Forum Energy Technologies, Inc.

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies first quarter 2022 earnings conference call. My name is Kirby, and I will be your coordinator for today's call. At this time, all participants are in a listen-only mode, and all lines have been placed on mute to prevent any background noise. As a reminder, this conference call is being recorded for replay purposes. You may press star 1 if you have any questions. I will now turn the conference over to Lyle Williams, Chief Financial Officer. Please proceed, sir.

Thank you, Kirby. Good morning, and welcome to FET's first quarter 2022 earnings conference call. With me today is Neil Lux, our President and Chief Executive Officer. We issued our earnings release after the market closed yesterday, and it is available on our website. Before we begin, we would like to caution listeners regarding forward-looking statements. Our remarks today may contain information other than historical information. Please note that we are relying on the safe harbor protections afforded by federal law. All such remarks should be considered in the context of the many factors that affect our business, including those disclosed in our Form 10-K, along with other SEC filings. Management statements may include non-GAAP financial measures. For a reconciliation of these measures, refer to our earnings release. This call is being recorded, and a replay of the call will be available on our website for two weeks. I will now turn the call over to Neil.

Thank you, Lyle. During our last call, I listed many reasons why FET is a great company and investment. Our employees, strong industry fundamentals, forums, innovative products and solutions, access to growing markets outside oil and gas, and opportunity for significant margin expansion. Since that call, our foundation has only grown stronger. We continue to recruit and retain entrepreneurial, dedicated, and customer-focused employees. Our teams make a remarkable impact for the company and are our greatest differentiator. We are thankful to have such wonderful colleagues. And I am thankful for the position we are in today. From all indications, we are at the beginning of a prolonged energy investment cycle. The unfortunate conflict in Ukraine has highlighted a trend already underway but somewhat invisible to the general public. The world needs energy and, more importantly, The world needs to invest heavily in secure energy supply. Commodity prices are trending near multi-year highs, and exploration and production companies are generating very strong free cash flows. The table is set for increases in traditional oil and gas investment. Despite favorable market conditions, we have only seen a modest increase in oil field service activity. Compared to the 2000 to 2018 cycle, U.S. rig count has grown 33% slower since the 2020 trough. Capital discipline by E&P operators has starved service companies and caused them to run their equipment as hard as possible for as little money as possible. Obsolescence, cannibalization, And human capital challenges have significantly constrained the capacity of the oil field services industry. So, what does that mean for today? New components are needed to maintain current levels of activity. I toured the Permian Basin a few weeks ago and saw stacked equipment parked near fence lines across many yards. It is hard to believe this equipment can be mobilized in its current state. So what does the future look like from here? To grow energy supply meaningfully, a lot more equipment is needed. The good news is strong utilization has allowed service companies to finally regain pricing power. This is encouraging as it will provide the capital that our customers need to make significant investments in new equipment to meet future demand. This should sustain investment and boost our capital sales in coming years, a remarkable change in trajectory. The technical demands required to drill and complete wells today is significantly greater than the last cycle. Upgrades to key components like iron roughnecks will benefit from our FR120 solution, which is capable of efficiently handling large diameter drill pipe. We see a similar theme for hydraulic fracturing operations. Traditional flow iron and manifold systems are not reliable under the pressure and continuous pumping hours required in today's completions. Our serpent series, flexible hose, and single line manifold system eliminates 95% of connections and associated downtime. These are just a few examples how our innovative products and solutions make energy production safer and more efficient. While the near-term case for oil and natural gas is clear, there is a future growth cycle for low-carbon energies like offshore wind, and FET is in a fantastic position to participate in this growth by utilizing our core competencies in engineering, designing, and manufacturing subsea remotely operated vehicles and trenchers. These specialized tools are required for the installation and maintenance of wind turbines. We believe vehicle demand for offshore wind can exceed the installed base for subsea oil and gas support in the coming decade. is an amazing opportunity for future growth, one where we can leverage our decades of expertise and subsidy towards the transition to lower carbon energy. Between traditional oil and gas markets and energy transition, we are pleased with the breadth of our top-line growth avenues. In addition, we have significant opportunities to expand profit margin in the near term. First, we are mitigating the inflationary pressures in our supply chain that was experienced in 2021. Second, demand is outstripping supply for the products our customers value and will allow for future sustainable net price benefit. Third, as an asset-light, scalable manufacturing company, we have significant operating leverage inherent in our business. I want to emphasize, that we have maintained the capacity that was built to meet much higher demand from prior periods of growth. This means we can dramatically increase our revenue within the existing footprint and leadership structure. While incremental margins will vary quarter to quarter, over the long term, we expect to generate $25 to $40 of EBITDA for every $100 of incremental revenue. If you believe, as we do, that the world is just now entering a new energy investment cycle, FET is poised for outsized earnings growth. This will benefit our balance sheet because roughly half of our debt converts to equity at a fixed stock price. And this is a unique opportunity to significantly de-lever the company and expand our EBITDA trading multiples. I am pleased with our strong start to 2022, our best result since before the pandemic. The pieces are in place. We have the fuel for long-term growth. I believe the best is yet to come. Let me now turn the call over to Lyle for more detail on our first quarter financial results. Lyle?