Good day and thank you for standing by. Welcome to the Dril-Quip First Quarter 2022 Fireside Chat. I would now like to hand the conference over to your speaker today, Mr. Tom Curran from Seaport Research Partners. Sir, please go ahead.

Thank you. Greetings, everyone. Welcome to Dril-Quip's first quarter fireside chat. I am Tom Curran, the Senior Energy Technology Analyst at Seaport Research Partners. And joining me this morning from management are CEO Jeff Bird, and CFO Kyle McClure. I'm going to pass the mic to Jeff, who will provide a brief summary and touch on some highlights of the results released last night. And then, we'll turn to what will be a deep and expansive discussion. Jeff?

Thanks, Tom, and thanks for hosting the fireside chat this morning. I'm looking forward to a robust conversation. Before I jump in, I'd like to say thanks to the global team for continuing to execute in the quarter, specifically our new business leaders and our new product line business leaders, Don, Bruce, and Steve, as they started to lead their respective teams and move from what's largely been a functional organization since the founding of the company to a more product-oriented company. We continue to be very pleased with the opportunities we see as a result of this reorganization. We believe, in the second half of the year, we'll start to see specific improvements in our ability to service our customers and also an improvement in our cost position as we go into the second half of the year and really exit 2022 and head into 2023. So just a thanks to those three people and their respective teams as well. Looking at the quarter, Q1 was really a middle-of-the-fairway quarter with what we had talked about a couple of months ago. Bookings were in line and continued strong bookings, definitely larger than what we saw in the middle of the pandemic, so pleased with that. Revenue and EBITDA met expectations. Free cash flow was a headwind, but we always knew that was going to be a headwind going into the quarter. We've got some one-time payments that always happen in the first quarter of the year, so that's always a challenge. We'll see that bouncing back later in the year. If you step back and look geopolitically, obviously a challenging environment for a lot of people in Ukraine and Russia right now. As we look at the resulting inflation, inflation continues to be an area of keen focus for us and our business leaders as we try to match price increases with inbound inflation. It's really hand-to-hand combat right now when we think about inflation and what we're seeing there. Despite the inflation headwinds, the environment overall is very constructive for increased spending. So we're still very optimistic about order intake over the balance of the year and look forward to a more robust discussion with you, Tom. Thanks.

Great. Let's start with a few questions on this quarter's results and then pivot to a market update and other topics. So the top line came in at $83 million, as you said essentially straight down the fairway, but the company realized a gross margin on that revenue of just 23%, which was below expectations. First question on that margin is on mix. Does the margin shortfall partly reflect that you did hit the top-line target, but perhaps with a less favorable mix than anticipated?

Yes. Hey Tom, it's Kyle. All of it can be attributed to mix in the quarter. Coming out of Q4, we had a 20% to 21.5% gross margin, and 23% in Q1. We would expect going forward the orders mix is much improved versus what we saw coming out of Q4, which had a heavy lean toward pipe and fabrication. We saw that play out in Q1. For the rest of the year, if we look at the orders mix going into Q2 and beyond, you're going to see a much better mix of SPS, wellheads, et cetera. We would continue to see gross margins get up into the mid to high 20s in the back half of the year.

Got it. And so if it was entirely on the mix side, looking at the cost of sales, it sounds as if you were able to control and manage the challenges you've been confronting there, at least in Q1. In general, both over Q1 and through to the present, how is Dril-Quip managing inflationary pressures, and just the supply chain and logistics challenges that are afflicting the whole industrial world?

Yes, so as Jeff mentioned, it's been hand-to-hand combat to some degree on inflation. We do have MSAs where we can ratchet up based upon certain indexes. It's a fluid situation. We are day-to-day thinking about this. Price increases are happening across the board based on lists in certain of our business units, or we're dealing with customer-by-customer situations. In addition to supply chain issues, we are certainly looking at the additional productivity initiatives we announced in the prior earnings call back in February. It's a fluid situation; inflation continues to be present depending on the business. If it's downhole tools or the subsea business, there are different dynamics. Downhole tools are a little more real time in terms of what they can do. Subsea has a bit more long-term contracts, but the MSA there should continue to help us. We are doing our best to manage it. In Q1, I think we did a good job. As the year goes on, we'll probably continue to see inflationary pressures. We'll continue to pull price where we can and pull costs as we need to.

Got it. So two levers there that you expect to continue to use. On the bright side for expenses, SG&A did come in 12% lower than consensus, and engineering and product development expense was right in line. How much of this year's target for productivity and efficiency savings did you harvest in Q1 and sequentially how do you expect the remainder to be achieved over the rest of 2022?

Yes. We talked about the $15 million back in February and we got about $3 million of that in the quarter. We expect to pick up another $5 million of that in Q2 on an annualized basis. The remaining piece is going to be largely supply chain savings and operational efficiency improvements and productivity. As the year plays out, I would target around maybe $5 million to $7 million more that we'll pick up this year; it'll be split between cost of goods sold and G&A. G&A will continue to be a focus for the organization. We're laser-focused on that, especially as revenues continue to come back; we want to make sure we get as much of that to flow through on incremental revenue. As you know, we saw when things came down how quickly decremental margins went; as revenues come back, we expect incremental margins to potentially overshoot our internal expectations. As we continue to pull those two levers, whether cost or price, we're keenly focused on both right now.

Got it. Turning to bookings, let's zero in on product orders. Inbound orders for products totaled $63 million, which was within that new guidance range of $60 million to $80 million but closer to the floor. Yet you've just reaffirmed annual bookings guidance for growth of 20% this year and clearly continue to think that forecast has potential upside. So did you just experience some standard slippage in Q1 in which the timing of certain orders or larger orders simply slid out a few months? And what does your full-year 2022 bookings guidance imply for a new expected quarterly product orders range both for Q2 and then what we should see sequentially over the second half?

Yes. We're still very optimistic about the 20% year-on-year and believe that's well within reach. If you look at the way into the pandemic, we had more misses to the downside. As we exit the pandemic, what we're starting to see now is more opportunities to the upside. Specifically Q1's $63 million number doesn't take much to move the needle; a tree order of three trees at about $15 million would suddenly move it to the upside. So we'll see some lumpiness quarter-to-quarter depending on how those orders play out. We would expect continued increases from Q1 to Q2 and throughout the balance of the year. What we're really seeing now in the market is two things. One, a lot of the conversations that we thought wouldn't happen until Q3 and Q4 are being pulled into the first half of the year. We're optimistic about that. Furthermore, there are some items that were lower-probability capital items this year that we just didn't expect to have meaningful conversations about, and those orders are starting to materialize now in Q2. We're very optimistic about the 20% and believe there's more likely-than-not upside to that number.

Got it. You just mentioned how much of a swing factor subsea trees can be from one quarter to the next. I know that you are anticipating a big year for subsea trees with 17 to 19 orders foreseen and the indicated timing of those awards was what underpins your original expectation for how product orders would fall by quarter, with 2022 expected to have a barbell shape with a bigger Q1 and then Q4. How many trees did you book in Q1 and what's the latest visibility on how the remaining orders should be distributed?

I believe there were about three trees booked in Q1. The balance we see chunkier in Q2 and Q3 right now. That's really on the back of two things: concerns from a supply chain standpoint from some customers and the underlying economics that they had. But I believe the number was three trees in Q1.

And then similar question, when it comes to the latest multi-year Petrobras awards you've gained. What was the Q1 order contribution? And then what level of call-off orders should those awards yield this year?

So under the Petrobras MSA, there are a total of 87 development and exploration wellheads. About 30% of those have already been placed in terms of purchase orders and were booked in Q1, that's well ahead of the schedule we would have expected to see. We now expect that probably sometime in the first half of 2023 there'll be another tender where we'll see another renewal or flip over of that MSA. Those approximately 30 wellheads will really deliver starting in September this year and probably through the first three quarters of next year.

And just broadly, Jeff, you touched on this to a degree, but it's worth revisiting and delving into a bit more. What sources are fueling your confidence that there is this positive bias to your 2022 bookings guidance? Is it a combination of customer conversations and what you're seeing in certain geographic regions? You've already touched on both the acceleration you're seeing for certain projects and the rising probability of materialization for others. What all is behind your conviction that any surprises are likely to be to the upside now?

There's a bit of everything. First, the customer visits and discussions have been very fruitful; almost every one of those conversations is about pulling things in and doing things earlier than originally expected. Some of that's pricing, but some of it is customers worried about supply chains and wanting to get early items out the door. That's anecdotal, but meaningful. We also have a robust process where every two weeks we have a 'war board' meeting with each regional leader and each product leader where we go through order-by-order with updates on the last customer conversation—for example, the customer said it was going to be Q4 and now it's Q2. Those conversations are literally every two weeks. My customer conversations with the business leaders are quarterly. I did a Europe trip in Q1 and got a lot of positive feedback; in Q2 we'll do an Asia tour and expect positive comments there as well. The one area that's weak right now is Asia-Pacific. Europe seems strong, Brazil is very strong, Gulf of Mexico is picking up, and LATAM is picking up. So that's what's behind our conviction.

Right. I know you just went through Europe and that was a very encouraging trip it sounds like. Moving on to the pillars of your growth strategy, you've made impressive headway with the collaboration approach since you first introduced the concept a few years ago. How have the collaborations with Proserv and OneSubsea respectively performed so far? And what portion of 2022 bookings are you counting on them to deliver?

Let me divide it between Proserv and OneSubsea. For Proserv, they provide the controls that go on the trees we sell. Of the 17 to 19 trees we expect to book this year, about half of the trees will have Proserv controls. That's a strong statement about the collaboration agreement. Sometimes we're bringing Proserv to the table and sometimes Proserv brings us to the table; it's mutually beneficial. For OneSubsea, that collaboration gives us exposure to EPCI and development wells. The challenge is Dril-Quip's portion of an overall EPCI contract is small when you look at total scope, so we won't target anything specific to OneSubsea publicly right now; we'll talk about it as opportunities happen. We're dependent on OneSubsea winning the broader contract. Also, there are a number of quieter collaboration agreements happening around the wellhead; we expect those to start to materialize in the last three quarters of this year. We're careful about putting a target out there because of our dependence on partners like OneSubsea.

Got it. The newest collaboration that Dril-Quip has entered with Aker Solutions was actually formed for the new energy side, specifically CCUS—carbon capture, utilization, and storage. Through that collaboration you'll be participating in the NASA-led consortium that's been selected as one of two co-finalists to provide a fee package for the Northern Endurance Partnership's East Coast cluster in the UK North Sea. Between that opportunity and some other prospects, you seem to have traction. It seems 2022 could be a breakthrough year for Dril-Quip's emerging CCUS efforts. What's the estimated offshore CCUS TAM for Dril-Quip and how much of that do you aim to capture eventually?

First, on the agreement: we're very pleased with the Aker Solutions collaboration. After we announced it, we received two or three inbound calls asking to participate in the joint bid with Aker Solutions. Other OFS companies also called us and asked about working together on that segment. We're very pleased. As for size of the market, it's a slow ramp. By 2030, it's easy to see 200 CCUS wells annually and then ramping from there. If you assume Aker's subsea tree share in CCUS is similar to its other segments, you might see around a 15% to 20% share—potentially higher given Aker's European influence and where CCUS is likely to take off first. We started the feed study two weeks ago and have ring-fenced resources around that. Our Director of Energy Transition has grown the team; we're jointly working with Aker Solutions. We probably won't see orders from that until 2023 because the fee process will take time. The bid will happen later this year, and the award likely next year. So bookings likely in 2023 and revenue in the 2023/2024 timeframe.

Okay. We'll stay tuned for that. That was a helpful overview. You've previously spoken to focal areas for additional collaborations—liner hangers, the VXTe. Revisit those and provide an update on where you're at in pursuing them and perhaps make a distinction between headline collaborations and quieter emerging collaborations around the wellhead. Should we think of those as two different categories?

Yes. Let me go through three segments and explain quiet collaboration agreements versus headline collaboration agreements. For downhole tools, we work with the major service providers around the world—Schlumberger, Halliburton, Weatherford, Baker Hughes—depending on the region. We provide liner hangers today in many cases; these aren't headline collaboration agreements but country-by-country, region-by-region partnerships. They're very successful and we see them growing. In subsea wellheads with OneSubsea, we literally sit down and jointly review all open tenders and how we approach them; that's developing. We expect growth in liner hangers this year from those collaborations. For other areas, the most likely is around our connector; there are major pipe providers that don't have a connector, and we pass through pipe purchases. Those opportunities would likely be regional, depending on the pipe supplier. Regarding VXTe, I don't think you'll see a collaboration agreement specifically on VXTe until we get the first installation. We had expected an installation in Q1 that was a dry hole, so we're back to square one. Realistically now, we're probably looking at the middle of next year at the earliest for the first installation. We continue to have conversations with majors and tree providers who are excited about it, but step one to get meaningful movement is that first installation. So I suspect you wouldn't see a collaboration agreement until probably late 2023 after first installation.

All right. So the next milestone for collaboration progress will be getting the first VXTe tree installed?

That's exactly right.

Turning to another pillar of your strategic growth plan, downhole tools. I know that's one of your highest-margin product lines, and given what consolidated gross margin came in at in Q1 it seems downhole tools might have had a bit of a late start to the year relative to your expectations for the full year. Do you still see double-digit growth for downhole tools this year and what should be the drivers of that growth rate?

Yes, we're still very optimistic about double-digit growth for downhole tools this year. The drivers are threefold. First, XPak DE continues to be a nice growth driver as a new product; we won an OTC award a couple of years ago and continue to see growth there. Second, we expect to get back some of the share we lost in the Middle East; originally TIW had a very strong presence in the Middle East and lost some of that over time—it's starting to return. Third, Latin America, including Mexico, is very strong right now—more a rising tide than share gain. So think of XPak DE gaining penetration, Middle East share returning, and Latin America being a strong market.

They did have a tough Q1, Tom, but they expect to grow nicely in Q2 and maintain that growth throughout the rest of the year. That will be a helpful margin tailwind for us heading forward.

Got it. You just touched on VXTe and timing expectations for the first VXTe installation. How about an update on further installations and adoption of your new technology suite? Where are some of the other offerings at this point?

While VXTe is a disappointment right now from an installation standpoint, the track record for the E-series continues to build. We installed our BigBore II-E 20K system in the Gulf of Mexico; that'll be featured at OTC next week. For BigBore II-E in general, by the end of the year we would expect probably 60% to 70% of our wellhead orders to be around that specific product. We went from 15 wellhead systems to four wellhead systems, and inside those four the BigBore II-E is the dominant system. That has been a very nice surprise for us from a new product standpoint, and XPak DE is starting to get installs now as well.

Shifting gears now to the company's ongoing transformation you've had underway: you continue to implement changes to the organizational structure. How are you progressing in terms of leadership and teams?

In terms of teams, we now have specific business unit managers around wellheads, our SPS franchise, and service equipment/connectors. Those leaders are building their teams. We've communicated to every individual in the organization what team they're on. As we start to divide and think about those teams, we're finding opportunity by breaking barriers where handoffs had previously created problems in cost, customer responsiveness, or on-time delivery. Right now those teams sit in separate areas on campus; over the next three to six months you'll see those teams start to colocate on campus. I'm optimistic that as they colocate we'll see more benefits in the back half of the year: improved on-time delivery, improved customer responsiveness, and margin improvement as we attack costs.

In the fourth quarter, you took a $53 million charge related to restructuring as an initial step toward product line rationalization. Could you expound on where you're at with that? Have you identified product lines you'll be exiting and will you give updates on how that will run its course?

We went through a grow/harvest/kill plan with every product line and are executing on it now; the $53 million charge in Q4 resulted from that. For example, we went from 15 wellhead systems to four wellhead systems; when you eliminate 11 systems, a lot of inventory and assets are affected. That was an example of what we've done. You're not going to see us exit major product lines such as wellheads, SPS, surface products, or downhole tools—we like those product lines and our position there. This was more about pruning within those product lines rather than wholesale exits.

Do you foresee wholesale exits as a potential or already planned next step?

No. We think we've proven these product lines to the right level; it's just more focused—again, the 15 to four example. It's much more focused and helps our customers, especially in today's supply chain world. We can be more thoughtful around stocking programs, which allows us to bypass some supply chain and logistics issues we've seen before. It's more consolidation than exit.

Understood. Another aspect of the transformation is rightsizing your footprint. How much of the eventual expected $40 million to $60 million in targeted property divestiture proceeds do you expect to achieve in 2022?

We've got the project in flight. The $40 million to $60 million is probably over a much longer period. I would say by year-end or the nine-month horizon we should be in a position to at least announce either a close or be somewhere around our first piece of property reduction. But it's tough to predict how much we'll pull in this year given market conditions and varying property values. I'd hate to put a specific number out at this time.

What you will see is that we'll have 'for sale' signs on probably around 85 to 90 acres of the Houston campus within the next 30 to 60 days if not already; some of that is already in process.

Predicting the exact cash timing is a bit tough right now.

And, in general, should we think about these restructuring and rightsizing improvements as separate from your targeted productivity and efficiency savings goal for 2022 of $15 million?

Yes, it's independent. The $15 million productivity workstream is separate from the property workstream. The property reductions are a longer-term savings driver. We think the property reductions and subsequent investments in manufacturing will yield additional savings—about $5 million in fixed-cost reductions from a smaller footprint. Beyond that, investing the proceeds into manufacturing—roughly a $20 million investment—could produce additional productivity improvements in the longer term, perhaps in the $15 million to $20 million range annually, but that likely won't kick in until late 2023 or early 2024.

When it comes to transformation, you've talked about pruning and monetizing but also about growth enhancement where the new organization should help pursue growth opportunities, specifically the new energy transition team. In addition to CCUS products with Aker, are there other transition areas you're interested in exploring?

Yes, we're evaluating other markets and matching up our core competencies—high-pressure, high-temperature metal-to-metal seal expertise—and seeing where those competencies fit in energy transition areas. We've identified some opportunities but it's early; we're still evaluating our ability to win in those markets. There's a lot of whitespace in the markets we're looking at, but we want the right match and formula for success. We'll likely talk more about these in coming quarters once evaluations advance.

You reaffirmed prior guidance for 2022. Returning to how Q1 came in and the resulting effect on expectations for Q2 and sequential progression over the remainder of the year, could we clarify both margin expectation for Q2 and top-line revenue? Are you still expecting 10% year-over-year top-line growth? Where should Q2 come in for margin inflection and its contribution to that full-year 10% growth?

We would see revenues in Q2 with a minimum growth of about 10% year-over-year. Our expectation is revenue growth of about 9% in Q2 sequentially, which will put us back in the $90 millions range for the first time since mid-2020. We're optimistic the remainder of the year will continue to build. We expect gross margins to tick up into the mid-to-high 20s in the back half of the year; for Q2, call it a roughly 450 basis point quarter-on-quarter improvement. We'll keep a close eye on SG&A and want to see margin flow through. As revenues increase, given the cost structure reductions already taken, we expect favorable incremental margins and strong flow-through.

Longer term, once you complete the reorganization and rightsizing, where do you think product gross margin should normalize?

Overall gross margins could normalize in the mid-30s, depending on productivity and revenue recovery. On the product side, across downhole tools and subsea products, we'd expect product gross margins in the low-to-mid 30s, with service margins bringing the consolidated gross margin up to the mid-to-high 30s over time.

You had warned free cash flow would be negative for Q1 and it came in at negative $13 million. Yet you remain confident in achieving a positive free cash flow margin for 2022 of 3% to 5%. What gives you conviction that over the next three quarters you'll reverse that and end up in that positive range?

Underlying improvements in the business are helpful and the one-time payments that typically occur in Q1 will dissipate into Q2. For Q2, we expect free cash roughly break-even and then a tailwind in Q3 and Q4 from working capital improvements. We may also see tax refunds from time to time that help bridge the gap. The math on the 3% to 5% free cash flow target is achievable if the business performs as we expect. Q1 actually came in better than our internal forecast. DSO is down nicely from Q4 to Q1 by about 17 days and we're focused on holding onto that improvement. As the business grows we'll consume some working capital for inventory and AR, but improvements in DSO and inventory positions will help.

Homing in on working capital, what's the likely quarter-by-quarter evolution of it? What should we expect in terms of draw versus contribution to cash flow in Q2 and then over Q3 and Q4?

For Q2, we'll call working capital roughly break-even. In the back half of the year, we should see some pickup—sizing that somewhere in the $10 million range from working capital contributions. So Q2 break-even and then picking up about $10 million in the back half of the year.

When it comes to capital allocation priorities, in descending order you've cited CapEx as the top priority with a $15 million to $17 million annual budget, second is M&A where you're open to energy and energy-adjacent transactions, and third is share repurchases. On M&A, could you elucidate what you mean by energy-adjacent and what we might see you consider?

When we look at the OFS landscape, there's a mix of companies with high energy exposure and some with challenge balance sheets or markets. Ideally, an acquisition for us would have OFS exposure but also non-OFS exposure, giving us more diversity while playing to our mechanical engineering and manufacturing strengths. We're starting to evaluate what those end markets would look like and are being thoughtful. We understand OFS well and will be equally thoughtful about any non-OFS side. Over the next two to three quarters we'll provide more thoughtful communication around guiding principles for M&A.

On the energy side, could you execute a transaction focused on new energy opportunities? Are there technologies or products you'd look to add as part of your CCUS pursuit?

Yes. CCUS is the obvious area. We have a product development plan for CCUS to create a fulsome offering. As we look at the roadmap we may decide it's smarter to buy certain technologies rather than develop them internally. The most likely acquisitions on the new energy front would be product- or technology-related rather than large business buys. One challenge is valuation: some new energy businesses have very high multiples today. So right now the most likely acquisition is something technology-related on the CCUS side.

Got it. And on CapEx, the reiterated budget of $15 million to $17 million—Kyle, could you refresh on how that should break down?

We're largely going to be in the rental tool space associated with prior work in Brazil; we have quite a bit of build-out there. It's largely rental tools followed by small pieces of IT and normal maintenance CapEx. We're heavily weighted toward rental tools this year.

That's primarily a combination of downhole tools and some BigBore II-E tools. These are growth CapEx projects. The $15 million to $17 million does not include the potential $20 million manufacturing investment Kyle mentioned earlier. That $20 million investment could have initial spend in this year but most of it would occur later given equipment lead times.

Once that $20 million spend starts, what sort of timeframe should we assume for execution?

We haven't negotiated terms yet. First delivery on the earliest machines would be about 48 weeks once an order is placed, and then every couple of months another machine, with a total of seven machines. So once we hit go, first delivery is roughly 48 weeks and then additional machines every two months. Most of the spend would bleed into 2023 and potentially 2024 depending on timing of approval.

As we get that approved internally, we'll update guidance on cash flow and CapEx accordingly.

Concluding capital allocation, on buybacks: in Q1 you spent $5.8 million to repurchase just under 274,000 shares. That would leave $118 million remaining under the existing authorization. Should we expect continual refreshment of the authorization as that remains your third priority for excess cash flow?

The authorization reopened to $118 million at the end of last year. We're discussing how to approach repurchases internally. There's market uncertainty given geopolitical events and China shutdowns. We'll continue to support the stock, but historically repurchases have been opportunistic. We did so in Q4 and early Q1, and we'll continue to keep buybacks as part of our capital allocation policy while being mindful of market uncertainty. For the time being, we're pausing more active repurchases until we see clearer market signals.

So the approach will remain opportunistic rather than a standing program?

Yes. When we say opportunistic, we still put grids and formulas in place when we execute. The challenge right now is understanding the market given the situation in Ukraine, Russia, and the shutdowns in China. We're not afraid to act, and when we do we'll likely roll out a thoughtful grid and dollar amount. Philosophically, we tend to match free cash flow and buybacks.

Got it, thanks. Returning to subsea tree order expectations: you mentioned reliable visibility partly stemming from specific projects such as BHP, Shenzi North, Harbour Energy's capture field. Could you split how those 17 to 19 trees should fall between major projects that are Greenfield or moving into new phases of development versus incremental trees on established installed production?

I'd say about 75% of them are build-ons from existing projects—trees five, six, seven, eight or in the case of capture trees in the 20s. There's a small portion that are one-off new trees. We tend to participate more with independents and larger independents and less with majors on huge Greenfield projects. The nice thing about knock-on trees is that serial number one is always challenging; by trees three, four, or five you can be much more efficient operationally. So we're pleased that a large portion are repeat trees.

Got it. That is consistent with how we've seen the overall subsea tree market upcycle progress. I'll wrap up my questions here and turn it back over to you, Jeff and Kyle, for your concluding remarks.

Sure. If we look at Q2, we're very optimistic about orders. As Kyle stated, we would expect revenue growth to start around 9%. We believe that will have strong incrementals as we ramp back. Once we hit that number, we expect a rising trend for the balance of the year. We're pleased with the order trend and the 20% year-on-year growth in orders. We're focused on our growth pillars, especially collaboration. Some collaborations will lay foundations now and show orders next year, for example CCUS; in other cases, like downhole tools or wellheads, they mean real orders this year. We're focused on our cost base and executing with customers. We've talked about shrinking the footprint and aligning the organization; we're well on our way and expect more upside in the back half of the year. It was a middle-of-the-fairway quarter and we're opportunistic about Q2 and beyond.

Great. I think we'll conclude there. Thank you to Jeff and Kyle for joining me for the first quarter fireside chat and to all of you for listening in.

Okay. Thanks, Tom.

Thanks, Tom.

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