the OEMs are doing that at even a greater scale, to get their stuff ramped up. So it an interesting dynamic. The OEMs are struggling. The is unprecedented demand. But, you know, they are all very quality conscious too. So as you ramp up these new plants, they are they are making sure it works. You know, the last thing they want is a bad reputation. So it is an interesting dynamic. We like where it is right now. You know, it. it is it is a strong ramp. So having it slow down a little bit is not really bothering us. it is actually allowing us to execute a little better.

But it is still within that range. Still within that range you gave them. Yeah.

Wonderful. Thanks so much.

Thank you. I am showing no further questions at this time. I would now like to turn it back to Donny Chia for closing remarks.

Thank you, operator, and thanks to everyone for participating on our third quarter 26 earnings call. If you have any additional questions or comments, please feel free to contact me directly. Thank you. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.