Newpark Resources, Inc.

Greetings and welcome to the New Park Resources fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Mr. Ken Denard. Thank you, Mr. Denard. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the New Park Resources conference call and webcast to review fourth quarter and full year 2021 results. Participating from the company in today's call are Paul Howes, New Park's Chief Executive Officer, Greg Piontek, Chief Financial Officer, and Matthew Lanigan, President and Chief Operating Officer. Following my remarks, management will provide a high-level commentary on the financial details of the fourth quarter results and near-term outlook, before opening the call for Q&A. Before I turn the call over to management, I have the normal housekeeping details to run through. There'll be a replay of today's call. It'll be available by webcast on the company's website at newpark.com. There'll also be a recorded replay, telephonically, available until March 4th, 2022. And that information is included in yesterday's release on how to access that. Please note that information reported on this call speaks only as of today, February 18th, 2022, and therefore you're advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of New Parks Management. However, various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read the annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K to understand certain of those risks, uncertainties, and contingencies. The comments today may also include certain non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in the quarterly press release, which can be found on New Park's website. And now with that behind me, I'd like to turn the call over to New Park's president and COO, Mr. Matthew Lanigan. Matthew.

Good morning, everyone. Before getting into the specifics of the fourth quarter, I'd like to start today's call with a brief overview of our strategy, which is underpinned by three key priorities. Priority one, reshape the company by transforming our fluids business into a more agile and capital-like model capable of generating cash across commodity cycles while focusing capital allocation into higher returning growth markets. Priority two, leverage our extensive product development and manufacturing experience and credibility to expand our sustainable technology and service solution offerings. And priority number three, a laser focus on operating costs and balance sheet discipline to maintain a flexible overhead structure and fund our growth as we reshape the company. While we continue to execute across all three, prioritizing investment to high returning markets is our primary focus. The impact of our efforts is readily evident in our industrial business's 2021 full year results. Specifically, our industrial solutions business delivered $194 million of revenue and $60 million of EBITDA for the year, with more than 80% of the segment revenues derived from outside our historical EMP markets. The revenue generation from utilities and other industrial markets reflects a record level for New Park and a 10% cumulative annual growth rate when compared to 2018. As we've discussed throughout this past year, we're encouraged by the increasing momentum we are seeing, which positions us well for continued profitable growth for years to come. Key to our industrial growth effort is our U.S. geographic expansion to better serve our growing number of utility customers and contractors. After establishing a beachhead in the southeast region in 2020, we highlighted our first large-scale T&D project in Florida on last quarter's call. Building on this focus, we completed a tuck-in acquisition in December, which strengthens our utility industry customer base and also enhances our footprint in the northeast region. We are now establishing a larger presence in the Mid-Atlantic region to bridge our existing northeast and southeast operations. As another aspect to our industrial growth strategy, we look to expand our manufacturing beyond our core matting product, leveraging our unique technical knowledge base in design, manufacture and product marketing to play a role in the growing circular plastic economy. While we have been successfully recapturing and repurposing select post-industrial materials for some time now, We're in the early stages of the expansion of this effort and will provide updates as we progress. In terms of our efforts to transform our fluids business to a more agile, capital-like model, the past two years have shown clearly that our historical model was not readily adaptable to the reduced activity levels and volatility of the oil and gas markets, particularly in the US. During this time, we've executed continued cost actions to right-size our roofline and overhead structure, And we continue to assess all aspects of the business to create a flexible cost structure capable of generating cash through commodity cycles. With international fluid systems profitability approaching pre-pandemic levels and our US fluids business benefiting from improving market activity and overhead cost actions, the fluid system segment returned to profitability in the fourth quarter. With industry fundamentals continuing to improve and COVID-related impacts subsiding, we remain encouraged by the signs of the ongoing recovery in oil and gas market activity. While the early beneficiaries in the U.S. land market have been more on the completion and production enhancement side, we're encouraged by the recent increases in drilling activity across our service markets. With the improving activity, a key priority remains their ability to offset raw material and labor cost inflation and recover product margins through necessary price increases. Along with margin improvement, our near-term action plan remains focused on optimising the level of working capital and taking necessary action on underperforming operations. As a part of our ongoing portfolio review discussed on last quarter's call, we highlighted two actions in yesterday's press release that are aligned to our strategic priorities. First, despite our success transitioning our oilfield blending capabilities into the disinfectant and cleaning product market over the past 13 months, In light of competing priorities for financial and human capital allocation, we recently concluded that it's in the best interest of our shareholders to shut down this operation and pursue the sale of our facility and related assets located in Conroe, Texas. The industrial blending business contributed $9 million of revenue in 2021 while incurring a $2 million operating loss and ended the year with $20 million of net capital employed. In addition, We have decided to explore strategic options for our Excalibur mineral grinding business, which supplies ground bayrite and other minerals for our U.S. fluid system operations, as well as third parties in oil and gas and industrial end markets. Following the previously discussed roofline reductions and working capital actions, which have contributed a nearly $100 million reduction in fluids net capital was deployed over the past two years, we see this as another step to driving a capital-light and agile model in our U.S. fluids business. The mineral grinding business contributed total third-party revenues of $36 million in 2021, yielding approximately break-even operating income and ended the year with $47 million of net capital employed, including roughly $25 million of net working capital. We believe these actions will unlock liquidity that can be redeployed to higher returning opportunities. In addition, as we simplify and streamline our operating model, we plan to continue driving efficiencies in our SG&A costs. Meanwhile, on the international side, we continue to progress our efforts in Saudi Arabia, where we intend to contribute our existing in-country business to establish a joint venture company with Taka, as previously announced. We anticipate completing the formation and begin operating under the joint venture arrangement around mid-year, which is a key step to support the evolving local content requirements and expand our presence in this important market. And with that, I'd like to turn my attention to the fourth quarter results. Consolidated revenues increased 18% sequentially to $180 million in the fourth quarter, benefiting from strong growth in both segments. Reported EBITDA for the fourth quarter was $10.5 million, which includes $1.8 million of charges, highlighted in yesterday's press release. Our industrial solutions segment generated $52 million of revenues in the fourth quarter, reflecting an 18% sequential improvement benefiting from the anticipated year-end demand for product sales in the utility sector. Aside from the charges highlighted in yesterday's press release, our industrial solutions operating margin was in line with our expectations, generating $14 million of EBITDA. The fluid system segment revenues also improved 18% sequentially, driven by broad-based growth across most key markets. In North America, revenues improved by 17% sequentially to $83 million, including 21% growth from both US land and Canada. International revenues improved 21% sequentially to $45 million in the fourth quarter, with activities in North Africa driving the majority of the revenue growth. As I touched on a moment ago, the fluid system segment returned to positive operating income benefiting from the revenue improvement and ongoing cost actions and generated $5 million of EBITDA, which included nearly $1 million of restructuring charges, as highlighted in yesterday's press release. And with that, I'll hand the call over to Greg to discuss in more detail the financials for the fourth quarter. Greg?