Good day, and thank you for standing by, and welcome to the Q1 2024 NCS Multistage Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mike Morrison, CFO. Please go ahead.

Thank you, Justin, and thank you for joining the NCS Multistage First Quarter 2024 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 our financial guidance and comments regarding our future expectations for financial results and business operations. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein. Please refer to our most recent annual report on Form 10-K and our latest SEC filings for risk factors and cautions regarding forward-looking statements. Our comments today as well as the results of operations included in our earnings release, contain the following non-GAAP financial measures, adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit, adjusted gross margin, free cash flow less distributions to non-controlling interest and net working capital. The underlying details and reconciliations of these non-GAAP measures to the most comparable GAAP financial measures are provided in our first quarter earnings release, which can be found on our website, 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 2024 earnings conference call. NCS is off to a strong start in 2024. Our first quarter revenue of $43.9 million exceeded the high end of our guided range by nearly $4 million. The strength was broad-based as we achieved or exceeded the high end of our guided revenue range for each of our U.S., Canadian and international markets, with the largest relative outperformance coming from Canada. Our adjusted gross margin of 40%, which excludes depreciation and amortization expense was within our guided range for the quarter. Our SG&A expense of $13.8 million for the quarter was $2.3 million lower than in the first quarter of 2023, resulting from cost savings measures that demonstrate our commitment to control expenses and a year-over-year reduction in litigation-related professional fees. We also benefited from an increase in other income as compared to the first quarter of last year, primarily royalty income related to licensing our intellectual property and the benefits from a technical services agreement with a local partner in Oman. Our adjusted EBITDA for the first quarter of $6.1 million exceeded our estimate of $3 million to $4 million and represents a year-over-year improvement of $1.2 million and a sequential improvement of $3.5 million. In prior earnings calls, I've referenced NCS' core strategies for creating value for our stakeholders. We've included a new slide in our investor presentation, which is available on our website, Slide 13, that helps to illustrate our strategy and provide examples of our progress. The first core strategy is to build upon our leading market positions. We've demonstrated our commitment to this strategy in Canada thus far in 2024. Our Q1 revenue in Canada of $32 million increased by 3% as compared to the…

Thank you, Ryan. As reported in yesterday's earnings release, our first quarter revenues were $43.9 million, a 1% increase year-over-year with our Canadian and international revenues up 3% and 39%, respectively, and our U.S. revenues down 12%. Despite a slight decrease in the average rig count, we saw a modest increase in our Canadian revenues. Additionally, our international revenues experienced growth driven by the sale of a frac systems to a customer in the North Sea. Our U.S. revenues continue to be impacted by lower natural gas prices that have curtailed some customer activity. Sequentially, our revenues in the first quarter increased by 24% with Canada up 27% and the U.S. up 10%, while international revenues nearly doubled. Our adjusted gross profit, defined as total revenues less total cost of sales, excluding depreciation and amortization expense was $17.6 million in the first quarter of 2024. Our adjusted gross margin was 40%, down compared to our adjusted gross margin of 43% for the same period in 2023, but up sequentially from 37% for the fourth quarter of 2023. Selling, general and administrative costs were $13.8 million for the first quarter, down by $2.3 million compared to the same period last year. The significant reduction was due in part to our restructuring efforts in 2023 to streamline operations and better leverage our SG&A spend. For the first quarter, we reported net income of $2.1 million or diluted earnings per share of $0.82 compared to a net loss of $15 million or a loss per share of $6.10 for the same period in 2023. Our prior year net loss was impacted by a $17.5 million litigation provision we recorded in the first quarter of 2023 that was later settled and reversed in the fourth quarter of 2023. Adjusted EBITDA for the first quarter…

Thanks, Mike. We're making only slight adjustments to our full year guidance for 2024 at this time. We currently expect full year revenue of $150 million to $160 million. This guidance increases the low end of the revenue range by $5 million and maintains the top end of the range. As a reminder, we expect our revenue growth will primarily result from increased sales at Repeat Precision and our Fracturing Systems product line in the U.S. and in international markets, the North Sea and Middle East, in particular. We're cautiously optimistic about Canadian activity as well. There are fundamental drivers supporting customer activity in Canada, including the TMX oil pipeline coming online this quarter and the Canada LNG facility due to come online in '25, which is driving activity increases to support increased natural gas production in advance of this facilities commissioning. In addition, the strong U.S. dollar supports Canadian activity is our Canadian customers have operating expenses in Canadian dollars, but can sell oil and condensate at prices linked to the strong U.S. dollar. These positive fundamental factors are tempered by the drought conditions that continue to exist in Western Canada. If we have a dry spring or an active wildfire season like we did in 2023, access to fresh water for our customers could be reduced, which could reduce in lower -- could result in lower completions activity as firefighting and agricultural activity would have preferential access to freshwater. At this point, our guidance incorporates at least some disruption from the drought conditions and wildfire prospects. So there could certainly be more favorable Canadian customer activity levels if we continue to benefit from a wet spring as we have thus far, and a less active fire season. We've increased our adjusted EBITDA range to $14.5 million to $17.5…

[Operator Instructions] And our first question comes from Dave Storms from Stonegate.

Just hoping we could start with the top line guidance. It's great to see that you've raised the low end. What would you need to see either in the international markets or elsewhere to also raise the top end of that guidance?

Sure. Thanks, Dave. Appreciate the question. I think for us, the biggest thing right now is that we are taking a relatively conservative approach to the Canadian market. I outlined during the call what we think is a really, really strong fundamental backdrop for Canada, and I think that will persist throughout the year. However, we certainly are aware that coming into 2024, you had a couple of years of extended drought conditions. There was a very active wildfire season last year. We're fortunate that there's been a relatively wet spring so far, but it's easy. So I think we're just being a little bit cautious right now around the potential prospects for some potential reduced activity on the completion side if our customers find that it's a bit more difficult to access freshwater for their completions as we move into the summer months. But -- so I think as we move through the second quarter and understand whether what the extent of that impact will be, if any. I think that's where we have a bit more confidence in really assessing whether there's some upside to the top end of the range as well.

Understood. Very helpful. And then you mentioned that international markets used to operate at around $15 million or so a year. What's the pathway to get back to that? Is that going to be getting cataloged with current companies? Is that going to be addressing new markets? What does that look like?

Yes. Thanks. Another great question, Dave. I think the path to that is the path we're on, quite frankly. And there are 2 components to it. I think first is during that period, we had one customer who was very active in the North Sea in Aker BP, who we've referred to as kind of our anchor customer in the North Sea over time. And as you know and as we've discussed, we've been really active in adding to our customer base for the North Sea. We think we'll work with at least 5 different companies this year. And what we're really looking forward to is both Aker and one of the other customers have field development projects that they're looking to bring online as we move forward into 2005 and 2026, which would represent more consistent work and would look a lot more like the level of activity that we saw back in those months or those prior years. And you pair that with the work that we've been doing in the Middle East, and we're in a really good spot right now with tracer diagnostics in the Middle East. We're getting additional well construction products qualified to be called out there. So with the North Sea back to historical activity levels that we saw during that period tied together with the additional opportunities in the Middle East, I think we are on the path towards hitting those sorts of that revenue profile that we saw in those prior years.

And our next question comes from Blake McLean from Daniel Energy Partners.

So I was hoping you could provide a little bit more color on kind of how we should think about the offshore opportunity set, timing associated with that and kind of what that sort of path forward to incremental revenue looks like over the next year or 2 or whatever time frame works.

Sure. Yes, happy to do the best I can there. So again, this year, we're going to be working for more customers in the North Sea than we ever have before. It will not be a large well count with any customers individually, but I think that sets the stage for some more work going forward. And I mentioned that there are 2 customers, in particular, operating in the North Sea, really one on the Norwegian side, one on the U.K. side, that have some larger development programs that we would expect to participate in. And we would see the work on those programs starting to ramp up more so next year, but could represent pretty consistent work for a multiple year time frame. We pair that with the technology development project that we have for the deepwater application, that's a little bit longer to develop. And I'd say the number of wells per year is not necessarily the same scope the North Sea is, but they're very attractive, well opportunities for us on a single well basis. So that could move forward and be a small handful of wells per year, but those individual well opportunities would be pretty impactful for us as a company. And again, that would develop over a longer-term time frame. I don't think you'd see that ramping up really until we may have a first well in 2025, but that would pick up more in 2026 and beyond.

That's helpful. Maybe just one more, just building on the last set of questions and again maybe zooming out a little bit. How should we think about the opportunity set internationally and specifically in the Middle East? And how do you sort of tee yourselves up to be successful there? What does the sales and business development sort of team look like? How do you sort of execute well over there? Do you have that team in place, do you have a plan to kind of build that out? And where do you think that, that -- the tracer diagnostics and some of the things you guys are doing out there, where do you think it really makes sense if we think about it from a sort of multi-year perspective?

Yes. Another really good question. So what I'd say is at the highest level, we've got the right teams and strategies in place when we think about the leadership for our international group and the business development teams from the international group. We are aligned with what we think are very strong local partners in the various geographies in Oman and in Saudi, particularly, who are helping us to navigate that process of getting each of our product lines, catalog and in a position where the asset managers in the various international regions can kind of call out our work very quickly and without getting additional approvals from procurement and whatever the case may be. So moving it from, call it, a technology trial into having our products and services utilized in production mode. The big opportunity for us that we're executing on this year are these unconventional tracer projects for a Middle East customer, I'd say there -- that customer is very early in their development of their unconventional resource and the opportunity there that -- really that period where utilizing tracer diagnostics, in particular, is very, very valuable for a customer to help them understand their resource and optimize their development plans. So I think there's a good runway there, where we'll probably need to support that development over time will be with additional operations personnel. Right now, we're mobilizing people from North America, from Argentina, from China to service some of that we'll work in the Middle East. So we'll probably need to make some more investments in personnel, both within our own head count but also some folks within our local partners. And over time, we may look to make some strategic investments in the region as well, whether that's a -- what I'd call sort of a relatively light footprint tracer lab for some other types of investment there. But we'd only do that once we've established the track record and have sort of several years of relatively robust revenue and earnings in those markets before we deploy additional capital into supporting that business.

Got it. Thanks for walking through that in some detail. I've got just one more, if you don't mind. Could you provide a bit more color on the fleet that you guys highlighted in your prepared remarks?

Sure. I think you're talking about the one in the U.S. with the fiber optics. Is that right?

Yes.

Yes. So that's a pretty interesting project. So what we're able to do there, the customer wants to run a fiber optic line in that well. And it's -- they're really -- it's somewhat unique project, especially in the U.S., where historically, waterflood projects have used vertical injectors. This is an area that was developed horizontally. So they're looking to execute a horizontal waterflood program and optimize that. The well that's going to be installed will have a very large number of sliding sleeves and they'll have a fiber optic cable clamped to it. And part of the reason the customer would use sleeves for that is, one, to be able to have as many well-known access points along that lateral. But more importantly, as opposed to if you're going to plug and perf that well, there is a risk of having your perforation if it's not aligned properly, accidentally shoot that cable and cut off your ability to acquire the data. So we're able to channel that fiber in between the ports of our sleeves to take that risk off the table. So the customer will benefit in a number of ways. And the other piece with that by installing sliding sleeves and specifically our reclosable sleeves, if the customer sees water breakthrough in parts of that well, that's indicated by the fiber what we can do is go in and help the customer manipulate those sleeves to shut off water breakthrough in certain areas. And again, just maximize the value for that area through the deployment of the technology.

[Operator Instructions] And I am showing no further questions. I would now like to turn the call back over to Ryan Hummer, CEO, for closing remarks.

All right. Thank you, Justin. All right. 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 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 believe we have the best team in the industry. Our team continues to provide excellent service to our customers and is developing new products and services that will enable our customers to be more successful. We appreciate everyone's interest to NCS Multistage, and we look forward to talking again on our next quarterly earnings call.

This concludes today's conference call. Thank you for participating. You may now disconnect.