ChampionX Corporation

Welcome to the ChampionX third quarter 2022 earnings conference call. My name is Hilda, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press 01 on your touch-tone phone. As a reminder, this conference is being recorded. I will now turn the call over to Byron Pope, Sir, 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 our company's highlights. Ken will then discuss our third quarter results and the fourth 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 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 third quarter press release, which is available on our website. I will now turn the call over to Salman.

Thank you, Byron. Good morning, everyone. I would like to welcome our shareholders, employees, and analysts to our third quarter 2022 earnings call. Thanks for joining us today. The third quarter reflected the accelerating momentum for ChampionX as we delivered strong performance along all key metrics, including revenue growth, adjusted EBITDA margin expansion, free cash flow generation, and capital return to our shareholders. Before I elaborate on why I am so pleased with our third quarter performance, I would like to turn your attention to slide number four. We always begin our earnings calls with our organizational purpose and operating philosophy driven by our commitment and responsibility of improving the lives of each of our stakeholder groups, which includes our customers, our employees, our shareholders, and our communities. In particular, as you can see in the heart of our purpose pyramid, Ensuring that ChampionX has a strong financial engine is a critical element of being able to create value for our shareholders. Our robust third quarter results represent the building momentum for the type of operational and financial performance that our company is poised to deliver for our shareholders as this energy upcycle unfolds next year and beyond. Ken will take you through the details of our third quarter financial results shortly, but let me first touch on four key business highlights which are shown on slide number five. First, revenue growth. ChampionX has consistently delivered strong top-line growth since our transformational merger in June of 2020. In fact, the third quarter in which we grew our revenue by 10% sequentially and 25% year-over-year marked the sixth consecutive quarter in which we have delivered sequential revenue improvement. International revenues grew 19% in the third quarter sequentially and accounted for 40% of ChampionX third quarter revenues. The strong international growth demonstrates the broad global reach of ChampionX, our competitiveness with global customers, and our leading share position in offshore markets. While there are macroeconomic concerns, we expect 2023 to be a solid growth year for our industry, driven by the constructive fundamentals and the importance of energy security. Our production-oriented portfolio has clearly demonstrated our portfolio's ability to significantly outpace global oil production growth and we expect this to be the case again next year. Second, EBITDA margin expansion. On our second quarter earnings call, we shared with you that we had turned the corner in terms of pricing realization, having caught up to the pronounced raw materials and other inflationary forces that our businesses, particularly our chemical technologies business, have faced over the last 18-plus months. In the third quarter, our adjusted EBITDA margin of 16.3% represented an approximate 140 basis points of sequential improvement, and we remain confident that we will deliver on our targeted exit 2022 adjusted EBITDA margin rate of 18%. We continue to focus and execute on levers within our control and deliver solid operational improvements. In addition, we are confident that our ChampionX will achieve our intermediate term goal of an EBITDA margin of at least 20%. Third, free cash flow. On our last earnings call, we stated that we expected our free cash flow profile to step up in the second half of the year versus the first half. Our third quarter free cash flow of $167 million represented 101% of adjusted EBITDA. This demonstrates the best-in-class cash flow generating capability of our capital-like portfolio of businesses and illustrates our high degree of confidence of generating 50% to 60% free cash flow to EBITDA conversion through the cycle. Fourth, returning capital to shareholders. We have previously shared with you our disciplined capital allocation framework And over the last two quarters, we have delivered on our commitment to return excess cash to our shareholders. In the third quarter, between our regular cash dividend of $15 million and $80 million of share repurchases, we returned 57% of our free cash flow to our shareholders. Going forward, we are targeting to return at least 60% of our free cash flow to our shareholders through the cycle. Consistent with this commitment, our board approved an increase in our share repurchase program authorization to $750 million versus the $250 million program initiated earlier this year. We expect healthy free cash flow generation again in the fourth quarter, which will enable us to further return capital to shareholders by continuing to execute on our share repurchase program. Before I turn the call over to Ken, I would like to congratulate our team for winning the Best Production Technology Award in the recent World Oil Awards. Our high-rise series ESP technology is specifically designed to handle the dynamic production rates and challenging down-cold conditions common to unconventional wells. Let me now turn the call over to Ken to discuss our third quarter results and our fourth quarter outlook.