ChampionX Corporation

Welcome to the ChampionX first quarter 2022 earnings conference call. My name is John. I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. During a question and answer session, if you do have a question, press 0 then 1 on your touchtone phone. As a reminder, the conference is being recorded. And now I'll turn the call over to Byron Pope, Vice President, ESG and Investor Relations. Mr. Pope, you may begin.

Thank you. Good morning, everyone. With me today are Soma Somasundaram, President and CEO of ChampionX, and Ken Fisher, our Executive Vice President and CFO. During today's call, Soma will share some of the company's highlights. Ken will then discuss our first quarter results and the second quarter outlook before turning the call back to Soma for some summary thoughts. We will then open the call for Q&A. During today's call, we will be referring to the slides posted on our website. Let me remind all participants that some of the statements we will be making today are forward-looking. These matters involve risks and uncertainties that could cause material difference in our results from those projected in these statements. Therefore, I refer you to our latest 10-K filing and our other SEC filings for a discussion of some of the factors that could cause actual results to differ materially. Our comments today may also include non-GAAP financial measures. Additional details on reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter press release, which is available on our website. I will now turn the call over to Soma.

Thank you, Byron. Good morning, everyone. I would like to welcome our shareholders, employees, and analysts to our first quarter 2022 earnings call. Thanks for joining us today. Before turning to our business results, let me first note that we are approaching the two-year anniversary of our transformational merger. As I reflect on all that our team has accomplished during what has been a dynamic and unprecedented market environment for our energy industry, we have truly been better together. And I would like to express my gratitude to all our employees for their ongoing focus and dedication in serving our customers and community. As a purpose-driven company, we always start with our organizational guiding light on slide number four, which is improving the lives of our customers, employees, shareholders, and community. As an example of our commitment to providing our employees with a truly diverse, equitable, and inclusive work environment, I was recently honored to accept the Energy Workforce and Technology Council Diversity, Equity, and Inclusion Champion Award on behalf of ChampionX. This award is based on a commitment and advocacy for diversity, equity, and inclusion in the energy industry. At ChampionX, we take a proactive approach to diversity and inclusion in company decision-making, recognizing, differences both as a competitive advantage and necessary for meaningful change. One of our four operating principles is our customer focus, which we describe as being relentless advocates for our customers. As you can see here on slide number five, we are proud that Energy Point Research, an independent customer satisfaction research firm, which surveyed more than 3,700 customers of oil field products, recently recognized ChampionX as being ranked first in five specific oilfield categories, including our largest product line of production chemicals and artificial lead, which speaks to the strong customer-centric cultural alignment across our organization. This is the fifth consecutive year that ChampionX has been recognized by Energy Point Research. At ChampionX, we continue to innovate to support our customers to bring affordable and lower-carbon energy to the world. On Flight 6, we are pleased to spotlight our innovative, seamless, water-cooled diamond bearings that help Ocean Renewable Power Company to reliably capture and convert hydrokinetic energy from river currents and ocean waves into renewable emission-free electricity, bringing sustainable and clean energy to millions of people who live in remote communities without access to traditional energy. Many of these remote communities are built near rivers and ocean environments that have the potential to provide carbon-free hydrokinetic power. In the past, these harsh environments have been too challenging for conventional bearing and seal technologies making hydrokinetic power unreliable. Today, our innovations make this hydrokinetic power a reality. With that, let me turn to our first quarter performance. As the cyclical recovery in demand for energy services and equipment has gained further momentum, our business portfolio once again delivered industry-leading top-line growth in the first quarter, both sequentially and year-over-year driven by strong top-line growth both in North America and international markets. In the first quarter, our revenues increased 26% year-over-year and 5% sequentially, demonstrating the strong organic growth potential and execution capabilities of our global business. In North America, our revenue grew 31% year-over-year and 5% sequentially. International revenue grew 19% year-over-year and 6% sequentially. All of our segments contributed to this strong top-line growth. Drilling technology and production automation technologies teams executed well and delivered strong sequential revenue growth of 14% and 9% respectively. Both the segments expanded, adjusted EBITDA margins in the quarter, we expect drilling technologies and production automation technologies to continue to deliver solid margin performance throughout 2022. Our production chemical segment grew 4% sequentially, driven by activity increase and pricing realization. Given the strong top-line start to the year, combined with the increasing pricing realization, we expect to achieve solid full-year growth approaching mid-teens percentage in our production chemicals business in 2022. We expect production chemical technologies segment EBITDA margin to progressively improve through the year, driven by volume and pricing improvement, reaching an exit rate of at least 18% in 2022. Our production chemical team continues to remain focused on execution and delivering a differentiated performance in the industry amidst an unprecedented inflation and supply chain disruption. Thanks to the diligent efforts of our team, ChampionX fully delivered the targeted annualized cost synergies of $125 million exiting the first quarter, sooner than our original objective of within 24 months of the merger closing. We remain encouraged by customer receptivity to our better together efforts with our combined technology products and services offering. Our teams are executing well and gaining traction on price increase realization and productivity to offset the impact of raw materials, labor and logistics related cost inflation that we have experienced in our portfolio of businesses. We are increasingly confident that we will see ChampionX margin expanding throughout the year with adjusted EBITDA margin reaching 18% as we exit 2022. Consistent with our strategic priority of evolving our portfolio, we have started a process to explore strategic options for our reservoir chemical technologies business, and we expect to execute on this in 2022. We are excited about the constructive demand tailwinds in our businesses that support a favorable multi-year outlook for our sector. The positive market fundamentals combined with our top-line momentum and traction on pricing improvement gives us increasing confidence that we will deliver positive top-line and bottom-line growth with meaningful margin expansion and solid cash generation for the full year and beyond. I would now like to turn the call over to Ken to discuss our first quarter results and our second quarter outlook.