Newpark Resources, Inc.

Greetings and welcome to the New Park Resources First 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 then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennett with Dennett Lascaux Investor Relations. Thank you, Kenny. 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 first quarter 2022 results. Participating from the company in today's call are Matthew Lanigan, New Park's president and chief executive officer, and Greg Piontek, chief financial officer. Following my remarks, management will provide a high-level commentary on on the financial details of the first quarter results and near-term outlook before opening the call for Q&A. Before I turn the call over to management, I have a few housekeeping items to cover. There will 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 until May 18, 2022, and that information on how to access as in yesterday's press release. Please note that information reported on this call speaks only as of today, May 4th, 2022, and therefore you are 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 Park's management. However, various risks, uncertainties, and contingencies could cause New Park's 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 comparable GAAP 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 CEO, Mr. Matthew Lanigan. Matthew.

Good morning, everyone. We are very encouraged by our performance in the first quarter, which reflects improving market fundamentals across both of our business segments. as well as the impact from our continued execution on our key strategic priorities. In our industrial solutions business, the rental and service market continues to strengthen, as we posted another quarter of double-digit, sequential and year-over-year growth in our targeted non-oilfield markets. This strong start to the year positions us well to build upon the 10% cumulative annual growth rate we've delivered since 2018. reflecting our customers' acknowledgement of our unique product and service offering in the multi-billion dollar access market. With respect to product sales, despite the expected pullback in Q1 volumes and the shift of some sales into Q2, inquiry activity remains robust as we look to build upon the record levels of revenues achieved in 2021. As we've highlighted in the past, the energy transition is expected to require significant investment to upgrade the aging power transmission network and connect renewable generation sources to the grid. This demand underpins utility industry projections of more than $25 billion of annual capital investment in the coming years, roughly 10% of which reflects the site and access component, providing meaningful addressable market scale and demand for our products and services. In our fluids business, the appalling events unfolding in the Ukraine are driving a significant shift in the geopolitical landscape highlighting the importance of energy security in both North America and Europe. In the wake of recent events, we are seeing a renewed desire within several markets to increase activity levels to help ensure reliable energy supply in the coming years as they bridge to renewable sources over the longer term. While customers in these markets are in the early stages of evaluating their plans, we are seeing an uptick in communication and planning as we look to the second half of 2022 and beyond. In the U.S., The combination of geopolitics and the strong oil and natural gas prices are providing a more robust outlook, though we continue to expect operators to maintain their capital discipline, which we believe will moderate the activity levels. More importantly, we expect the discipline will help dampen the volatility of the US markets, which has historically been a significant challenge to the financial returns of our US fluids business. As the market strengthens, the supply chain remains the key near-term concern. which was further complicated in the first quarter by the COVID outbreak in China, as well as the conflict in Ukraine. We are experiencing unprecedented cost inflation for many hydrocarbon-based products and chemicals, and in many cases also facing extended lead times. We are encouraged by the meaningful pricing progress with many of our customers to mitigate the inflationary pressures, particularly in North America, though we are facing challenges with a subset of our long-term customer contracts in the EMEA region, that include fixed pricing. This has caused modest margin compression to the fluid segment in the quarter. In addition to the improving market fundamentals, I'm pleased with our execution supporting our key strategic priorities discussed last quarter. More specifically, we're advancing the process to explore the divestiture of our US mineral grinding business, which is another meaningful step to transform our fluids business to a capital light model, capable of generating consistent cash across commodity cycles. We have engaged PPHB to lead this process and have been pleased with the level of inbound interest. We have also been pleased with the level of inquiries for our Conroon blending facility and anticipate that these efforts will be completed in the second half of the year. Between these two operations, we have approximately $70 million of net capital employed, reflecting roughly 20% of the New Park's current market capitalization. These divestitures will provide meaningful opportunity for cash generation to reduce our debt levels, and return value to shareholders through the repurchase of shares, while also accelerating investment in higher returning growth opportunities. We also continue to progress our efforts in Saudi Arabia to contribute our existing in-country business to establish a joint venture company with Taka, as previously announced. We anticipate completing the joint venture arrangement in the second half of the year. And finally, I'd like to highlight that we recently completed an amendment to our U.S. asset-based loan facility with our bank group, including Bank of America, JP Morgan, and First Horizon Bank. The amendment extends our facility until 2027 and provides additional liquidity to support the execution of our portfolio transformation efforts, highlighting our bank group's confidence in our strategy. With that, I'd like to turn my attention to the first quarter results. Consolidated revenues decreased 2% sequentially to $176 million in the first quarter as the anticipated pullback in industrial solutions direct sales was substantially offset by broad-based growth in the fluid systems business and our expanding rental and service presence in the power and transmission sector. Reported EBITDA for the first quarter was $11.4 million, including an $11.2 million contribution from industrial solutions and a $7.4 million contribution from fluid systems. I'm particularly pleased with our ongoing focus on operating cost and balance sheet discipline, where the benefits of our cost reduction initiatives assisted our fluids business in achieving its second consecutive quarter of segment operating profit, despite facing meaningful supply chain related cost pressures. We've made solid progress in the first quarter and expect to build upon that momentum in the second quarter and beyond. And now, I'll hand the call over to Greg to discuss in more detail the financials for the first quarter. Greg?