NCS Multistage Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q2 2022 NCS multi-stage 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 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Ryan Hummer. Please go ahead.

Thank you, Christy, and thank you for joining the NCS Multistage Second Quarter 2022 Conference Call. Our call today will be led by our CEO, Robert Knipper, and I'll 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 SEC 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 networking capital. The underlying details and reconciliations of non-GAAP to the most comparable GAAP financial measures are included in our second quarter earnings release, which can be found on our website, ncsmultistage.com. I'll now turn the call over to our CEO, Robert Knipper.

Thanks, Ryan. Welcome to our investors, analysts, and employees joining our second quarter 2022 earnings conference call. Our performance in the second quarter was largely in line with the guidance we provided in early May. I'll briefly discuss our results and the outlook for each of the US, Canada, and international markets. Starting with the US, our revenue of $12.1 million in the second quarter was at the midpoint of our guidance of $11.5 to $12.5 million. Our revenue performance for the quarter increased by over 30% as compared to both the first quarter of 2022 and the second quarter of 2021. driven by increases in activity in fracturing systems and repeat precision. We continue to be encouraged by field trial progress for our new modular PurpleFire perforating gun system and expect revenue for that product line to continue to grow throughout the year. During the second quarter, we had successful initial trials of our PurpleFire Express system, an integrated, high-quality downhole tool string for plug-and-perf completions, which includes the composite plug, disposable setting tool, power charge, and the modular perforating gun system. We're also experiencing growth in our fracturing systems business in the U.S., with opportunities in multiple operating areas for the second half of the year, including Alaska, the Powder River Basin, and Mid-Continent, where the benefits of our technology are well known. Our Canadian revenue of $12.8 million in the second quarter exceeded the high end of our guidance of $11.5 to $12.5 million in as market activity remained strong despite seasonality related to spring breakup and wet weather conditions in June, which delayed customer activity. Our sales and operations teams in Canada continue to perform exceptionally well. We are maintaining the strength of our fracturing systems product line and are leveraging that strength to grow our customer base and other product lines. Our tracer diagnostics business in Canada is performing very well also, providing valuable insight to our customers are in turn utilizing the information to improve their completions and enhanced oil recovery strategies in addition we've more than doubled the number of customers purchasing purple seal composite plugs in canada thus far in 2022 providing opportunities not just for that product but for our full wellbore offering we're encouraged by discussions with our customers about both the timing and the scope of their expected activity after spring breakup Activity in the third quarter of 2022, which is already off to a good start with the current rig count over 90% of peak Q1 levels, could be as robust as in the first quarter, reflecting the strong economics available to our customers in Canada. Our international activity improved in the second quarter relative to the first quarter with revenue of $2.5 million. However, it fell below our expectations of $3 to $4.5 million of revenue. Although our international activity and revenue increased during the second quarter of 2022, we believe that it will continue to increase as we move into the second half of the year. We expect to fall short of our initial expectations for revenue from our international operations in 2022. One highlight for the quarter was our initial sale of sliding sleeves to a Supermajor customer operating in the UK North Sea. We currently expect these sleeves to be installed later this year, and we will deliver a second order of sleeves for this customer before year-end. Expanding our customer base in the North Sea has been a priority as it will allow us to increase our scale and presence in the market and better and more efficiently support all customers in the region. We continue to be impacted by supply chain and labor cost increases, including increases 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 have implemented price increases and surcharges and expect to initiate future price increases as our input costs continue to rise. From a timing standpoint, we incurred cost increases in early 2022 before we received the full benefit from our pricing actions, which has pressured our gross margins during the first half of 2022. We currently expect gross margins to improve in the second half of 2022 as the benefits of the price increases materialize. We maintain our strong balance sheet with approximately $7 million in net cash and an undrawn revolver as of June 30th of 2022. Our net capital expenditures for the quarter were only $0.2 million and have been $0.3 million through the first six months, highlighting both the capital-like nature of our business and our continued financial discipline. Our entire team at NCS has done a tremendous job, and I'm proud to say that we have had zero recordable incidents in 2020, 2021, and thus far, year-to-date, 2022. Now I'll ask Ryan to discuss our financial results in more detail.