ChampionX Corporation

Good morning. Welcome to ChampionX Report's first quarter 2023 results. Your host for this morning's call is Byron Pope. I will now turn the call over to 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 our company's highlights, Ken will then discuss our first quarter results and 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 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 Selma.

Thank you, Byron. Good morning, everyone. I would like to welcome our shareholders, employees, and analysts to our first quarter 2023 earnings call. Thanks for joining us today. Let me start by saying that ChampionX delivered strong performance in the first quarter on our key metrics, including adjusted EBITDA margin expansion, free cash flow generation, and capital return to our shareholders. I'm appreciative of the remarkable dedication that our employees demonstrate daily in delivering value to our customers. Before I touch on our first quarter performance, on slide number four, we always begin our earnings call with our corporate vision, purpose, and operating philosophy. Because we wake up every day focused on improving the lives of our customers, our employees, our shareholders, and our communities. On slide number five, we share a glimpse into just a few of the countless ways in which our teammates within our businesses and functional areas around the world take seriously our purpose of improving lives in the communities in which we live and work. Now turning to first quarter performance. Our first quarter revenues grew 10% year over year. During the first quarter, we experienced normal sequential seasonal decline in international revenues. This was partially offset by the strength of our North American revenues, which grew 4% sequentially. All of our four segments posted sequential growth in North American revenues. Our digital revenues grew 6% sequentially and 32% year over year. We are seeing continued strong adoption of our fit for purpose digital solutions, including our emissions management technologies that drive tangible productivity for our customers and help them achieve their sustainability goals. We are continuing to invest in this area. Ken will take you through the details of our first quarter financial results shortly, but let me first touch on three key business highlights, which are shown on slide number six. First, EBITDA margin expansion. Our continued focus on margin expansion is delivering meaningful and sustainable results. Despite experiencing a sequential revenue decline in the first quarter, which was primarily driven by seasonality we typically see in international operations, our Q1 adjusted EBITDA margin improved by approximately 40 basis points sequentially and 410 basis points year over year. on continued productivity improvement, pricing realization, and cost management. This marked the fourth consecutive quarter of sequential improvement in our adjusted EBITDA margin. We expect our adjusted EBITDA margin to progressively improve through the year, and we now expect to deliver an exit rate of greater than 20% in the fourth quarter of this year. Second, free cash flow. We are pleased that we delivered another strong and differentiated free cash flow quarter, especially given that the first quarter tends to be our lowest free cash flow conversion quarter of the year. Our first quarter free cash flow of 69 million represented 39% of our adjusted EBITDA. This once again demonstrates the best in class cash flow generating capability of our capital life portfolio of businesses and illustrates our high degree of confidence in converting at least 50% of EBITDA to free cash flow in 2023 and continue to deliver between 50% to 60% conversion of EBITDA to free cash flow through the cycle. Third, returning capital to shareholders. We previously shared with you, and most recently in detail at our investor day last month, how our disciplined capital allocation framework is designed to create value for our shareholders. And in the first quarter, we once again delivered on our commitment to return excess cash to our shareholders. In the first quarter, between our regular cash dividend of $15 million and $40 million of share repurchases, we returned 80% of free cash flow to shareholders. We remain committed to return at least 60% of free cash flow to our shareholders this year and through the cycle. Let me now turn the call over to Ken to discuss our first quarter results and our second quarter outlook.