NCS Multistage Holdings, Inc.

Welcome to the first quarter 2022 NCS multi-stage earnings conference call. My name is Sylvia and I'll be your operator for today's call. At this time, all participants 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 touchtone phone. As a reminder, the conference is being recorded. I will now turn the call over to Ryan Hummer. Mr. Hummer, you may begin.

Thank you, Sylvia, and thank you for joining the NCS Multistage first quarter 2022 conference call. Our call today will be led by our CEO, Robert Knipper, and I will also provide comments. I want to remind listeners that some of today's comments include forward-looking statements, such as comments regarding our future expectation for financial results and business operations. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein, including the impact of the COVID-19 pandemic and Russia's ongoing invasion of Ukraine on the global economy, oil demand, and our company. Please refer to our latest Securities and Exchange Commission filing for risk factors and cautions regarding forward-looking statements. Our comments today also include non-GAAP financial measures, including adjusted EBITDA, free cash flow, and net working capital. The underlying details and reconciliations of non-GAAP to the most comparable GAAP financial measures are included in our first quarter earnings release, which can be found on our website, ncsmultistage.com. And I'll turn the call over to Robert.

Thanks, Ryan. I want to welcome all of our investors, analysts, and employees joining our first quarter 2022 earnings conference call this morning. Our performance in the first quarter was largely in line with the guidance that we provided in early March. 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 $9.1 million in the first quarter was at the low end of our guidance of $9 to $10 million. as completions activity started slowly in January before improving during the remainder of the quarter. As a result, we expect to return to sequential revenue growth in the U.S. in the second quarter. We continue to be encouraged by field trial progress for our new modular purple fire perforating gun system and expect revenue for that product line to grow throughout the year. We are incorporating knowledge gained from the field trials into the product design. One of the things that we are most excited about with the Purple Fire introduction is that it gives us the ability to provide our customers with an integrated, high-quality downhole tool string for our plug and perf completion, which includes the composite plug, the disposable setting tool, power charge, and the modular perforating gun system. We expect trials for this system, the Purple Fire Express, during the second quarter. Our Canadian revenue of $28.5 million in the first quarter met the high end of our guidance range of $26.5 to $28.5 million as customers pushed to complete as much work as possible before the onset of the spring breakup. I'm very pleased with the success of our Canadian sales and operations team in growing our well construction business with the first quarter's results reflecting strong activity across our proprietary liner hanger, toe sleeve, and airlock case and buoyancy systems offerings. We expect that our Canadian business will exhibit typical seasonality with a period of low activity through May before recovering in June. We're encouraged by discussions with our customers about both the timing and scope of their expected activity after spring breakup, weather permitting. Activity in the third quarter of 2022 in Canada could be as robust as in the first quarter, reflecting the strong economics available to our customers. International operations were slow for us in the first quarter, with revenue of $1.5 million at the low range of our guidance of $1.5 to $2.5 million. Our international activity has begun to recover in the second quarter, and we believe that it will continue to increase as we move into the second half of the year. We continue to be impacted by supply chain and labor cost increases, including expenses in employee wages, steel, fuel, and fiberglass costs, as well as extended lead times for purchases and higher third-party service and transportation charges. We've implemented price increases and surcharges and expect to initiate future price increases as our input costs continue to rise. We're working with our largest customers to secure volume commitments that allow us to better plan purchases and partially mitigate these cost increases. From a timing standpoint, We have incurred cost increases in early 2022 before we received the full benefit from our pricing actions, which has led to pressure our gross margins during the first half of 2022 until we realized the full benefit of the price increases in the second half of the year. We maintain our strong balance sheet with approximately $7.6 million in net cash and an undrawn revolver as of March 31st of this year. We recently entered a new, larger credit facility that Ryan will discuss later. Our net capital expenditures for the quarter were only about $100,000, highlighting both the capital-light nature of our business and our continued financial discipline. Our entire team at NCS has done a tremendous job, and I am so proud to say that we have extended our track record of zero recordable incidents, which began in 2020 through 2022, with no reportable incidents thus far this year. Now I'll ask Ryan to discuss our financial results in more detail.