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spk_0: good day and welcome to the mcs not as those fourth quarter two thousand and twenty two earnings conference call all participants will be and was lonely mode so you need assistance please signaling thousand specialists potassium a star of he followed by zero after her his presentation or of in alberta leader ask questions to ask a question he was a star than one on a touchstone flown to enjoy your question please first star them to do please note today's event is being recorded our knowledge from the conference over to my morrison chief financial officer pulled go ahead sir
spk_1: pinky rocco in thank you for joining in cs mott i stage fourth quarter in full year twenty twenty two conference call or called today will be led by our ceo rhine hummer 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 in business operations the statements including our financial guidance are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectations expressed herein including the impacts of inflation central banks action to combat inflation and russia's ongoing invasion of ukraine on the global economy oil and natural gas demand and our company please refer to our most recent and a report on fourteen k and our latest fcc filings for risk factors and cautions regarding forward looking statements our comments today also include now gap financial measures including adjustment income adjusted ebitda free cash flow and networking capital the underlying details and reconciliations amount gap to the most comparable gap financial measures are coated in our fourth quarter and for your earnings release which can be found on our website in cs mott i staged i come i will now turn the call over to rhyme
spk_2: thank you mike and welcome to our investors analysts and employees turn joining our fourth quarter and full year two thousand and twenty two earnings conference call our of your performance and accomplishments during two thousand twenty two our actions during the year have positioned us to capitalize on a growth opportunities ahead and our strategic objectives for two thousand and twenty three make will follow and cover the financial results for the quarter
spk_1: two thousand twenty two represented a year of meaningful growth or industry and for ncs as demand for oil and natural gas continue to rebound from the lows reese during the pandemic we believe that we are still in the early stages of this multiyear recovery with a moderating rate of industry activity growth in north america paired with robust opportunities for further growth in international markets as national oil companies execute expansions of their productive capacity against this backdrop we're able to increase our revenue to one hundred fifty five point six million dollars in two thousand twenty two an increase of thirty one percent as compared to two thousand twenty one primarily driven by the strength of our performance in canada and the u s which experienced year over year revenue growth a thirty eight percent and thirty two percent respectively we made significant progress and eat a murky product and service lines in two thousand twenty two adding to our portfolio technologies that support our customers was spending our address bull market beginning with fracturing systems we successfully grown or customer base in the north sea we first started working with our current anchor customer in the north sea in two thousand and seventeen
spk_2: during two thousand and two twenty thousand twenty two a second customer purchase citing fleas from us with completion activity to began in two thousand and twenty three also in early two thousand and twenty three we were awarded a trial well with a third customer in the north sea as we continue to build on our success helping customers in the region execute highly efficient completions that enhanced the economics of their operations
spk_1: we've also combined are enhanced recovery product line into fracturing systems highlighting potential opportunities for are citing sleeves to support customer operations throughout the producing life of the well your controlled fracturing solids control and preferential production in addition to enhanced recovery operations that support water gas and c o two injection within both construction we challenge our sales and operations teams in canada to grow this product line and they've responded we grow line or hangar business in canada by more than two hundred percent in two thousand twenty two as compared to two thousand and twenty one and expect further growth next year with this growth we are expanding our operations footprint and we'll be moving into a new facility during the second quarter of two thousand twenty three forty thousand twenty three a key focus for the well construction product line is to further develop or casing buoyancy offering to meet customer specific applications in north america and international markets or tracer diagnostics product i produce strong results in our core geography is in two thousand and twenty two with your over year revenue growth of a were forty percent on a global basis which included growth of the more than thirty percent in each of the us and canada and growth of over sixty percent outside of north america we expect to continue to expand or tracer diagnostics business an international markets in two thousand twenty three and to convert first well than trials with customers into repeatable work in the future we're investing in all aspects of the tracer diagnostics product line advancing are already efforts to introduce new service offerings to reduce chemical usage and also to further optimize or injection and sampling equipment to provide better and more actionable results to our customers i repeat precision the existing portfolio frac plugs and setting tools continues to perform very well exhibiting high reliability repeat supported by the efforts of the ncs team and canada where we continue to grow our customer base and gain new trial opportunities we've officially commercialized are purple fire factory assembled modular perforating and system in late two thousand and twenty two following extensive field trials we have since grown or customer base with an initial focus on the permian basin as a reminder the purple fire provides us with the opportunity to participate in a larger addressable market and is fully compatible with our factory assembled purple seal express system which combined the disposable setting tool and a composite frac blogger bridge blood this combined offering which we call the purple fire express is an ideal system for efficient billion per of operations i want to touch briefly on our margin performance in two thousand twenty two and how are responding to the inflationary pressures of the last few years for the full year in two thousand twenty two are gross margin percentage was thirty nine percent slightly below are forty one percent gross margin in two thousand and twenty one the lower margin reflect significant cost increases especially related to oil field tubular such as casing which are utilized in the production of our products as well as other cost items such as elastomers chemicals and to
spk_2: transportation
spk_1: he's cost increases were partially offset by higher volumes and by pricing increases achieve with our customers from which we began to benefit in late two thousand twenty two moving into two thousand and twenty three were implementing additional price increases across our business as with two thousand twenty two expect the full benefit from these price increases to be realized in the second half of the year
spk_2: we remain very focused on managing our costs especially rst in a expenses which fell from forty one percent of revenue and two thousand and twenty one to thirty seven percent of revenue in two thousand twenty two
spk_1: we expect our se an expense to rise in two thousand and twenty three as compared to two thousand twenty two levels reflecting annual cost of living increases for two thousand twenty three investments that were making to attract and retain the great people we need to support our growth expectations and a more normalized annual bonus program
spk_2: our spend on i p related litigation matters which falls within as dna is expected to begin to moderate and two thousand and twenty three as compared to two thousand and twenty two where we had to patent infringement trials in the u s related to our airlock a buoyancy system where the jury awarded us damages against the accused infringing parties
spk_1: and of and trial and canada where we are still waiting results we have one more patent infringement trial related to a different product line scheduled for the end of the first quarter of two thousand and twenty three and certain post trial matters for other cases putting this together as a result we believe our total as to in it as dna expense could increase by ten to twelve percent in two thousand and twenty three relative to two thousand and twenty two levels but the as dna as a percentage of revenue will continue to decline supporting even dot margin expansion we're very proud of and css track record of free cash flow generation over time and through cycles we invested heavily in working capital and two thousand and twenty two to facilitate our growth leading to negative free cash flow of two point one million dollars respect to generate positive free cash flow in two thousand and twenty three as the cash generated from operations is expected to find both working capital increases supporting further revenue growth and strategic capital investments will make in our business
spk_2: i want to reiterate and cs as long term strategy and briefly discuss our corporate goals for twenty three
spk_1: the vision for ncs has to be globally recognized as a trusted partner and bold innovator enabling our customers resource development strategies through technology driven solutions and reliable expertise aligned with his vision or three course strategy is that we are falling over the next five years drive growth and increased profitability in the business the first course strategy is to build upon our leading market positions
spk_2: it is most evident in our fracturing systems product line where we continue to take our technology into new market segments to leverage bleeding positions and certain geography like canada to sell additional products and services and where we are continually working to expand the functionality of our completion systems to provide while you value to our customers throughout the producing life of their wealth
spk_1: the second course strategy is to capitalize on are growing set of international and offshore opportunities we've been investing time and effort to position ncs to participate and meaningful growth and select international markets we believe this hard work will begin to pay off in two thousand and twenty three and thereafter particularly as we capitalize on are growing customer base in the north sea and expand our opportunities in the middle east the third course strategy is to commercialize innovative solutions to complex customer problems through this horse strategy we are utilizing our strong customer connections from the field to the office using the boys and customer to feed our new product development process and refine the technology vision for each product line we're also leveraging our position as a global leader in fracturing systems to work directly with our customers to develop new technology and a collaborative manner where by we retain the rights to this new technology with the ability to markets the prep market the products to a global customer base he had course strategies are supported by our guiding principles of upholding the ncs promise which embodies or values and outlines how we treat our son key stakeholders as well as or other guiding principle of maximizing financial flexibility which is supported by our capital a business model our goals for two thousand twenty three are fully aligned with our long term strategy at the corporate regional and product line levels which has been a significant undertaking over the last few months broadly speaking our goals in two thousand and twenty three are built around enabling are outstanding people and powering our future through a commitment to innovation centered on the voice of our customers and growing profitably from are strong existing base i now ask my to the skies are financial results in more detail pinky rhyme as reporting yesterday's earnings release or fourth quarter revenues were forty point two million eleven percent higher than the prayers fourth quarter or us and canada revenues increased by thirty four and fifteen percent respectively which were partially offset by decline in our international business from itself sells can be lobby as expected from a sequential basis or fourth quarter revenues were down eighteen percent compared to the third quarter due in part to seasonality and customer budget exhaustion primarily in canada for the four year twenty twenty two or revenues were one hundred thirty five point six million an increase of thirty one percent compared to twenty twenty one gross profit defined as total revenues less cost to cells excluding depreciation and amortization expense was sixteen point one million in the fourth quarter or gross profit percentage was forty percent compared to forty four percent from the same period one year ago and forty two percent sequentially so in general and ministry of costs or thirteen point one million for the fourth quarter which was approximately three hundred thousand lower than the same period and twenty twenty one primarily due to lower professional fees relate to litigation matters which was partially offset by an increase in our payroll expenses associated with salary increases from earlier and twenty two me too where the fourth quarter report and net income a two point zero million or eighty one cents per diluted share which was an improvement of thirteen cents per diluted share compared to the same period in twenty twenty one are adjusted net income was one point six million or sixty four cents per diluted share in improvement of sixty cents per diluted she heir to the fourth quarter last year adjusted ebitda for the fourth quarter was six point four million consistent with the same period and twenty twenty one and a decline of two million sequentially compared to the fourth quarter guidance provided on our last earnings call we were approximately two million below or revenue range but in the range of are expected gross profit percentage and adjust to be better while revenue fell short of our expectations we saw an improvement in the mix revenues and had lower as a cost than anticipated turning now the cash flow items in the balance sheet cash flow from operations and free cash flow for the fourth quarter with some point six million and seven point four million respectively are free cash flow for the four year twenty twenty two was a negative two point one million which was primarily the result of an increase in that working capital of seven point two million which totaled thirty five point two million in the the year on december thirty first we had sixteen point two million in cash in total debt seven point nine million resulting in a positive net cash of eight point three million as of december thirty first the marine base under are under on a b l facility was eighteen point six million bernie now to a few points a guidance for the first quarter of twenty twenty three we currently expect first quarter total revenue of forty three to forty seven million in improvement over both the first and fourth quarters of twenty twenty two we expect us revenue of twelve to thirteen million canada a thirty to thirty two million in international revenue of one to two million we expect our gross margin percentage to be between thirty eight and forty one percent which is similar to the gross margins we experienced in the first and fourth quarter to twenty twenty two we expect our adjusted ebitda to be between four to five million we expect our first quarter depreciation and amortization expense to be approximately one million
spk_2: or handed over to ryan to provide our full year twenty twenty three guidance and for closing remarks
spk_1: like mike our for your guidance for two thousand twenty three is as follows we currently expect for your avenue to be between one hundred seventy five and one hundred ninety million dollars and fill your adjusted ebitda to be between twenty and twenty five million dollars with the just the the dod consistent with the reconciliations and our earnings release
spk_2: we expect our gross capital expenditures for two thousand and twenty three to be between four and five million dollars as stated before we expect networking capital be a use of cash in two thousand twenty three supporting our anticipated growth i do expect that we will generate positive free cats was during the year
spk_1: in addition at an adjusted either doll level of twenty to twenty five million dollars we would expect to generate positive net income for the or underpinning our revenue growth expectations as anticipated year over year average annual industry growth up to ten percent in both canada and the u s that activity in the us is expected to be below the levels reached in the fourth quarter of two thousand and twenty two
spk_2: furthermore we expect international industry activity to grow by at least ten percent in two thousand twenty three
spk_1: we expect a revenue growth to exceed that of the underlying industry activity by cheating marketshare increases in selected product and service lines are growth in international markets and continued adoption of newly introduced technologies across our product and service lines we also expect the full impact of the price increases that we achieve with our customers to us
spk_2: that cost inflation or provide a positive impact especially in the second half of the year
spk_1: do the seasonality of our business and consistent with prior years we would anticipate that the achievement of our annual adjust the but i guidance range will be waited to the second half of the year before we open up the car to queue and and a close with a couple of brief comments we had strong performance in two thousand and twenty two growing total annual revenue by thirty one percent in improving our adjusted ebitda margin from eight percent in two thousand and twenty one to ten percent in two thousand twenty two
spk_2: we have the infrastructure in place to support revenue growth and each of our geographic markets providing leverage to grow future earnings
spk_1: as demonstrated by or guidance for two thousand twenty three achieving the midpoint of our guidance range would grow our annual revenue by over fifteen percent and further increase our just the bid on margin to twelve percent at the midpoint of the guidance range we would grow revenue by approximately twenty seven million and adjusted ebitda by seven million reflecting incremental adjusted either done margins of approximately twenty five percent we continue to successfully introduce new technologies that meet the needs of our customers adding to our portfolio and expanding our address bull market and finally we enter two thousand twenty three of the strong balance sheet and liquidity position and in two thousand twenty two with the cash balance it over sixteen million dollars in addition we expect to add to that cash balance by jan
spk_0: narrating positive free cash flow during the year providing us with financial and strategic possibility with that we would love many questions from the audience thank you will and i'll be your mickelson answer session classic questioning repressed started in one hundred has found phone if you're using the speakerphone we are seeing fees for hooker handset before pressing the he's through entire question please first star them to was momentarily to assemble roster
spk_3: amazon once more if you have a question please first star them one at this time and today's first question would come from know asked austin and their new energy partners please go ahead
spk_4: hey guys and good good i quarter and nice nice nice often to year
spk_3: thanks bill i'm sorry our and just touch on a little bit on the
spk_1: just a little on working capital and are you get talked about the help increase last year little bit sly tiger and and married touch our little bit there at the end like just kind of how you see that going on drop year and then how that generates
spk_5: our allies twenty three kind of plays out of that helps you guys generate your free cash flow or are more positive free cash flow for twenty three
spk_1: you're out of take that at the start and and make and supplement get one the things that was actually an accomplishment for us during two thousand twenty two was we we did get a lot more efficient with are working capital so while that working capital did increase by just over seven million dollars the end of two thousand twenty one and the under two thousand and twenty two are networking capital as a percentage of are trailing twelve months revenue came down from about forty five percent to thirty five percent and that really get us back to the of the ratio can a networking capital as a percentage of sales that we had in two thousand and eighteen two thousand and nineteen prior to the down and turn i think there was even yo more accomplishment in there and given the fact that we've seen cost inflation and or inventory base so we been been really doing a great job and managing absolute inventory levels but the cost of inventories been increasing at the same time so for two thousand and twenty two we had good underlying earnings
spk_6: and the business but we grew revenue by thirty percent so the the cash that went into building networking capital
spk_3: yes slightly overcame the cash generated from just normal business operations leading us to slightly negative free cash flow for the year but as we turned to two thousand and twenty three year the underlying earnings in the business or higher and yet of the level of growth the rate of growth while still a good at more than fifteen percent as moderating a bit which will allow us to convert that yeah sort of operating cash will before working capital build into true free cash flow for the business this year
spk_1: great thanks image is why i'm such a just a little bit on that i'm just on the on the wire the modulator for bringing guns at them out posted would be much longer than your comments house fraction going on that when you start really seeing corrected good generation of revenue from from that are from that our system and twenty three yeah thanks because it's a great question so we were really threw in the feel proud trial process for most of two thousand and twenty two why brought the purple fire out yeah we we had an anchor customer and and for us that i'm channel to market a little bit different most of our products and services we sell directly to the in p company or with perforating guns you're selling through the wireline company so or or or child market as through another service provider although we we certainly do i'm yum market for me out kind of pull through marketing to the in customer bases as well the we worked with one wireline company who certainly saw the advantages of our system to get through the field trial process there were a lot of learnings their as we got into late in the third quarter of two thousand twenty two we are very comfortable with where that product was and started to take that out and sell purple fires three other wireline customers that was those kind of the journey we went we we've gone through it's still a relatively small contributor to near the overall revenue profile right now we would anticipate that starts to pick up a bit more through kind of the second and third quarter and and hit more of a steady state in the second half of the year of the process that we go through with the purple fire in in some ways and this is getting a little bit into the weeds but yeah there's there's a process called a to prep for some prague bug in perth wells
spk_7: where we can you introduce that system with a wireline computer company in a very low risk basis get them comfortable with the system and then they can start taking that out to your regular stage work with customers so as we grow the customer base it starts with yoga relatively low stage count trials and then we week
spk_0: grow that into yeah for stayed work and take it from there and again because we were building and assembling the arab the purple fire systems in the permian basin were starting out know taking that product to the permian so we can provide
spk_2: yeah very responsive field service to both year the andy and p customer but also are wireline customers through that trial process as he gets adopted
spk_1: great that's that's all for me or and me there are no the put ladies and gentlemen as he goes or has an answer session other is an accomplice back over for the management team for the on remarks at things are aka on behalf of or management team and are board we'd like to thank everyone on the call today including our shareholders and research analysts and especially our employees i truly appreciate the tremendous work and dedication demonstrated by or team here it and cs and repeat precision were only as good as our people and i'm fortunate to be able to work with the best team in the industry
spk_0: just yesterday or ceo and i've visited with our supply chain a manufacturing team and south houston to celebrate that teams accomplishment of achieving over two thousand days of working say with no recordable incidents in manufacturing over that time our team continues to provide excellent service to our customers and as commercializing new products and services that will enable our customers to be more successful were taking on demanding and technically challenging work and we're delivering results we believe that we're still in the early stages of a multiyear cycle of improve prospects for industry and i'm excited by how and see as as position to participate in that growth and to deliver benefit to our employees customer shareholders and other stakeholders we appreciate everyone's interest in ncs multi stage and we look forward to talking again on the next quarterly earnings call thank you thank you sir listen grizzlies conference hall we thank you all for coming to their presentation you may not a smoker minds and have a wonderful day good day and welcome to the mcs not as those fourth quarter two thousand and twenty two earnings conference call all participants will be endless normally mode so you need assistance please suddenly thousand specialists potassium a star if he followed by zero as her a son and a summer of in alberta leader ask questions to ask a question he was a star than the one on a touchstone farm
spk_1: to answer your question please first star them to do please note today's event is being recorded our knowledge from the conference over to my morrison chief financial officer for go ahead sir pinky rocco and thank you for joining in cs mott i stage fourth quarter in full year twenty twenty two conference call or called today will be led by our ceo rhine hummer and i will also provide comments i want to remind listeners that of today's comments include forward looking statements such as comments regarding our future expectations for financial results in business operations the statements including our financial guidance are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectations expressed herein including the impacts of inflation central banks action to combat inflation and russia's ongoing invasion of ukraine on the global economy oil and natural gas demand and our company
spk_2: please refer to our most recent and a report on fourteen k and our latest fcc filing for risk factors and cautions regarding forward looking statements our comments today also include large gap financial measures including adjustment income adjusted ebitda free cash flow and networking capital the underlying details and reconciliations amount gap to the most comparable gap financial measures are included in our fourth quarter and for your earnings release which can be found on our website and cs me
spk_1: they staged i come i will i'll turn the call over to rhyme thank you mike and welcome to our investors analysts and employees during joining our fourth quarter and full year two thousand and twenty two earnings conference call our of your performance and accomplishments during two thousand twenty two our actions during the year have positioned us to capitalize on a growth opportunities ahead and our strategic objectives for two thousand and twenty three like will follow and cover the financial results for the quarter two thousand twenty two represented a year of meaningful growth or industry and for ncs as demand for oil and natural gas continue to rebound from the lows reese during the pandemic we believe that we are still in the early stages of this multiyear recovery with a moderating rate of industry activity growth in north america paired with robust opportunities for further growth in international markets as national oil companies execute expansions of their productive capacity against this backdrop we're able to increase our revenue to one hundred fifty five point six million dollars in two thousand twenty two an increase of thirty one percent as compared to two thousand twenty one primarily driven by the strength of our performance in canada and the u s which experienced year over year revenue growth a thirty eight percent and thirty two percent respectively we made significant progress and eat a murky product and service lines in two thousand twenty two adding to our portfolio technologies that support our customers by spending our address bull market beginning with fracturing systems we successfully grown or customer base in the north sea we first started working with our current anchor customer in the north sea in two thousand and seventeen
spk_2: during two thousand and two top two thousand twenty two a second customer purchase citing fleas from us with completion activity to begin in two thousand and twenty three
spk_1: also in early two thousand and twenty three we were awarded a trial well with a third customer in the north sea as we continue to build on our success helping customers in the region execute highly efficient completions that enhanced the economics of their operations we've also combined are enhanced recovery product line into fracturing systems highlighting potential opportunities for are citing sleeves to support customer operations throughout the producing life of the well controlled fracturing solids control and preferential production in addition to enhanced recovery operations that support water gap and c o two injection within both construction we challenge our sales and operations themes in canada to grow this product line and they've responded we grow line or hangar business and canada by more than two hundred percent in two thousand twenty two as compared to two thousand and twenty one and expect further growth next year with this growth we are expanding our operations footprint and we'll be moving into a new facility during the second quarter of two thousand twenty three forty thousand twenty three a key focus for the well construction product line is to further develop or casing buoyancy offering to meet customer specific applications in north america and international markets or tracer diagnostics product i have produced strong results in our core geography is in two thousand and twenty two with your over year revenue growth of a were forty percent on a global basis which included growth of the more than thirty percent in each of the us and canada and growth of over sixty percent outside of north america we expect to continue to expand or tracer diagnostics business and international markets in two thousand twenty three and convert first well than trials with customers into repeatable work in the future we're investing in all aspects of the tracer diagnostics product line advancing are already efforts to introduce new service offerings to reduce chemical usage and also to further optimize or injection and sampling equipment to provide better and more actionable results to our customers i repeat precision the existing portfolio frac plugs and setting tools continues to perform very well exhibiting high reliability
spk_8: repeat supported by the efforts of the ncs team and canada where we continue to grow our customer base and gain new trial opportunities we've officially commercialized are purple fire factory assembled modular perforating and system in late two thousand and twenty two following extensive field trials
spk_1: we have since grown or customer base with an initial focus on the permian basin as a reminder the purple fire provides us with the opportunity to participate in a larger addressable market and is fully compatible with our factory assembled purple seal express system which combined the disposable setting tool and a composite frac blogger bridge blood this combined offering which we call the purple fire express is an ideal system for efficient plug in for or if operations i want to touch briefly on or margin performance in two thousand twenty two and how are responding to the inflationary pressures of the last few years for the full year in two thousand twenty two are gross margin percentage was thirty nine percent slightly below are forty one percent gross margin in two thousand twenty one the lower margin reflect significant cost increases especially related to oil field tubular such as casing which are utilized in the production of our products as well as other cost items such as elastomers chemicals and transportation
spk_2: these cost increases were partially offset by higher volumes and by pricing increases achieve with our customers from which we began to benefit in late two thousand twenty two
spk_1: moving into two thousand twenty three were implementing additional price increases across our business
spk_2: as with two thousand twenty two expect the full benefit from these price increases to be realized in the second half of the year
spk_1: we remain very focused on managing our costs especially rst in a expenses which fell from forty one percent of revenue and two thousand and twenty one to thirty seven percent of revenue in two thousand twenty two we expect our se an expense to rise in two thousand and twenty three as compared to two thousand twenty two levels reflecting annual cost of living increases for two thousand and twenty three investments that were making to attract and retain the great people we need to support our growth expectations and a more normalized annual bonus program our spend on i p related litigation matters which falls within as dna is expected to begin to moderate and two thousand and twenty three as compared to two thousand and twenty two where we had to patent infringement trials in the u s related to our airlock a buoyancy system where the jury awarded us damages against the accused infringing parties and of patton trial and canada where we are still waiting results we have one more patent infringement trial related to a different product line scheduled for the end of the first quarter of two thousand and twenty three and certain post trial matters for other cases
spk_2: putting this together as a result we believe our total as to in it as dna expense could increase by tend to twelve percent in two thousand and twenty three relative to two thousand and twenty two levels but it as dna as a percentage of revenue will continue to decline supporting either dot margin expansion
spk_1: we're very proud of and css track record of free cash flow generation over time and through cycles we invested heavily in working capital and two thousand and twenty two to facilitate our growth waiting to negative free cash flow of two point one million dollars respect to generate positive free cash flow in two thousand and twenty three as the cash generated from operations is expected to fall the working capital increases supporting further revenue growth answer tt capital investments will make and our business i want to reiterate and theaters long term strategy and briefly discuss our corporate goals for twenty three the vision for ncs is to be globally recognized as a trusted partner and bold innovator enable in their customers resource development strategies through technology driven solutions and reliable expertise
spk_2: aligned with his vision or three course strategy is that we are falling over the next five years drive growth and increase profitability in the business
spk_1: the first course strategy is to build upon our leading market positions it is most evident in our fracturing systems product line where we continue to take our technology into new market segments to leverage of leading positions and certain geography like canada to sell additional products and services and where we are continually working to expand the functionality of our completion systems to provide while you value to our customers throughout the producing life of their wealth the second course strategy is to capitalize on are growing set of international and offshore opportunities we've been investing time and effort to position ncs to participate in meaningful growth and select international markets we believe this hard work will begin to pay off in two thousand and twenty three and thereafter particularly as we capitalize on are growing customer base in the north sea and expand our opportunities in the middle east the third course strategy is to commercialize innovative solutions to complex customer problems through this horse strategy we are utilizing our strong customer connections from the field to the office using the boys and customer to feed our new product development process and refine the technology vision for each product line we're also leveraging our position as a global leader in fracturing systems to work directly with our customers to develop new technology and a collaborative manner where by we retain the rights to this new technology with the ability to markets the prep market the products to a global customer base he had course strategies are supported by our guiding principles of upholding the ncs promise which embodies or values and outlines how we treat our son key stakeholders as well as or other guiding principle of maximizing financial flexibility which is supported by our capital a business model our goals for two thousand and twenty three are fully aligned with our long term strategy at the corporate regional and product line levels which has been a significant undertaking over the last few months broadly speaking our goals in two thousand and twenty three are built around enabling are outstanding people and powering our future through a commitment to innovation centered on the voice of our customers and growing profitably from her strong existing based on now ask my to the skies are financial results in more detail pinky rhyme as reporting yesterday's earnings release or fourth quarter revenues were forty point two million eleven percent higher than the prayers fourth quarter or us and canada revenue increased by thirty four and fifteen percent respectively which were partially offset by decline in our international business from which sells can be lobby as expected on a sequential basis or fourth quarter revenues were down eighteen percent compared to the third quarter due in part to seasonality and customer budget exhaustion primarily in canada where the four year twenty twenty two or revenues were one hundred thirty five point six million an increase of thirty one percent compared to twenty twenty one gross profit defined as total revenues less cost to cells excluding depreciation and amortization expense was sixteen point one million in the fourth quarter are gross profit percentage was forty percent compared to forty four percent from the same period one year ago and forty two percent sequentially so in general and ministry of costs or thirteen point one million for the fourth quarter which was approximately three hundred thousand lower in the same period and twenty twenty one primarily due to lower professional fees relate to litigation matters which was partially offset by an increase in our payroll expenses associated with salary increases from earlier and twenty twenty two for the fourth quarter report and net income a two point zero million or eighty one cents per diluted share which was an improvement of thirteen cents per diluted share compared to the same period and twenty twenty one are adjusted net income was one point six million or sixty four cents per diluted share in improvement of sixty cents per diluted share heir to the fourth quarter last year adjusted ebitda for the fourth quarter was six point four million consistent with the same period and twenty twenty one and a decline of two million sequentially compared to the fourth quarter guidance provided on our last earnings call we were approximately two million below or revenue range but in the range of are expected gross profit percentage and adjust to be better while revenue fell short of our expectations we saw an improvement in the mix revenues and had lower as dna cost than anticipated thirty now the cash items in the balance sheet cash flow from operations and free cash flow for the fourth quarter was some point six million and seven point four million respectively or free cash flow for the four year twenty twenty two was a negative two point one million which was primarily the result of an increase in that working capital of seven point two million which totaled thirty five point two million into the year on december thirty first we had sixteen point two million in cash in total debt seven point nine million resulting in a positive net cash of eight point three million as a december thirty first the marine base under are under on a b l facility was eighteen point six million are you now to a few points a guidance for the first quarter of twenty twenty three we currently expect first quarter total revenue of forty three to forty seven million in improvement over both the first and fourth quarters of twenty twenty two we expect us revenue of twelve to thirteen million canada a thirty to thirty two million in international revenue of one to two million
spk_2: we expect our gross margin percentage to be between thirty eight and forty one percent which is similar to the gross margins we experienced in the first and fourth quarter to twenty twenty two
spk_1: we expect our adjusted ebitda to be between four to five million we expect our first quarter depreciation members they seem expense to be approximately one million
spk_2: or handed over to ryan to provide our full year twenty twenty three guidance and for closing remarks
spk_1: mike mike our for your guidance for two thousand twenty three is as follows we currently expect for your avenue to be between one hundred seventy five and one hundred ninety million dollars and fill your adjusted ebitda to be between twenty and twenty five million dollars with the just the the dod consistent with the reconciliations in earnings release we expect our gross capital expenditures for two thousand and twenty three to be between four and five million dollars as stated before we expect networking capital be a use of cash in two thousand twenty three supporting our anticipated growth but do expect that we will generate positive free cats were during the year in addition at an adjusted either doll level of twenty to twenty five million dollars we would expect to generate positive net income for the or
spk_2: underpinning our revenue growth expectations is anticipated year over year average annual industry growth up to ten percent in both canada and the u s that activity in the u s is expected to be below the levels reached in the fourth quarter of two thousand and twenty two
spk_1: furthermore we expect international industry activity to grow by at least ten percent in two thousand twenty three we expect a revenue growth to exceed that of the underlying industry activity by cheating marketshare increases in selected product and service lines are growth in international markets and continued adoption of newly introduced technologies across our product and service lines we also expect the full impact of the price increases that we achieved with our customers to offset cost inflation or provide a positive impact especially in the second half of the year
spk_2: do the seasonality of our business and consistent with prior years we would anticipate that the achievement of our annual adjust the but i guidance range will be waited to the second half of the year
spk_1: before we open up the car to queue and and a close with a couple of brief comments we had strong performance in two thousand and twenty two growing total annual revenue by thirty one percent in improving our adjusted ebitda margin from eight percent in two thousand and twenty one to ten percent in two thousand twenty two we have the infrastructure in place to support revenue growth and each of our geographic markets providing leverage to grow future earnings
spk_0: as demonstrated by or guidance for two thousand twenty three achieving the midpoint of our guidance range would grow our annual revenue by over fifteen percent and further increase our just the bid on margin to twelve percent at the midpoint of the guidance range we would grow revenue by approximately twenty seven million and adjusted ebitda by seven million reflecting incremental adjusted either done margins of approximately twenty five percent we continue to successfully introduce new technologies that meet the needs of our customers adding to our portfolio and expanding our address bull market and finally we enter two thousand twenty three of the strong balance sheet and liquidity position and in two thousand twenty two with the cash balance it over sixteen million dollars in addition we expect to add to that cash balance by generating positive free cash flow during the year providing us with financial and strategic possibility with that we would love many questions from the audience thank you will and i'll be your mickelson answer session
spk_9: classic questioning repressed started in one hundred has found phone and her using the speakerphone we have seen fees for hooker handset before pressing the he's
spk_3: to entire question please first star them to coupons momentarily to assemble roster i will who's on wants more if you have a question please first star them one at this time and today's first question comes come from know austin a daniel energy partners please go ahead
spk_1: hey guys good good i quarter and nice nice nice offense to year
spk_5: thanks bill
spk_1: i'm sorry i was just touch and a little bit on the just a little on on working capital and he gets talked about the up increase last year little bit sly tiger and and are you touch our little bit there at the end like just gonna how you see that going on dropped the year and then how that could generate our allies wait three kind of plays out how that helps you guys generate your free cash flow or are more positive free cash flow for twenty three you're out of take that at the start and then make can supplement your things that was actually an accomplishment for us during two thousand twenty two was we we did get a lot more efficient with are working capital so while that working capital did increase by just over seven million dollars between
spk_6: and the end of two thousand twenty one in the under two thousand and twenty two our network and capital as a percentage of are trailing twelve months revenue came down from about forty five percent to thirty five percent and that really gets us back to the of the ratio can a networking capital as a percentage of sales that we had in two thousand and eighteen two thousand and nineteen prior to the day
spk_3: downturn i think there was even yo more accomplishment in there and given the fact that we've seen cost inflation in our inventory base so he been been really doing a great job in managing absolute inventory levels but the cost of inventories been increasing at the same time so for two thousand twenty two we had good underlying or earnings in the business but we grew revenue by thirty percent so be the cash that went into building that working capital
spk_1: yet slightly overcame the cash generated from just normal business operations leading us to slightly negative free cash flow for the year but as we turned to two thousand and twenty three yeah the underlying earnings in the business or higher and yet at the level of growth rate of growth while still be a good at more than fifty percent as moderating a bit which will allow us to convert that yeah sort of operating cash flow before working capital build into true free cash flow for the business this year great thanks image is why i'm such and just a little bit on that just on the on the wire the modulator for bringing guns at them out posted mentioned older than your comments house fraction going on that when do you start really seeing corrected good generation of revenue from from that are from that our system and twenty three yeah thanks god it's a great question so we were really threw in the feel proud trial process for most of two thousand and twenty two why brought the purple fire out yeah we we had an anchor customer and and for us that
spk_2: channel to market a little bit different most of our products and services we sell directly to the in p company or with perforating guns you're selling through the wireline company so we're or our channels market is through another service provider although we we certainly do
spk_1: i'm young market for me out kind of pull through marketing to the in p customer bases as well that we worked with one wireline company who certainly saw the advantages of our system to get through the field trial process there are a lot of learnings their as we got into late in the third quarter of two thousand and twenty two we are very comfortable with where that product was and started to take that out and sell purple fires through other wireless customers i was those kind of the journey we went we've gone through
spk_7: it's still a relatively small contributor to yeah the overall revenue profile right now
spk_0: we would anticipate that starts to pick up a bit more through kind of the second and third quarter and and hit more of a steady state in the second half of the year of a process that we go through with the purple fire in in some ways and this is getting a little bit into the weeds but yeah there's there's a process called a to prep for some prague bug in perth wells
spk_1: where we can you introduce that system with the wireline computer company in a very low risk basis get them comfortable with the system and then they can start taking that out to your regular stayed work with customers so as we grow the customer base it starts with yoga relatively low stage count trials and then we we grow that into yeah for stayed work and take it from there and again because we were building and assembling the arab the purple fire systems in the permian basin were starting out yeah take that product to the permian so we can provide yeah very responsive field service to both year the and p customer but also are wireline customers through that trial process as it gets adopted great that's that's all for me
spk_0: or and me are no the put ladies and gentlemen as a or has an answer session other determine how his mother was for the management team for his on remarks
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