NCS Multistage Holdings, Inc.

Good day, and thank you for standing by. Welcome to the Q221 NCS Multistage Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ryan Hummer. Please go ahead.

Thank you, Summer, and thank you for joining the NCS Multistage Second Quarter 2021 Conference Call. Our call today will be led by our CEO, Robert Knipper, and I will also provide comments. We would like to caution listeners that some of the statements made on this call could be forward-looking, and to the extent that our remarks today contain information other than historical information, please note that we are relying on federal safe harbor protections. Such forward-looking statements may include comments regarding our future expectations for financial results and business operations and are subject to known and unknown risks and uncertainties, including the impact of the COVID-19 pandemic on the global economy, oil demand, and our company. I would like to refer you to our press release issued last night, along with other public filings made with the SEC that outline those risks. In today's call, we refer to adjusted EBITDA, free cash flow, and net working capital, which are non-GAAP financial measures. We use these measures because they allow us to compare performance consistently over various periods without regards to costs associated with our current capital structure and in a manner that we believe better reflects our operating performance. Our press release and the updated investor presentation posted yesterday, both of which are available on our website, ncsmultistage.com, provide reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measure. I will now turn the call over to Robert.

Thanks, Ryan. Welcome to our investors, analysts, and employees joining our second quarter 2021 earnings conference call. Our performance in the second quarter was generally favorable to the guidance we provided in early May. I'll briefly discuss our results and outlook for each of the U.S., Canada, and international markets. Starting with the U.S., Our revenue of $9.2 million in the second quarter represented a sequential increase of 18%, but fell below our guidance as activity at repeat precision was impacted by unanticipated white space in a large customer's completions program. This customer restarted their completion program in June and has had a steady activity plan through the third quarter. With WTI pricing of $65 to $75 a barrel, we have seen increased fracturing systems work in the U.S., as private operators have increased activity in the basins where pinpoint completions using sliding sleeves have demonstrated operational benefits for our customers. Our tracer diagnostics business has benefited as well, with several multi-well pad projects underway. As a result, we expect that sequential growth in the U.S. will continue in the third quarter. Our Canadian revenue of $9.2 million in the second quarter exceeded our guidance range of $5 to $6 million, as warm, dry conditions allowed our customers to begin increasing their activity in early June. Coming out of spring breakup this year, the Canadian rig count has been tracking closely with 2019 levels, indicating a stronger recovery in Canada thus far than in the U.S. We expect the Canadian recovery to continue to track 2019 levels more closely, outpacing activity growth in the U.S. through the remainder of the year. This is also reflected in the most recent survey by Petroleum Services Association of Canada, which recently increased their expectation for the number of wells to be drilled in Canada in 2021 by 18% to 4,250, as compared to their prior expectation of 3,600 in April, and as compared to just under 3,000 wells drilled in 2020. Although the international recovery has lagged that of North America, our international operations picked up significantly for us in the second quarter, with revenue recovering to $3 million for the quarter up from only a half million dollars in the first quarter and ahead of our guidance of one and a half to two and a half million dollars. We believe that international activity will continue to increase as we move into the second half of the year, though it remains difficult to staff projects in several markets due to COVID-related travel restrictions. We remain very focused on managing our costs and have maintained discipline on the SG&A and capital spending. Our SG&A for the second quarter of 2021 decreased by 24% as compared to the second quarter of 2020 and decreased by 8% as compared to the first quarter of 2021. Our net capital expenditures for the quarter were only $3 million, highlighting both the capital-like nature of our business and our financial discipline. We have also retained our strong balance sheet with approximately $8 million in net cash as of June 30, 2021. The borrowing base for our revolver at the end of June exceeded $10 million. We're seeing signs of cost inflation and supply chain stresses impacting our business in employee wages, steel, fiberglass costs, as well as extended lead times for purchases and higher third-party service charges. We're working with our customers to pass through some of these price increases or secure volume commitments that allow us to mitigate these cost increases, but we have not yet achieved net gain in pricing. I'll also point out that we continue to add licensees for our intellectual property related to our airlock casing buoyancy system providing for a growing stream of royalty income. We will continue to assert and defend our intellectual property as we become aware of competitors that we believe are infringing on our intellectual property. Our team at NCS continues to do a tremendous job, and I'm proud to say that we have continued our track record of zero recordable incidents from 2020 into 2021, with no reportable incidents thus far this year. I'll now ask Ryan to discuss our financial results in more detail.