Exterran Corporation

Greetings and welcome to the Exterin Corporation second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Blake Hancock, Vice President, Investor Relations for Exterin Corporation. Thank you. You may begin.

Good morning and welcome to Exterin Corporation's second quarter 2021 conference call. With me today are Exterin's President and Chief Executive Officer, Andrew Way, and David Barta, Exterin's Chief Financial Officer. During this conference call, we may make statements regarding future expectations about the company's business, management's plans for future operations, or similar matters. These statements are considered forward-looking statements within the meaning of the U.S. securities laws and speak only at the date of this call. The company's actual results could differ materially due to several important factors, including the risk factors and other trends and uncertainties described in the company's filings with the Securities and Exchange Commission. Management may refer to non-GAAP financial measures during this call. In accordance with Regulation G, the company provides a reconciliation of these measures in its earnings press release issued yesterday and a presentation located in the investor relations portion of the company's website. With that, I will now turn the call over to Andrew.

Thanks, Blake, and good morning, everyone. Exterrin performed well in the second quarter as we remain focused on employee safety, operational efficiency, strong execution of our global backlog, and positioning the company to capitalize on a robust commercial pipeline that continues to grow. Overall, the quarter came in line with our expectations on an EBITDA as adjusted basis, up over 40% when compared to the second quarter of 2020. While the COVID-19 vaccine appears to be working to lower the severity of the impact of the virus, the latest variants are starting to create potential challenges. Having traveled to different parts of the world since we last spoke, the operating environment continues to be dynamic. We are beginning to see some logistical challenges, important equipment, and people to facilities and sites beginning in the third quarter. We continue to mitigate most of these challenges given our global supply chain, but COVID continues to be present and provides the greatest risk we see in the second half of this year. Another topic that continues to come up with investors and others since the last earnings has been around inflation. I would say we have three distinct areas of commercial checkpoints where inflation can impact us. The first being projects that are operational and generating revenue, And there we typically have annual escalation clauses allowing us to increase rates for inflation. The second area would be projects under construction. Here we leverage our global supply chain to help minimize and offset inflation costs. We also have the ability to work with our customers as well on passing through material inflation changes, also affording us to minimize our capex or margin impacts on the projects. And lastly, projects that are in the bid phase. The biggest adjustment we have made here is to reduce the bid validity to minimize time between bid and award to allow us to have better control over our costs. Overall, I would say we have not seen any material impact on our costs over the past several months, but continue to monitor inflation globally. Commercially, we continue to further our discussions with our customers globally and continue to feel strongly in the over 3.5 billion opportunities we see in both our natural gas and water products. The Middle East continues to drive the bulk of these opportunities, but we are seeing incremental gas and water project demand in Latin America and Asia Pacific. We also continue to have constructive conversations on renewals in Latin America. We signed over 30 million in renewals or new contracts in the region in the second quarter, and over 100 million due in the past year. There are additional opportunities that could meaningfully add to our backlog without any material CapEx needs. On the waterfront, we continue to work towards at least one more incremental eco project this year. This would meaningfully add to our eco backlog and has the potential to make water account for nearly 30% of eco backlog in the future. As we look at our technology, we continue to see applications across many industries, including petroleum mining, and where this technology originated in municipal water waste, to name just a few. And as we continue to build our opportunity set and book of business, we're also beginning to look at what will be needed to begin branching our technology out into other sectors outside of oil and gas. We are confident that our water business is pious for growth that will drive enhanced financial performance and compelling value creation. Looking over the past quarter, commercially and operationally, little has changed. We continue to progress well on both fronts and are excited about the transition and transformation that is underway for the company. Dave will cover the capital structure review process that should only help accelerate and drive our ability to continue to push and win new opportunities. And with that, I will now turn it over to Dave.