Forum Energy Technologies, Inc.

need to press star 1 1 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. A link with instructions can also be found on the company's investor relations website under the events section. 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, everyone, and welcome to FET's second quarter 2024 earnings conference call. With me today are Neil Lux, our President and Chief Executive Officer, and Lyle Williams, our Chief Financial Officer. Yesterday, we issued our earnings release, 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 today 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 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 second quarter 2024 to first quarter 2024.

I will now turn the call over to Neil. Thank you, Rob. And good morning, everyone. Now that we are halfway through the year, it is a good time to take stock of our progress. And I am pleased with our direction. Free cash flow results have been strong, and we have converted EBITDA into cash faster than our plan. This performance has provided confidence to raise our free cash flow guidance for full year 2024. Also, we are in the process of redeeming more than half of our 2025 notes prior to the end of the third quarter, and it is our intention to retire the balance around the end of the year. At that point, the remainder of our debt will be fully prepayable without penalty and will not mature until December 2026. This is a big step for our balance sheet. In addition, we are executing our beat the market strategy through new product development and international market penetration. These results are evident in our market share gains and increased sales outside of the United States, which were 50% of FETs total in the second quarter. Finally, our financial results demonstrate the positive benefits of the Verifirm acquisition. We have increased EBITDA nearly 50% year over year, despite a more challenging market. The combination of our companies has successfully increased our scale and margins. As a management team, we have a strong focus on free cash flow, and this quarter we generated $21 million through consistent profitability and improved working capital management. This allowed us to repurchase $13 million of our 2025 notes and announce the redemption of another $60 million. In addition, we are raising our full year 2024 free cash flow guidance to between 50 and 70 million. The team continues to execute at a high level and I am proud of their efforts. Putting it all together, we are following through on our plan to create value through a strong balance sheet. Once complete, FET would be positioned to return cash to shareholders around the middle of next year. Last quarter, we discussed our growth and profitability strategy. This consists of four foundational pillars, growing profitable market share, developing differentiated products and technologies, utilizing our optimized global manufacturing and distribution footprint, and expanding our participation in energy transition. I'd like to provide an update on progress made so far. First, we are seeing the benefits from new product development. We have a growing opportunity pipeline within the power generation sector for our industry-leading Jumbotron XL heat transfer units. The Jumbotron XL is a critical component for power systems that are utilized for many applications, including AI data centers. The PowerGen market should grow rapidly over the coming years, Importantly, these opportunities are geographically diverse with demand in the US, Middle East, Canada, and Latin America. This is an exciting opportunity that expands FET's addressable market. We are also benefiting from our optimized global presence. To meet growing global demand and provide our products around the world, we do not need to expand our roofline or invest additional growth capital. We can service the world with the strategic manufacturing and distribution hubs that are already in place. A great example is our Saudi Arabian manufacturing facility, where we are delivering products and technologies to support unconventional resource development throughout the Middle East. These products include key hydraulic fracturing components, casing equipment and hardware, coil tubing, and artificial lift solutions. For the first half of 2024, we have grown our Middle East revenue by 16% compared to the first half of 2023. This highlights our ability to pivot with changing market conditions and grow where our customers are spending money. Turning to the second quarter, we delivered revenue and EBITDA within our guidance range despite softer than expected U.S. activity. Our year over year results demonstrate the benefit of our beat the market strategy and the VeriPerm acquisition. Our revenue increased 11% and EBITDA was up 48% with a 320 basis point improvement in margins. These results are particularly impressive given that the global rate cap was down about 5%. VeriPerm performed well during the quarter even though the Canadian market was down due to typical seasonality. While revenue was essentially flat, favorable mix and cost controls helped Verifirm deliver increased EBITDA and margin contribution. They were also a meaningful portion of FET's free cash flow. Revenue synergies from the acquisition are starting to reap benefits. By working closely with VeriPerm's experts to expand FET share, we increased our artificial lift and casing equipment sales in Canada by 5%. Also, we are leveraging an existing distribution network to have product readily available for these customers. Gaining share in a new market takes time, but we do have some early wins. Now, let me give you additional color on the prior quarter's market conditions and how it impacted our results. In the U.S., E&P consolidation continues to slow drilling and completion spending as companies evaluate their combined portfolios. Also, weak natural gas prices contributed to a decline in U.S. rig count and hydraulic fracturing activity. Internationally, rig activity declined 6% due entirely to Canadian breakups. Outside of Canada, rig count was flat with strengthening activity from shale plays in the Middle East and Latin America. Also, offshore activity remains vibrant as demonstrated by our strong subsea quotation pipeline. Now, let me turn to our outlook for the remainder of the year. We believe it is unlikely that U.S. rig count and hydraulic fracturing activity will experience a significant increase from current levels. As a result, we now expect U.S. rate count to be down 15% on average for the year compared to our initial expectation of a 5% decrease. However, the benefits of our VeriPerm acquisition and Beat the Market strategy should mitigate this softness. With this revised market outlook, we are reducing the top end of our 2024 EBITDA guidance by 10 million. Therefore, our updated range is now 100 to 110 million. We anticipate the third quarter to be relatively on par with the second, with revenue in the range of 200 to 220 million and EBITDA in the range of 24 to 28 million. Despite this change in our EBITDA guidance, we have increased confidence in our ability to generate free cash flow. As a result, we have increased our guidance range by 10 million to between 50 and 70 million. This reflects the benefit of our capital life business model and operational execution. I am now going to turn the call over to Lyle for more details on FET's second quarter financial results.