Good morning and welcome to Dril-Quip’s Fourth Quarter and Full Year 2023 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. At this time, I would like to turn the call over to Erin Fazio, Corporate Finance Director for Dril-Quip. Please go ahead.

Thank you, and good morning. We appreciate you joining us on today’s call. An updated investor presentation has been posted under the Investors tab on the company’s website along with the earnings press release. This call is being recorded and a replay will be made available on the company’s website following the call. Before we begin, I would like to remind you that Dril-Quip’s comments may include forward-looking statements and discuss non-GAAP financial measures. It should be noted that a variety of factors could cause Dril-Quip’s actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Please refer to the fourth quarter 2023 financial and operational results announcement we released yesterday for a full disclosure on forward-looking statements and reconciliations of non-GAAP measures. Speaking on the call today from Dril-Quip, we have Jeff Bird, President and Chief Executive Officer; and Kyle McClure, Vice President and Chief Financial Officer. I would now like to turn the call over to Jeff Bird.

Thank you, Erin and thank you all for joining us today. Dril-Quip delivered strong fourth quarter results, marking a pivotal year with double-digit growth in both annual revenue and adjusted EBITDA, showcasing significant progress towards our longer-term financial, operational and strategic objectives. Total revenue grew 17% year-over-year and our fourth quarter organic revenue was the highest quarter achieved since pre-pandemic. Net bookings in the quarter were $123 million, an increase of $76 million sequentially and above our expectations for the quarter. There were several notable orders in the quarter. The largest was for subsea production systems or trees for approximately $40 million. Orders for trees, as we’ve mentioned, tend to be very large, discrete events that can shift materially from period to period depending on the customers’ schedules. This project includes three trees plus various accessories, which will be delivered over the next 2 years in Australia. We also saw incremental call-offs from Petrobras in the quarter and some large diverter orders. Total bookings for subsea products in the period were $97 million. There were also multiple significant contract wins in the quarter, not reflected in our bookings. We were awarded a 3-year $20 million deepwater subsea wellhead MSA by CNOOC. We won a multi-well, multiyear contract to supply subsea wellhead systems in Mexico. We were awarded a second project on the North Slope of Alaska for 20 liner hanger systems through 2025. Additionally, we are off to a strong start to 2024 as we were directly awarded the contract for all of BP’s subsea wellheads for another 5 years and the Tullow subsea wellhead MSA has been extended for 3 more years. Throughout 2023, we consistently communicated that bookings may not be the most accurate metric to evaluate the current state of Dril-Quip, particularly following the recent acquisition of…

Thank you, Jeff, and good morning, everyone. As Jeff highlighted, the company delivered strong fourth quarter and full year results, demonstrating continued progress on our business initiatives and reflecting the initial stages of a multiyear upcycle in the international and offshore market. Looking at our results, fourth quarter revenue was $126.3 million, an increase of 31% year-over-year and 8% sequentially, driven by activity increases in subsea services in Brazil, Europe and Australia, and the impact of the full quarter of Great North. For the full year 2023, revenue was $424.1 million, an increase of 17% year-over-year. Great North contributed $35.2 million for the year. Looking at the segment results. Subsea Products and Subsea service revenue increased 2% and 7% compared to the previous year, respectively. While we encounter challenges related to rig availability and FPSO delivery timing earlier in 2023, the fourth quarter showed increased activity resulting in a $76 million increase in bookings quarter-over-quarter. Included in that, as Jeff mentioned, is approximately $40 million related to the Subsea tree order that we will be recognizing in revenue over the next 2 years. The Well Construction segment revenue grew 70% year-over-year, reflecting the addition of Great North and activity increases in Latin America and Saudi Arabia. Embedded within the Well Construction segment is the legacy TIW business which is exiting 2023 with a $100 million annual run rate ahead of schedule. Gross margins were 27.4% during the fourth quarter and 27.3% for the full year. Full year gross margins improved 73 basis points largely due to our ongoing initiatives across the organization to drive operational efficiency, partly offset by some supply chain headwinds and international start-up costs in our legacy well construction product line. Selling, general and administrative expenses increased 8% compared to the full year 2022, which was driven…

[Operator Instructions] We have a question from Eddie Kim with Barclays. Your line is live.

Hi. Good morning. Really strong bookings in the fourth quarter here. And just sorry if I missed it, but could you provide the subsea product bookings for full year 2022 and 2023? I just want to see how that compares to the ‘24 guide of $200 million to $225 million.

Yes. Hey, good morning. Good morning Eddie. This is Jeff. The number in 2022 and 2023 was about flat at, call it, $215 million, $217 million somewhere in that range in both 2022 and 2023. So, the 2024 number, if you think about that as a midpoint, would be flat with the high end being $225 million. I think the one notable thing about that is what’s not included in those bookings numbers, which are the MSAs that we are pretty consistently now signing. So, if you think about the BP MSA that I mentioned, that 5-year extension, those are about 20 to 25 well heads a year that don’t go into our bookings number until they are called off, and the value of that would be, call it, $15 million to $20 million annually when they start reordering well heads. Right now, they are really working through customer property. We expect them to start reordering late this year or early next year. So, that is the nuance. We just think this is probably a better way to be more clear with those following the stock that this is directly tied to subsea, the bookings right now.

Yes. Got it. Great. And then just a quick follow-up, the 24 wells that you just announced for the Woodside Trion development offshore Mexico, is that going to be included as part of subsea bookings in the first quarter, or was that booked in the fourth quarter?

That was an MSA in the fourth quarter and will be called off over the next year or 2 years probably. So, that’s the challenge. We signed an MSA, right. It’s a nice award. But in the past, that would have just hit a big splashy number in the fourth quarter, and now that’s just not the way that things are contracted.

Right. Okay. Understood.

At least for our products.

Yes. And then just my follow-up is on the margin guide for this year. In the slide deck last quarter, you said you are targeting kind of 15% to 18% EBITDA margins for 2024. But the midpoint of your guidance implies around 14% for this year. So, just wondering if you could help us understand the delta there. Are some cost savings going to be lower than anticipated this year, or is this a reflection of kind of recent bookings coming in at maybe lower pricing than you anticipated? Just any color there would be great.

Yes, Eddie, it’s Kyle. I would tell you that the difference between those two numbers is probably just timing on productivity initiatives inside the company right now, things probably moved out a quarter or so on some productivity concepts that we are moving forward on.

Okay. More timing related. Okay. Understood. That was all I had. Thank you for the color and I will turn it back.

Thanks Eddie.

Thank you. As we have no further questions in queue at this time, this will conclude today’s conference call. Thank you for participating and you may now disconnect.