Good morning, ladies and gentlemen, and welcome to the Newpark Resources Third Quarter 2022 Conference Call. Operator instructions were provided. And with that, I will now turn the program over to your host, Ken Dennard.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Newpark Resources conference call and webcast to review third quarter 2022 results. Participating from the company in today's call are Matthew Lanigan, Newpark's President and Chief Executive Officer; and Gregg Piontek, Chief Financial Officer. Following my remarks, management will provide a high-level commentary on the financial details of the third quarter results and near-term outlook before opening the call for Q&A. Before I turn the call over to management, I have a few housekeeping details to run through. There will be a replay of today's call. It will be available by webcast on the company's website at newpark.com. There will also be a recorded replay available until November 16, 2022, and information on how to access it is included in yesterday's release. Please note that the information reported on this call speaks only as of today, November 2, 2022, and therefore you are advised that time-sensitive information may no longer be accurate at the time of any replay listening or transcript reading. In addition, the comments made by management during the conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of Newpark's management. However, various risks, uncertainties and contingencies could cause Newpark's actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties and contingencies. The comments today may also include certain non-GAAP financial measures. Additional details and reconciliation to the most comparable GAAP financial measures are included in the quarterly earnings release, which can be found on Newpark's website. And with that behind me now, I'd like to turn the call over to Newpark's President and CEO, Mr. Matthew Lanigan. Matthew?

Good morning, everyone. Our third quarter demonstrated solid execution on several fronts, including meaningful improvements in operational performance and significant progress on a handful of critical priorities that we laid out on our August call. Third quarter consolidated revenues grew 13% sequentially to $220 million, benefiting from broad-based improvements across both segments. Adjusted EBITDA improved 48% sequentially to $20 million, representing our strongest quarterly EBITDA result since the second quarter of 2019. Adjusted EPS improved $0.05 sequentially to $0.06 per diluted share, reflecting our strongest quarterly EPS results since the fourth quarter of 2018. Touching on segment performance. In Industrial Solutions, our focus remains on the execution of our expansion strategy. As highlighted in our last call, we expected our Industrial Solutions business to perform well in Q3, with our geographic expansion and utility sector penetration offsetting the typical seasonal weather impacts that suppressed T&D project activity in the Southern U.S. regions. I'm very pleased that our team delivered sequential growth in both revenues and operating income, while continuing to generate solid cash flows. Our performance continues to validate our unique value proposition in the market as we look for ways to accelerate our Industrial Solutions growth strategy. As we have stated before, we will continue to prioritize capital to the expansion of our geographic footprint where we see strong growth potential and returns. In Fluid Systems, we are making progress to reshape the business as we focus on markets where we can generate acceptable returns. With double-digit sequential growth rates in both North America land and international markets, Fluid Systems adjusted EBITDA improved to $9 million in Q3, which puts the segment on an annualized run rate approaching $40 million after consideration of the combined loss from the unit's pending divestiture. With respect to our other key focus areas in the quarter, I'd like to take a moment to discuss the progress made against our announced portfolio actions, including the sale of our Excalibar mineral grinding business and Conroe industrial blending facility and the optimization of our fluids Gulf of Mexico investments. As announced last month, we've entered into a definitive agreement with Cimbar Resources to sell substantially all the assets and operations of Excalibar. Importantly, the transaction also includes an agreement with Cimbar to supply buyer rights for our U.S. fluid operations, and we look forward to a strong working relationship with the team at Cimbar. Separately, we've also signed a letter of intent to sell our Conroe, Texas blending facility and related equipment to a global chemical provider and are moving diligently to execute this transaction. While both transactions remain subject to standard closing conditions, we expect them to be completed in the fourth quarter, generating approximately $80 million of cash. Over the past three months, our team has also made significant progress with the assessment of options to optimize our invested capital in the Gulf of Mexico, executing two separate agreements with key strategic market participants that result in Newpark effectively exiting this market. We entered an agreement in the third quarter to sell substantially all assets associated with our Gulf of Mexico completion fluids operations, and in October, entered a separate agreement with a leading global energy service provider to sublease our deepwater drilling fluids facility for seven years and to sell substantially all of our related inventory over the next few quarters. When completed, these two transactions are anticipated to generate cash of approximately $30 million from the sale of assets and release of related working capital, and importantly, eliminate the persistent operating losses that have historically weighed on our Fluids division performance. Ultimately, our decision to cease operations in the Gulf of Mexico was driven by current and projected activity levels that could not demonstrate a pathway to sufficient return on our investments. While we are proud of the technology and services we've provided to our valued customers in the Gulf over the years, it was clear that winding down our operations provided the best financial outcome for our broader Fluids business and our shareholders. As we work through the exit, we will be working closely with our customers to ensure a seamless transition. As highlighted in yesterday's earnings release, prior to the consideration of the third quarter impairments, the Excalibar and Gulf of Mexico operations have contributed a combined $63 million of revenues and a $7 million operating loss in the first nine months of 2022. We believe that exiting these businesses will result in a meaningful improvement to our Fluids business operating margins and returns moving forward. These transactions, along with our office space consolidation as we transition our Katy, Texas Fluids Technology Center into a company-wide and multi-tenant facility, provide line of sight to reducing our Fluids Systems net capital employed to approximately $210 million. This represents a reduction of more than $200 million from 2019 levels and marks a significant milestone in our journey to create a more agile and capital-light Fluids business. I'm pleased with the progress we have made over the last quarter in executing these critical priorities. As previously discussed, we expect the cash proceeds from these divestiture activities to be used to reduce our debt, creating capacity to accelerate investments in high-returning opportunities and return value to shareholders via share repurchases. And now I'll hand the call over to Gregg to discuss in more detail the financials for the third quarter.

Thanks, Matthew, and good morning, everyone. I'll start with the specifics of the segment and consolidated financial results for the quarter before providing an update on our near-term outlook. Overall, our third quarter operating results were stronger than our outlook provided in August, reflecting a $6.3 million sequential increase in adjusted EBITDA, largely driven by improvements in our Fluid Systems segment, while the Industrial Solutions performance remains solid. Industrial Solutions revenue improved 5% sequentially to $51 million in the third quarter as the benefit from our geographic expansion in the utility sector, along with improvements in oil and gas customer activity, successfully offset the typical Q3 seasonal market softness. Product sales contributed $18 million in the third quarter, fairly in line with the prior quarter, benefiting from continued strength in utility sector demand, along with international sales into the E&P sector. Rental and service revenues also increased 9% sequentially to $33 million as higher service revenues were slightly offset by a modest decline in rental revenues. In terms of revenues by end market, the utility sector remains our primary customer base, contributing the majority of rental and service revenues, and substantially all of our direct sales while E&P customers contributed roughly 25% of year-to-date segment revenues. Industrial Solutions operating income improved modestly to $10 million in the third quarter, reflecting a 20% operating margin, impacted somewhat by the weaker revenue mix in Q3 as service revenues represented a higher proportion of our rental and service projects. Comparing to the third quarter of last year, Industrial Solutions revenues increased $9 million or 22%, with stronger contributions from all three revenue streams: product sales, services and rentals. Segment operating income improved 23% year-on-year. In Fluid Systems, total segment revenues improved 16% sequentially to $169 million in the third quarter, reflecting double-digit percentage growth in both North America land and international markets. Total North America land revenues, excluding Excalibar, increased 14% sequentially to $88 million, relatively in line with the 16% improvement in market rig count. Outside of North America, revenues improved 13% sequentially to $55 million in the third quarter with solid improvements seen across several European markets despite a $2 million headwind from the strengthening U.S. dollar. As disclosed in yesterday's earnings release, adjusted EBITDA for the Fluid Systems segment improved to $8.8 million, reflecting the strongest quarterly contribution since Q3 of 2019. The incremental operating margin provided by the sequential revenue growth was at the low end of our typical range, reflecting a softer sales mix in the quarter, along with the timing impact in passing cost inflation through to customers, both of which we expect to improve going forward. Bringing up the impact of the pending divestitures to the overall Fluid Systems performance, the Excalibar and Gulf of Mexico operations contributed $26 million of combined revenues and a $2.6 million combined operating loss to the Fluid Systems' third quarter 2022 results excluding the $29.4 million impairment charge. The remainder of our global Fluid Systems business contributed $142 million of revenues and $7.9 million of operating income, which reflects a 5.5% operating margin. Turning to the year-over-year comparison. Our Fluid Systems revenues increased $61 million or 56%. North America land revenues, excluding Excalibar, improved by $32 million or 59%, benefiting from the recovery in market rig count. International revenues improved $17 million or 46% and benefited from broad-based improvements in customer activity across most EMEA and Asia Pacific markets, while the stronger U.S. dollar provided a $6 million headwind in the year-over-year comparison. Corporate office expenses decreased 11% to $6.6 million in the third quarter, primarily reflecting lower long-term incentives. SG&A expenses remained fairly in line with both prior quarter and prior year at $24 million. SG&A as a percent of sales decreased to 11% in Q3, which reflects the lowest quarterly level since 2014 as we maintain our focus on streamlining our overhead structure across the organization. Interest expense increased sequentially to $1.9 million in the third quarter, primarily reflecting the impact from increasing benchmark borrowing rates and higher borrowings. Despite reporting a $22 million pretax loss for the third quarter, the quarter's tax provision reflects a $2.8 million expense as we are unable to recognize a tax benefit associated with the Gulf of Mexico impairment charge. Our adjusted EPS for the quarter was $0.06 per diluted share, as described in yesterday's earnings release compared to $0.01 per diluted share in Q2, and a loss of $0.07 per share in the third quarter of last year. Turning to cash flow. While we were pleased to see an improvement in days sales in both receivables and inventory, operating cash flow was impacted by the $26 million sequential increase in quarterly revenues, which contributed to a $19 million increase in receivables. Operating activities for the third quarter used $5 million of cash, which included approximately $15 million of combined usage to fund working capital increases in the Excalibar and Gulf of Mexico business units. Investing activities used net cash of $8 million, nearly all of which reflects additions to our site access rental fleet to meet the increasing customer demand associated with our utilities market expansion. Despite these growth-driven capital investments, it's worth highlighting that our Industrial Solutions business continues to consistently generate positive quarterly free cash flow. We ended the quarter with a total debt balance of $157 million and a net debt balance of $137 million. As Matthew highlighted, we expect our debt levels will decline significantly in the fourth quarter as we complete the sale transactions. Now turning to our near-term operational outlook. As we look ahead, although we are closely monitoring the evolving economic landscape, we expect Q4 will mark our strongest quarterly performance of 2022, and we remain encouraged by the strong fundamentals in both oil and gas and utilities markets as we head into 2023. In the Industrial Solutions segment, T&D project activity has rebounded well following the typical Q3 seasonal slowdown, and we expect to see this strong activity continue through the end of the year. In addition, consistent with our experience in past years, fourth quarter product sales should benefit from the typical seasonal strength from the utility sector as regulated utility providers look to exhaust their remaining capital budgets. Although the visibility on product sales is always somewhat limited and challenging to predict, overall, we anticipate the Industrial Solutions segment revenues could reach the $60 million level in the fourth quarter, with operating margins likely in the low to mid-20s range, which would mark the strongest quarterly performance for this business in several years. In Fluid Systems, we are encouraged by the longer-term outlook within our core markets in North America land and throughout the EMEA region, particularly as we are well positioned in several key countries that are expected to be relied upon to fulfill the European communities' need for oil and gas going forward. We are continuing to see an elevated level of planning across several areas within the EMEA region, which provides opportunities for growth beyond historical levels in both traditional energy sources and increasingly in the geothermal space, as we look ahead to 2023. Focusing on Q4. Excluding the business units being exited, we expect the Fluid Systems segment revenues will pull back modestly as compared to the $142 million of revenues in Q3, reflecting the timing of projects in both North America land and international markets, including some level of seasonal slowdown around the year-end holidays. Profitability of the go-forward Fluid Systems business is expected to be in a similar range as Q3, with operating margins remaining above the 5% level as we expect the effects of the softer revenues will be offset by our ongoing efforts to drive pricing improvements, including the transition to the previously discussed long-term contract in Algeria. Regarding corporate office expenses, we expect quarterly spending to remain near the $7 million mark. We expect interest expense will remain relatively flat in Q4 as the rising benchmark rates will mostly offset the benefit from the anticipated near-term debt reductions following the completion of the anticipated sale transactions. As we look beyond Q4, we expect interest expense will drop below the $1 million quarterly run rate as we head into 2023. Our tax rate will likely remain in the mid-30s range for the fourth quarter. On a consolidated basis, we expect the fourth quarter will mark our strongest quarterly EBITDA and EPS result since Q4 of 2018. For CapEx, our full year expectation is trending toward the high end of our previously discussed range. With the strong growth outlook for rental and service activity, we expect gross expenditures of roughly $25 million for 2022, with more than 80% directed to support Industrial Solutions growth. Quarterly investment levels will remain heavily dependent upon profit-driven opportunities as we expand the mat rental fleet to support our T&D and industrial market penetration. In terms of cash flow, we see the pending transactions for Excalibar, Conroe and Gulf of Mexico as key steps in our efforts to generate consistent free cash flow. Through the first three quarters of 2022, these business units consumed nearly $30 million of cash to fund working capital growth while posting negative EBITDA, providing a significant headwind to our free cash flow generation. As we look ahead to Q4, with the roughly $80 million of anticipated cash proceeds, along with the positive free cash flow generation from our ongoing businesses, we expect to be able to reduce our net leverage at year-end to well below 1x our annualized EBITDA run rate. And with that, I'd like to turn the call back over to Matthew for his concluding remarks.

Thanks, Gregg. Our efforts in the quarter have created visible momentum, both in terms of our operational improvements and our strategic actions. We laid out a number of priorities in our Q2 call, and we now have line of sight to more than $100 million of cash generation within the coming quarters, with approximately $80 million expected in the fourth quarter. As Gregg touched on, the impact is meaningful in creating a capital-light fluids business and positioning our net leverage to below 1x EBITDA by year-end. This generates the required capacity for us to maintain appropriate debt levels while executing our strategic growth initiatives and returning value to shareholders through share repurchases. I want to recognize all our employees who have worked tirelessly to get us to this point. And while we still have work to do to get a number of these operational improvements and strategic actions across the finish line, I'm grateful for all the hard work and tough decisions they have made. With respect to our ongoing business operations, we remain encouraged with the market fundamentals in both oil and gas and utilities, which, along with our capital redeployment and operating cost reduction initiatives, are seeing us return to levels of profitability we have not seen in several years. As energy security remains a top priority across the globe, we believe this will necessitate a multiyear investment cycle to de-risk and rebalance supply, which will generate improved activity and profitability. On balance, we see the strong fundamentals as robust into 2023 despite global recessionary concerns. In Fluids, we are well positioned in key international markets that stand to benefit most in the near term as many of our customers look to fast-track programs to provide additional supply to European markets. We have strong partnerships that enable us to profitably support these efforts with limited additional capital investment. Our pricing actions are improving margins, and we will continue to work with our team to look for ways to further strengthen our business model through initiatives to enhance profitability and cash flow while also continuing to evaluate further strategic opportunities. While we are encouraged with the improving outlook for 2023 and beyond, and the benefits expected from exiting Excalibar and the Gulf of Mexico, we recognize we have more work to do to further improve our Fluids margins and optimize our working capital investments to strengthen our operating and free cash flow generation. For our Industrial Solutions business, the recent Infrastructure Investment and Jobs Act, combined with the Inflation Reduction Act, will inject approximately $479 billion into climate and energy spending that will provide additional incentives to transmission infrastructure build-out and resilience. These initiatives, in addition to the projected annual capital expenditures of around $27 billion already earmarked for transmission spending provide significant opportunity for our business in this recession-resilient market. Accordingly, we will continue to invest and expand our presence in key U.S. geographies in our rental and service business, which we estimate still has high single-digit market share, providing comfortable room for meaningful growth. Separately, we will seek opportunities to expand our presence in the important circular plastic space. Leveraging our core manufacturing competencies developed over the last 20 years, with the objective of driving further cost efficiencies in our manufacturing operations and product line expansion opportunities. And with that, I'd like to close by thanking our shareholders for investing in us and thanking our employees for their hard work and their continued focus on safety. We'll now take your questions. Operator?

Operator instructions were provided. Our first question will come from Bill Dezellem.

First of all, would you just walk through the commentary that you gave that the fourth quarter will have EPS that is — yes, hasn't been this high since the Q4 of '18, which the system that I looked at said you had $0.13 of earnings that quarter. And you mentioned a lot of moving parts. So if we're talking about something in that $0.13 range for the fourth quarter, is that a number that we can consider a new run rate? Or are there some special items in Q4, whether that be mat sales or otherwise that will keep that number from really being a true recurring number? So a lot of words, but hopefully that conveyed the question.

Sure. Bill, this is Gregg. I'll take that. Not suggesting that Q4 is going to be back to the Q4 of '18 level of $0.13, but we do expect an improvement from the adjusted number that we posted here of $0.06 per share. We do expect a step-up from that based on the outlook that we provided overall. In terms of the one-offs or nonrecurring type of activity, I think the only thing to really highlight there is, you have the issue of the direct sales activity within the industrial business. You do have that seasonal strength in Q4. As we highlighted, that's also probably the biggest uncertainty as well because that's the one that we don't have a lot of great visibility to. But beyond that, I think when you look at where we are at with the business overall, we definitely see what we posted here in Q3 as kind of a good sustainable level that we look to build upon.

And then two additional questions. First of all, do you anticipate that the mat sale — probably the mat business will essentially have a surge as a result of the hurricane repair work? And then secondarily, would you provide more commentary behind what you were seeing from your oilfield customers relative to pricing, your view of your market share and just the activity levels that is being anticipated going forward, please?

Thanks, Bill. This is Matthew. I'll take the first part of that question. Look, I think fortunately for the region of Florida, the work that is being done there to harden the transmission infrastructure paid off for them through the hurricane, and they actually saw fairly minimal damage to their transmission network. So most of the damage you were seeing was on the distribution side, and I think they've restored almost all of the power in that part of the world. So we're not anticipating to see a surge from that off the back of the fact that there wasn't material damage done to that transmission network through that. With respect to the second question in terms of the commentary we're saying, I think it's an international versus domestic story there. I think internationally, we're seeing a lot more conversations with customers around increasing activity in markets that can rapidly step up and provide product to the continent there into Europe. So that activity is building for us. In the U.S., I think what our real focus here is driving margin improvement. As the rig count kind of moves around, we're looking to high-grade our revenues there, and we're focusing more on margin improvement than share growth.

So Matthew, Greg, we ask investors to send in questions, which we have a couple of good ones. I thought I'd read to you here that came in. One is, you continue to talk about the capital-light model and consistent free cash flow generation. However, over the past several quarters, the free cash flow has failed to materialize. Can you help us understand when the company will be positioned for this, and why we should have confidence?

Yes, I'll take that. I think we're getting close here with these transactions. As you look at 2022, I really see the free cash flow headwind in three buckets. First of all, quarterly revenues, Q3 were up nearly $70 million year-on-year. That obviously has a big drag on the receivables' growth. Receivables consumed $61 million of cash over the past 12 months. As we look ahead, while we're continuing to drive growth, I don't think we expect it to be at that level, although I will say if revenue is growing at that pace, it's kind of a high-rent problem to have there. Secondly, you had acute supply-chain disruptions. And we are seeing that normalize. So I think the worst of that is behind us. And then third was the business models. Specifically, there, we have the Gulf of Mexico and the Excalibar businesses, which just naturally as part of that business model have large surges in working capital based on the timing of activity. So you see each of those three improving going forward. And therefore, it's a much more constructive outlook as we look ahead in terms of driving consistent free cash flow generation.

Good. The next question I have is, do you think there's a point in 2023 or '24 that you would pursue M&A? And would that be strictly limited to Industrial Solutions?

Thanks, Ken. I'll take that one. Look, I think we've been working hard over the last year to really free up the capital, identifying bits of the business where we couldn't see a pathway to returns or sustainable returns. That looks like we'll be yielding around about $100 million of cash from that, and also getting our businesses to a position where they can generate cash flow on their own, which is equally important. We've kind of outlined our capital allocation priorities. We want to make sure that we get our debt down to an acceptable level. We want to make sure that we're looking at share repurchases in our capital allocation, and we're also reserving some powder for strategic activities. I would say that it's always on the agenda for us to look at those things, and it is a potential to be a priority. That being said, beyond things that can deliver immediate efficiency to the Fluids business, the priority will be on the Industrial side.

And thanks, Bill Dezellem for asking questions and the investors that sent in those two questions. And that completes the call. If you want to say some final comments, Gregg?

Yes. Just thank you once again for joining us on the call and for your interest in Newpark and we'll talk to you again next quarter.

All right, ladies and gentlemen, that does conclude your call. You may now disconnect your lines and thank you again for joining us today.