Good day, ladies and gentlemen, and welcome to KLX Energy Services Third Quarter 2018 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. And as a reminder, today’s conference is being recorded for replay purposes. I’d now like to turn the conference over to Michael Perlman, Treasurer and Senior Director of Investor Relations at KLX.

Thank you, James. Good morning, and thank you for joining us. Today, we are here to discuss KLX Energy Services financial results for the third quarter period ended October 31, 2018. The company’s earnings news release, which was issued earlier this morning presents our third quarter 2018 results. If you haven’t received it, you’ll find a copy in our website. For comparison purposes, we have presented our financial results on a GAAP basis, as well as an adjusted basis to exclude the one-time costs of approximately $23 million associated with the merger of the Aerospace Solutions business with The Boeing Company; the spin-off of the KLX Energy Services business into an independent public company; the amendment of the $100 million asset-based lending facility; the issuance of the $250 million senior secured notes due 2025; and the acquisition of Motley Services, which was completed on November 5, 2018, all of which are collectively referred to as cost as defined. We will begin with remarks from Amin Khoury, Chairman and Chief Executive Officer of KLX Energy Services. Also on the call this morning is Tom McCaffrey, Senior Vice President and Chief Financial Officer. For today’s call, we have prepared a few slides to help you follow our discussion. You can find our presentation on the Investor Relations page of the KLX Energy Services website at klxenergy.com. In addition, copies of the slides are posted on our website for you to refer to. Before we begin, we have some additional information to cover. Any forward-looking statements that we make are subject to risks and uncertainties. And as always, in a prepared remarks and our responses to your questions, we will rely on Safe Harbor exemptions under the various securities acts and our Safe Harbor statements from the company’s filings with the Securities and Exchange Commission. We will address questions following our prepared remarks. At that time, the operator will provide Q&A instructions. Now, I’ll turn the call over to Amin Khoury.

Thank you, Michael, and good morning, everyone. We are very pleased to be speaking with you this morning, as we review what has been an extraordinarily productive third quarter. During the quarter, management completed the merger of the Aerospace Solutions business with The Boeing Company; the spin-off of the Energy Services business into a publicly-traded company; the issuance of $250 million of senior secured notes due 2025; the addition of the large diameter coiled tubing product service line through the acquisition of Motley Services; the successful launch of our DHPS service line, including our proprietary line of dissolvable plugs; and the launch of the HydroPull tool used in our thru-tubing operations that complements our large diameter coiled tubing product service line. During this period, we also completed the establishment of our IT, legal, accounting, tax, treasury, risk management, internal audit, and human resources functions to be able to operate as a standalone public company with robust financial and operating controls independent from our former parent KLX Inc. Additionally, in our efforts to continue to address the trend towards extended reach laterals and plug & perf style completions, we introduced to our customer base several important new proprietary product service lines. First, a line of magnesium-based dissolvable plugs, which we co-developed with an engineering firm; second, our patented debris-less flotation collar; and finally, a HydroPull tool used in our thru-tubing operations and which complements our large diameter coiled tubing PSL. The HydroPull tool was introduced to a cooperative marketing agreement. These new proprietary product service lines are already making a solid impact on fourth quarter revenues. As we move forward as an independent public company, we expect to leverage our integrated platform to continue to launch new and differentiated product service lines through internal development, through partnerships and licensing agreements and…

Thank you, Amin. I’ll now turn the call over to James for the Q&A portion of today’s call. James will provide instructions on how to ask a question. James?

Thank you. [Operator Instructions] Our first question will come from the line of Brad Handler with Jefferies. Your line is now open.

Thanks. Good morning, all.

Good morning, Brad.

Thank you for a thorough walkthrough of – as you introduce us all to the marketplace, so I appreciate that. I guess, actually, your clear comments, Amin, notwithstanding, I guess, I’d love to just sort of dig into the fourth quarter, because it’s such a dynamic, if not in a great way time in the – in our space. So maybe we can review a little bit of what you’re seeing and kind of parse out. So in other words, a lot of your peers now are talking about pretty significant activity declines in the fourth quarter sort of double-digit. And it’s really is right, it’s not just a fracking problem. There were some pricing issues in fracking, but it’s literally that activity will fall off and fall off very hard in December. I guess, you’re obviously speaking to new product introductions and some other drivers that are helping to offset that. But is that what you see in the market as well? Do you expect that December is just a very quiet month even relative to October, November?

I think that your question speaks to the model. In other words, we have such broad geographical coverage now. We’re in Pennsylvania, West Virginia, Ohio, Colorado, Wyoming, Oklahoma, Louisiana, North Dakota, Texas, New Mexico, et cetera, et cetera. We are basically everywhere. And I mentioned earlier that the combination of the breadth of our geographical coverage, the size of our product line – the broad product line that we have, enabled us to service 600 customers during this past quarter. And that was like a 20% increase in the number of customers that we covered, as compared to the same quarter last year. And really importantly, those customers that delivered $3 million or more of quarterly revenues, that was up like a 150% compared to the same period last year. And the customers that delivered $2 million or more in quarterly revenues, but less than $3 million, that was more than doubled the number last year. So it is the combination of the very large number of customers that we’re serving in a large geographical customer base. And the breath of our product line, together with the new product service lines that we introduced in the third quarter, which are already beginning to generate substantial revenues in Q4, which gives us some confidence about the Q4 outlook that we’re providing, which is high single-digit revenue growth. So there maybe less activity on a number of customers, but we are very substantially increasing our share of customer wallet or customer spend for the customers that we’re serving and we’re very rapidly increasing the number of customers. And then during this fourth quarter, we will get access to the Motley customer base, which will further help Southwest revenue growth in addition to the new PSLs. So for us, it’s about breadth of product line, the breadth of the customer base and the introduction of new products and some new customers that we get – we have access to this quarter due to Motley that is giving us the optimistic outlook for Q4.

Understood. And they’re obviously – it’s obviously helpful, but there are a number of pieces to that story, so I understand. That’s great. I guess, as a follow-up albeit on this key point about sort of taking more of the wallet, if you will. Can you lay out for us a bit of what you could see near-term potential as either expressed in sort of number of customers running at that $3 million a quarter run rate, or you could express it in terms of where the aspirations are to get to say, $5 million a quarter of run rate or something like that? How much opportunity do you see over the next 12 months to kind of continue to take more of the wallet?

Well, trying to express it this way. In this quarter, our top 25 customers generated $80 million of revenues or pretty much two-thirds of our revenues in the quarter. So the share – the size of spend that we are – now we are growing is large with our top 25 customers. They’re probably more than that, but we sort of cut it off at the end of 25 and then have the balance of our customers in the list. But all of those customers, all of the top 25 generated more than a $1 million in revenues per quarter, and there are probably a number below the top 25, which also did the same. So – and as you move up, there are customers that generate $2 million, $3 million, $4 million, $5 million per quarterly revenues. What we expect to do in the fourth quarter or the next year, I’m certainly not going to hazard a guess as to how many customers are going to generate what amount of revenues. But we expect to continue to grow the size of our customer base and we expect to continue to gain share of wallet. It is particularly important that we’ve introduced the dissolvable plugs and our new thru-tubing assets in the third quarter at the same time we acquired the CT business because of the natural relationship between those service offerings to our customer base. And interestingly, when we announced the Motley acquisition, we have customers in Oklahoma, Colorado, North Dakota and Wyoming begging for us to be – to deliver to put in the first CT assets – large diameter CT assets, which those customers don’t have today. So the synergy or the services that we have and CT, together with the breadth of our customer base again gives us some confidence in our 2019 outlook.

Understood. That’s very helpful color. And I’m as almost a throw away, given what we’ve heard around the mix success around dissolvable plugs or certainly very interested to see how yours fare, I’m pleased to hear your enthusiasm about it and customer interest in it, for sure. Thanks. I will turn it back and maybe get back in queue, but I’ll let others have a turn.

Okay. Thank you.

Thank you. At this time, I’d like to turn it back over to the executive team and Mr. Perlman for closing remarks.

Right. I think, Brad wore everybody out with his customers – with his questions and asked most of the questions. With that, I think we’ll – we will end the call, and wish everybody a good day. And we’ll note our respect for the passing of George Bush #41. Have a great day.

Ladies and gentlemen, that does conclude today’s conference. thank you very much for your participation. You may all disconnect. Have a wonderful day.