Dril-Quip, Inc.

Good morning and welcome to DROQIP's second quarter 2023 earnings and Great North acquisition update call. At this time, all participants are in a listen only mode and there will be a question and answer session opportunity at the end of this call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Erin Fazio, Corporate Finance Director for DROQIP. Please go ahead.

Thank you and good morning. We appreciate you joining us on today's call. An updated investor presentation has been posted under the investors tab on the company's website, along with the earnings release and press release announcing the Great North acquisition. We have also posted an investor deck with additional details on the Great North acquisition that may be referenced during today's call. This call is being recorded and a replay will be made available on the company's website following the call. Before we begin, I would like to remind you that DrillCoop's comments may include forward-looking statements and discuss non-GAAP financial measures. It should be noted that a variety of factors could cause DrillCoop's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Please refer to the second quarter 2023 financial and operational results announcement that we released yesterday for full disclosure on forward-looking statements and reconciliations of non-GAAP measures. Speaking on the call today from DrillQuip, we have Jeff Bird, President and Chief Executive Officer, and Kyle McClure, Vice President and Chief Financial Officer. I would now like to turn the call over to Jeff Bird.

Thank you, Erin, and thank you all for joining us today. As you saw in yesterday's releases, we announced our Q2 2023 earnings, as well as the acquisition of Great North. We are excited to welcome Great North to the DrillQuip team. And this acquisition is a significant step in our strategic effort to expand our well construction portfolio. We've been discussing our inorganic capital allocation strategy for about a year now and are very excited that we found the right opportunity to put our cash to work, creating shareholder value. Great North is a perfect example of a high quality asset purchased at the right terms. Before we dive deeper into the acquisition details, both Kyle and I will first touch on our financial, and operational results for the second quarter. During the second quarter, we delivered strong results supported by the ongoing upcycle in key offshore markets. We produced revenue of $89.6 million, which is in line with the expectations we communicated to the market coming out of Q1. Our second quarter gross margin of 26.7% remains healthy, and we continue to execute on our organic initiatives across the organization to drive operational efficiency. Adjusted EBITDA for the second quarter was $8.8 million, flat sequentially and down $600,000 year-over-year. Notably, however, we generated positive free cash flow during the quarter, showing strong year-over-year and sequential improvements. Kyle will go into greater detail on the free cash flow movements. Bookings in the quarter were $72.7 million, an increase of 36% sequentially and in line with our prior guidance. It should be noted that with the acquisition of Great North, more than 50% of our revenue is now booked, shipped, and billed within our subsea product segment as our primary backlog business. The Q2 book-to-bill ratio for our subsea product segment was 1.2 times. During the second quarter, we saw 49 wellheads called off from existing MSAs. And as of quarter end, we had approximately 70 open MSAs. We ended the quarter with approximately $252 million in backlog, representing growth of 7% sequential. Strength of our backlog, combined with our confidence in the underlying market backdrop, confirms that we are well positioned for a strong second half of 2023. We also had several significant operational milestones in the second quarter. Our customer first mindset, when it comes to innovation is driving incredible success stories and fueling some of the second half growth outlook. These anecdotes include passing a new wellhead qualification testing requirements for the Petrobras exploratory project in Brazil. We're the only wellhead provider who has met Petrobras' stringent requirements, and I'm very excited about the level of excellence we continue to provide our customers in key growing markets such as Brazil. Additionally, There was a call-off of an MSA in the quarter of 33 wellhead systems, 17 of which were directly attributable to the qualification success. In our well construction segment, we were awarded the first of five Big Boar EXPAC DE liner hangers in Namibia from a major operator. We are very optimistic this is the first tranche of growth related to this previously dormant region. The well construction team also successfully installed a floating liner hanger for a major operator in Alaska. The well is one of the longest extended reach wells in the world with a lateral length of over five and a half miles. The ability to install a liner hanger in that length allowed the operator to reduce its carbon footprint and overall cost of production by minimizing its surface drilling locations. Finally, Our equipment was used in the second quarter to inject CO2 for purposes of permanent storage for a project in Denmark. We spoke in a bit over the past year about our investment in an energy transition team. We are very excited to be contributing to these important early projects. With that, I'll turn the call over to Kyle for some color on our financial results. Kyle?