Forum Energy Technologies, Inc.

Good morning, ladies and gentlemen, and welcome to the Forum Energy Technologies first quarter 2023 earnings conference call. My name is Gigi, and I'll be your coordinator for today's call. There is a process for entering the question and answer queue. A link with instructions can be found on the company's investor relations website under the events section. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. At this time, all participants are in a listen-only mode, and all lines have been placed on mute to prevent any background noise. This conference call is being recorded for replay purposes and will be available on the company's website. I will now turn the conference over to Rob Kukla, Director of Investor Relations. Please proceed, sir.

Thank you, Gigi. Good morning, and welcome to FET's first quarter 2023 earnings conference call. With me today are Neil Lux, our President and Chief Executive Officer, and Lyle Williams, our Chief Financial Officer. We issued our earnings release yesterday, and it is available on our website. Please note that we are relying on the safe harbor protections afforded by federal law. Listeners are cautioned that our remarks may contain information other than historical information. These remarks should be considered in the context of all factors that affect our business, including those disclosed in FET's Form 10-K and our other SEC filings. Finally, management statements may include non-GAAP financial measures. For a reconciliation of these measures, you may refer to our earnings release. During today's call, all statements related to EBITDA refer to adjusted EBITDA, and unless otherwise noted, All comparisons are first quarter 2023 to fourth quarter 2022. I will now turn the call over to Neil. Thank you, Rob, and good morning, everyone.

I would like to begin today's call by emphasizing three key points. First and foremost, we are focused on meeting or exceeding the commitments we make to our customers and investors. We accomplished that during the first quarter as our employees executed the plans and delivered revenue, EBITDA, and free cash flow within our guidance range. Our EBITDA and EBITDA margins both increased sequentially on relatively flat revenue. Second, the first quarter highlights FET's global reach. We have abundant opportunities in the international and offshore markets to drive our growth through the rest of 2023 and beyond. And third, we set high expectations earlier this year. Today, I remain confident in our previous 2023 guidance of 80 to $100 million of EBITDA and free cash flow of 20 to 40 million. Demand for our products is strong. Before addressing the markets, let me briefly talk about bookings this quarter. Coming in at 95%, This is the first quarter in over two years with a book-to-bill ratio below 100%. Our product orders are typically book-and-ship or longer lead time capital equipment. This can cause a lumpiness in our quarterly book-to-bill ratio. Also, fourth quarter bookings were very strong, particularly with the addition of a $25 million Middle East project award. As we look out through the remainder of 2023, our current backlog and expected bookings should be sufficient to meet our full year revenue expectations. Now, let me walk through our markets and the opportunities we continue to see. During the first quarter, we saw a divergence in growth rates between the United States and international markets. The US recount was softer than originally expected. This is driven by lower commodity prices leading to less drilling and completion activity from private operators. However, equipment in the lower 48 can be redeployed quickly and our customers are forecasting a rebound in the second half of 2023. Also, even with a moderating rig count, service intensity and equipment utilization remain high. For our service company customers, demand and pricing remains very strong for state-of-the-art upgraded equipment. Their older, less capable equipment is seeing less demand. So clearly, our customers want to ensure their high-spec equipment is well-maintained. And they want to have more upgraded, in-demand equipment in this increasingly bifurcated market. FET can help our customers achieve this goal with our diverse products and solutions. In summary, while current market conditions are a bit soft, the U.S. is expected to pick up in the back half of 2023. In contrast, international and offshore markets are currently strong and are becoming more important in supplying the world's energy needs. Investment and activity are shifting towards these markets. The planning Equipment build-out and deployment of these investments have longer runways. This results in contractual customer commitments which are less susceptible to short-term volatility. In our past several quarterly updates, we have stressed FET's extensive global reach. We are much more than a U.S. land-based company. In fact, in past cycles, our international sales approached 50% of total revenue. ABT's brand and footprint provide us access to global markets. As a result, we have seen our international leads and opportunities grow substantially over the past six to 12 months. For example, our drilling capital equipment product family has seen its Middle East opportunities increase almost threefold compared to six months ago. And for our handling tool business, which already has a strong global presence, opportunities have doubled. International drillers are building new and upgrading existing rigs to increase their efficiencies and meet demand. Another example is within our coil tubing product line, which generates more than 50% of its revenue outside of the U.S. our team saw a significant increase in commercial activity across Latin America, Europe, and the Middle East. Within the offshore markets, our subsea technologies product line is seeing aftermarket demand increase 40% as our installed base goes back to work. New build, ROV, and trencher inquiries are up as well. The sales cycle from inquiry to award can take several months for these big ticket items. So we are forecasting the bookings to occur later this year and into next year. And finally, we have some product lines that have been primarily focused on the U.S. markets, such as our extremely successful Artificial Lift product family. Now we are exporting their success to new markets. They have recently entered several new Latin American countries and are in the process of expanding technical qualifications with national oil companies in the Middle East and Asia Pacific regions. Geographic expansion with proven products and services will be an important growth lever in 2023 and beyond. International and offshore investment will be a larger portion of spending for energy productions. As a global manufacturer of critical technology, FET will benefit from this trend. We can also outpace the market with share gains through the introduction of new products. Last quarter, I introduced our new FRAC automated switch technology system. The FastConnect system is a direct replacement of zipper manifolds. the value proposition for our customers is very clear. The FastConnect increases safety by eliminating personnel from high pressure danger zones, drives efficiency by completing more frac stages per day, and improves the well site environmental footprint by eliminating grease. If all zipper manifolds were replaced with FastConnect, we could eliminate 18 million pounds of grease annually. That is an ESG win for our customers and the industry. I am happy to report that we are delivering our first unit to a key customer this month. Excitement around this solution is building and we are having constructive conversations with potential customers who want to adopt this technology. As we look further into the future, our product portfolio aligns with and supports energy transition markets, including offshore wind, emissions capture, geothermal, and biogas. Although a small part of the FET story today, we are seeing early signs of activity and expect an acceleration in commercial and engineering efforts in the coming years. To conclude, I remain excited about FET's growth opportunities. We are in the early stages of an energy investment cycle. To increase global living standards, the world needs energy, and the energy industry needs FETs, innovative products and services. While the U.S. market has started slowly, it is expected to pick up in the back half of the year. International and offshore activity growth is robust, driving revenue opportunity, and FET's new product pipeline will further support growth by taking market share. I will now turn the call over to Lyle for more detail on our first quarter results and the second quarter 2023 outlook.