Good morning, and welcome to the NCS Multistage First Quarter 2023 Conference Call. [Operator Instructions] I would like now to turn the conference over to Mr. Mike Morrison, CFO of the company. Please go ahead.

Thank you, Caroline, and thank you for joining the NCS Multistage first quarter 2023 conference call. Our call today will be led by our CEO, Ryan Hummer and I will also provide comments. I want to remind listeners that some of today’s comments include forward-looking statements such as comments regarding our future expectations for financial results and business operations. These statements, including our financial guidance and expectations are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein, including the impacts of inflation, central bank actions to combat inflation, distress at U.S. regional banks and Russia’s ongoing invasion into Ukraine on the global economy, oil and natural gas demand and our company. Please refer to our most recent annual report on Form 10-K for our latest SEC filings for risk factors and cautions regarding forward-looking statements. Our comments today also include non-GAAP financial measures, including adjusted net income, adjusted earnings per diluted share, adjusted EBITDA, free cash flow and net working capital. The underlying details and reconciliations of non-GAAP measures to the most comparable GAAP financial measures are included in our first quarter earnings release, which can be found on our website at ncsmultistage.com. I’ll now turn the call over to Ryan.

Thank you, Mike and welcome to our investors, analysts and employees joining our first quarter 2023 earnings conference call. Our performance in the first quarter of 2023 was largely in line with the guidance we provided in early March with revenue slightly above the low end of the range and adjusted EBITDA near the higher end of the range. I’ll briefly discuss our results and outlook for each of the U.S., Canada and international markets. Starting with the U.S., our revenue of $11.3 million in the first quarter fell below the low end of our guidance of $12 million to $13 million, reflecting reductions in activity by certain customers that are focused on natural gas production and lower-than-expected perforating gun sales. Despite the reduction in industry drilling and completion activity targeting natural gas, we expect to return to modest sequential revenue growth in the U.S. in the second quarter. The operational performance of our perforating guns in the field was very strong in the quarter. We also made good progress in introducing these products to additional customers that has taken time to migrate customers from trials to steadier ongoing work, which is what led to the lower-than-expected sales volumes for the quarter. Offsetting the lower perforating gun sales, we saw increased momentum throughout the first quarter in PurpleSeal composite plug sales for Repeat Precision, which has continued into the second quarter. Our Canadian revenue of $30.7 million in the first quarter was near the midpoint of our guidance range of $30 million to $32 million. We had strong increases in revenue as compared to both the first and fourth quarters of 2022 with the fourth quarter having been impacted by customer budget exhaustion. We continue to grow product sales volumes across sliding sleeves and well construction products and the impact…

Thank you, Ryan. As reported in yesterday’s earnings release, our first quarter revenues were $43.6 million, 11% higher than the prior year’s first quarter. Our U.S. and Canadian revenues increased by 25% and 8% respectively with our international revenues slightly up compared to one year ago. On a sequential basis, revenue in the first quarter was 8% higher than revenue in the fourth quarter of last year with a 24% increase in Canada, partially offset by declines of 16% and 19% in the U.S. and international markets, respectively. Our gross profit, defined as our total revenues less cost of sales, excluding depreciation and amortization expense, was $18.5 million in the first quarter. Our gross profit percentage improved to 43% compared to 38% for the same period one year ago and 40% sequentially. This improvement was due to in part, our customer pricing increases and a higher utilization of our manufacturing capacity and field service personnel more than offsetting our higher supply chain costs. Selling, general and administrative costs were $16.2 million in the first quarter, slightly up compared to the first quarter of last year. Our salary and wage-related expenses are up due to increases in our headcount, merit raises and higher incentive bonus accruals, which were mainly offset due to decreases in our share-based compensation and professional fees compared to one year ago. For the first quarter, we reported a net loss of $15 million or loss per share of $6.10. As Ryan mentioned moments ago, our first quarter results were impacted by a $17.5 million charge related to a jury verdict against us last week. While we expect most, if not all, of the award to be covered by insurance, we have not yet recorded the insurance recovery as an asset to offset this legal contingent liability. We…

Thank you, Mike. We are making slight adjustments to our full year guidance for 2023. We currently expect full year revenue of $170 million to $185 million and full year adjusted EBITDA of $20 million to $25 million, consistent with the calculations in our earnings release. This new revenue range is $5 million below the prior range, but we have maintained our adjusted EBITDA guidance, reflecting better expected gross margin performance as seen in the first quarter and slightly lower expected SG&A expenses for the remainder of the year. With the improved performance in the first quarter of 2023, as compared to the same period in 2022, our adjusted EBITDA for the trailing 12-month period is $17.7 million. We expect our gross capital expenditures for 2023 of $3 million to $5 million, which is reduced well into the range by $1 million from the prior guidance. We continue to expect to be free cash flow positive in 2023 after accounting for both capital spending and investments in net working capital to support our growth. As we move past the second quarter of 2023, we expect our spending on litigation matters to moderate meaningfully, which should allow us to convert a higher percentage of adjusted EBITDA to free cash flow in the second half of this year and going forward. Underpinning our revenue growth expectation is anticipated year-over-year average annual industry activity growth of up to 10% in both Canada and the U.S. The activity in the U.S. is expected to remain below the levels reached in the fourth quarter of 2022, primarily as a result of a decline in natural gas prices. Furthermore, we expect international industry activity to grow by at least 10% in 2023. We expect our revenue growth to exceed that of the underlying industry activity by…

Okay. Thank you, Caroline. So on behalf of our management team and Board, we’d like to thank everyone on the call today, including our shareholders, analysts and especially our employees. I truly appreciate the tremendous work and dedicated – dedication demonstrated by our team here at NCS and Repeat Precision as we implement our long-term strategy. We’re only as good as our people and I am proud to be a part of the best team in the industry. This team continues to provide excellent service to our customers and is developing new products and services that will enable our customers to be ever more successful. We see the potential for a multiyear cycle of improved growth prospects for our industry, and I’m excited by how NCS is positioned to participate in that growth and to deliver benefits to our employees, customers, shareholders and other stakeholders. We appreciate everyone’s interest in NCS Multistage and we look forward to talking to you again on our next quarterly earnings call. Thank you.

Thank you all for attending today’s presentation. This conference has now concluded. You may now disconnect. Have a good day.