could include forward-looking statements as of today, May 21, 2024. FET's disclosures regarding such statements can be found under the Investor Relations tab of its corporate homepage. Neal and Lyle, I'd like to thank you for taking the time to join us today. Thank you, Jeff. Great to be here, Jeff. FET provides technology solutions to the oil, natural gas, industrial, and renewable energy industries. The company's products are designed to help customers safely increase operational efficiency and reduce the environmental impact of their activities. Operational efficiency is really measured in improved performance on their assets, which can result in lower costs and higher returns on investment. The company's product lines are segregated into two segments, Drilling and Completions, and Artificial Lift and Downhole. FET serves some of the largest oil field services companies in the world with its drilling and completion segment, and the E&P operators who own and process hydrocarbons with its Artificial Lift and Downhole segment. Neal, I'd like to begin, if we can just talk about the segments and the customers for FET's business. Mm-hmm. What drives revenue for those two segments, and how are they impacted each by capital spending cycles? Yeah. So Jeff, we, you know, we recently, you know, adjusted our reporting segments in order to help ease the understanding of our business. And so, you know, as we think about our customers and drivers, I'll, you know, start with our Drilling and Completions segment, which is just about 60% of our revenue. And in this segment, we sell to the world's largest oil field service companies, and so they utilize our products and solutions to drill and complete wells for oil and natural gas operators. So this is generally highly engineered capital equipment and mission-critical consumable items and aftermarket services. This segment revenue is really driven by the level of activity of our service company customers. So specifically, you know, we tend to look at global rig count and hydraulic fracture fleet count. As these metrics increase, we sell incrementally more capital, while also selling activity-based consumable items. I think about, I'm sorry? Go ahead, Jeff. I think roughly 75% of FET's first quarter revenue came from activity driven consumables. How do you differentiate between drilling and completion-related activity versus the production related activity? Yeah, again, it goes back to the customer base. So, you know, yeah, I just mentioned the Drilling and Completions. On the, you know, for that segment, you know, I think what's important is that those activity-based consumables are usually big-ticket items, so their unit prices can be in the thousands, if not the hundreds of thousands of dollars. So much bigger than nuts and bolts, and they need to be replaced every 3-6 months. For the Artificial Lift and Downhole segment, we generally sell our products to the operators directly. So their metrics are, you know, how do they increase production, eliminate equipment damage, and minimize costly workovers? So these activity-driven consumables we sell in that, that segment are driven by well count, both newly completed and remediated wells and well complexity. So both segments, we are tied to—generally tied to activity, more so on the Artificial Lift and Downhole segment, and we think that's a great place to be, 'cause it's generally more predictable and more stable. So on the—just to be clear, for my purposes, so downhole or Artificial Lift and Downhole really is over the life of the well, so that creates recurring revenue opportunities over the life of a producing well, as opposed to technologies that are used for drilling and completion, whose recurring revenue, I guess, is driven by the replacement cycle. Yes, I think... Yes, that's correct. So I think a couple of caveats there: so as the wells are first drilled, the Artificial Lift and Downhole segment will—they'll consume our products there. Over time, as those wells are worked over or, you know, remediated, then our products are used again, and so we have multiple bites at the apple in that segment. On the Drilling and Completions side, our products are generally not per well, but per multiple well consumption rate, so that, you know, wireline, coiled tubing, for example, drilling consumables will be used over, you know, let's call it 10 or 20 wells, and then they'll wear out. So they'll wear out over time. I think there, what's changing is the amount of time that these products wear out. Because of service intensity, what we're seeing is that our products are being utilized more and more per day as wells get longer, as hours pumped per day increases, as laterals get longer, and so they're wearing out more quickly over time. So that's where we see the benefit from, service intensity. You, you talk about the strategy in terms of a Beat the Market plan to gain share and drive growth. Neal, can you really talk about what do you mean by Beat the Market, and how do you execute that strategy? Yeah. So as we think, you know, to create value over the long term, we need to exceed the rate of growth of our market drivers. So, you know, global rig count is really, at the FET level, our main driver. The focus we want to have is we want to grow faster than that rate of growth of that global rig count, and we do that a few ways. You know, first, we want to grow profitable market share. So this is done by, you know, aligning our product portfolio to activity. So we've talked about that here just a second ago. We also focus on niche markets where we have fewer competitors and higher margins, and we leverage our globally recognized brands. Second approach is we want to continue to develop differentiated products and technologies that allow our customers to be safer and more efficient. And we combine that with our global manufacturing and distribution footprint, where we ship our solutions around the world, wherever energy is produced. And then the final, final leg of this Beat the Market strategy is energy transition. As a manufacturer of engineered solutions, we have a lot of different ways of participating in, in that opportunity. And so when we put it all together, our, our strategy to Beat the Market is an approach that we think is paying off today and, and will pay off even more in the future. You've talked about the business model being asset-light in the past. How, how does an asset-light business model fit in with the manufacturing and distribution company to really position FET to capitalize on margin opportunities? Yeah. So I think, you know, as a manufacturer, you know, for us, we can deliver our products wherever energy's produced, without having to invest in facilities or bases. So if we wanna sell into West Africa, we just put our products on a boat and have them delivered. We don't have to invest in local facilities there. It also allows us to pivot where we need to go. So globally, we can shift from the U.S. to Canada to Latin America, to Asia, or the Middle East, and we can do it without adding a lot of incremental capital expenditure. So we believe that we can grow our revenues organically by 50% from our current levels, without a meaningful change in our level of capital expenditure. So this is what we mean by capital light. We have a business with really strong operating leverage that does not require a lot of capital investment to grow revenue. Lyle, let's, if we can just touch on the balance sheet. I know we'll talk about VariPerm, the acquisition which closed in January, here in a few minutes. But from a big picture standpoint, how do you think about managing the balance sheet to maintain FET's flexibility and be able to adapt to, changing market conditions in the different parts of the world in which the company operates? Yeah, good question, Jeff, and thanks for hosting us today. Neal mentioned operating leverage, and that's a key something that's very interesting, I believe, from our investment thesis. And operating leverage specifically stems from our capital light business that Neal talked about, that means that we can grow considerably without more CapEx, and also from our ability to grow top line without having to add a lot of other fixed costs. So as we grow, we ought to be able to expand our margins. We believe firmly that a company like ours that has a lot of operating leverage should not have a lot of financial leverage. So the last several years, we've done a lot of work to fix the balance sheet. You know, first, since 2020, we've reduced our net debt position from $400 million or so to roughly $100 million, a level that's less than the accounts receivable on our balance sheet, so a lot of delevering of the business. Last year, we upsized our asset-backed revolving credit facility, our ABL, to $250 million. So as we grow, and we need to grow working capital, that facility will grow along with us. It gives us dry powder. Then finally, in January, you mentioned VariPerm, but we did complete the VariPerm acquisition, really dramatically increasing our scale, profitability, and drop through of cash from that profitability. So with that new scale and profitability, we're able to generate a lot more free cash flow. So right now, I think we have the right financial structure to weather ups and downs in the market. If there's softer times in the market, we can service our debt by monetizing working capital. As times of stronger growth, we can leverage our ABL to fund those requirements and cash needs. Neal, I'd like to go back to the correlation of revenue with global rig count, as you talked about, with that, that really revenue is driven by activity levels. But in the U.S. and unconventional basins, laterals are getting longer, as you mentioned, completion that requires more intense stimulation, which puts more wear and tear on the type of capital equipment products that you, that FET provides for drilling and completion work. So if you think about revenue on a per-rig basis in a stagnant rig count, is there a opportunity still to grow revenue because of the shorter replacement cycle for a lot of the products that FET provides? Yeah, Jeff, absolutely. So, you know, the first and most direct way we benefit from, you know, the unconventional, you know, growth of lateral length and other completion intensity, is greater demand for our products. So the more footage drilled, the longer lateral length, you know, more stages per well, more pumping hours per day, that, you know, as those metrics you mentioned earlier increase, the more our products are consumed in a year. So this is really a secular driver related to service intensity. And, you know, a great example of that is our wireline cable business. So with more stages per well and more pumping hours per day, our cables are gonna help the operator enable more production for that well, which is great for that operator. But for the service company, they're gonna need to replace our cable more often because it's working more. And so this is service intensity that drives demand and more revenue for FET. The really to gain share and to increase FET's total addressable market requires the company to provide technology solutions that really meets those changing needs of the customers that you talked about. How do you-- what's the engineering and design process to identify solutions to where FET can supply its customers with innovative products to capitalize on those types of trends? Yeah. So, again, we look at those trends and, you know, we key our product development a couple different ways. You know, we wanna develop products and solutions that last longer, again, so that they see more value per dollar they spend, that reach farther, that go longer into the lateral, that reduce downtime. And especially as service intensity increases, the value of our products that increase efficiency, they go up as well. So we utilize our market-facing employees, who are really, you know, experts in their market niches, and who understand how to capture value so that we develop the right way to develop products that separate ourselves from our competition. And, you know, as we look at key markets, we wanna... When we wanna innovate, we wanna, we wanna earn a great return, we wanna generate higher margins. And we've had success doing that, especially with our, our newest products, like the FR120 Iron Roughneck and our, our latest iteration, the Enviro-Lite Greaseless Cable. You all, I think, developed some new pump pressure pumping manifolds, which also have been shown so far to pretty dramatically increase operational efficiency. Neal, what's the adoption timeline on some of the innovative products that you design look like, and how do you drive adoption within among the customer base? Yeah, that's a great question, and it varies. So, you know, we do innovation in a couple ways here. So there's really kind of what's called the iteration, where, you know, every quarter, every six months, every year, we make our existing products better. We see that, you know, great examples is in our wireline business, our coiled tubing businesses, our MultiLift pump business, where we're just making the existing products we have incrementally better year-over-year. And again, that separates us from new entrants and makes it hard for a competitor to get into the market. That adoption rate is generally very quick, so that happens more quickly. On new products that are disruptive, and I think the FastConnect is a great example of that. It takes longer time. You know, service companies, operators, everyone likes to be the second first user of your product. So what we need to do is to get our product in the field as early as we can. And so, you know, what we do is, early stages of product development, as we're analyzing the market that we're targeting, we are listening to the voice of the customer. That's critical. So that when we are ready for our first field deployment, we have a customer who we've convinced, who's worked with us, who's ready to adopt. Then, when we get in the field, we gather data. We wanna ensure that we are indeed solving the problem that we've set out to solve. And when we are successful, we create white papers, we present at industry events, and we utilize targeted marketing to develop leads and opportunities. And, you know, we are in a relatively small industry. You know, there's fewer and fewer operators, there's fewer and fewer service companies. So anytime you have success with a leading customer, you will get a lot of adoption more quickly, just by having success and word of mouth. Neal, it sounds like there's a lot of collaboration then between FET and your customers on what they need and how you all can best provide it. Is that also true in your coiled tubing line of products, as companies say, "These are the types of wells we need to be able to drill, and can you design a coiled tubing string to allow us to be safe and efficient? You know, absolutely. You know, I think the coiled tubing example is one that we see across the company. But, you know, we have multiple engineers working for us today that, you know, in their previous parts of their career had been, you know, engineers for the service companies, utilizing coiled tubing in the field. And we've brought that expertise in-house, and they work on a daily basis looking at well designs, you know, different types of casing, different types of wells, depending on the severity and the tortuosity, where they will make specialized and custom designs for our customers, to enable them to have the most productive coiled tubing string utilized in their operation. And then, what we combine that with is our manufacturing and supply chain so that we can be as flexible as possible and customized as possible, but do it in an extremely friendly way for working capital, so we can turn our inventory and move quickly through the manufacturing process. So we, we've spent a lot of time putting all those phases together, and I think it's led to a lot of our success, especially, you know, in the completion side of the business. FET acquired VariPerm Energy Services, a Canadian oilfield services company which specialized in flow control products, primarily for the Oil Sands market in Canada, in January of this year. Neal, what, what role do acquisitions play in the Beat the Market strategy? I know FET has really, executed a series of transactions since the company was, formed. Yeah, so, you know, for us, Beat the Market is a combination of organic and inorganic approaches. So when we do look at acquisitions, we want acquisitions that have strong industrial logic, that can increase our margins, that have, you know, products that are differentiated and, you know, ideally protected with IP or industrial know-how, and, you know, can be accretive. Specifically with VariPerm, which is a great example, they increased our total addressable market by adding sand and flow control products to our downhole portfolio. Their products are used globally in complex well formations, but adding VariPerm also gave us access to the Canadian Oil Sands, which is one of the largest and most stable oil basins in the world. And then, I think at a time when energy security dominates political calculus, participating in the Canadian Oil Sands is a great place to be. Neal, you talked a little bit about margin accretion, but, VariPerm's margin accretion in the Artificial Lift and Downhole segment was very evident in first quarter 2024 results. Adjusted EBITDA margin was 21.6%, which was more than 500 basis points higher than, first quarter 2023, with nearly a full quarter of contribution from VariPerm, VariPerm. Why are their solutions so accretive to FET's overall margins? Yeah, so, you know, when I think about, you know, by adding VariPerm, you know, they're. You know, we're able to bolt on this acquisition very easily. They were efficient, well-run company. They have a really strong portfolio. And by adding VariPerm, we increased our Adjusted EBITDA per share by over 40%. You know, their products, you know, are aligned with our strongest products. They compete in very specific and targeted niche markets. They're differentiated from the competition. And they have facilities that have the right scale and efficient design, combined with their employees. Their knowledge of the customers has allowed them, and now us, to be extremely profitable, and we expect that to continue on a go-forward basis. Lyle, do you think those margins are sustainable? And then how do they affect your free cash flow outlook for FET? Yeah, Jeff, we do think those are sustainable margins. Neal mentioned Oil Sands being a relatively stable oil basin globally, so we think that's gonna be a slow and steady revenue driver for that business. The differentiated nature of their products and the moat that they've built from an operational efficiency perspective should allow that business to continue forward. So we're excited about that. But also, we think there's opportunities for, I'll call them, revenue synergies. VariPerm was private, so we didn't bank on a lot of cost savings, but we do think we can drive revenue synergies really two ways. First, leveraging VariPerm's relationships in the Oil Sands to pull through additional of our downhole products. So specifically, our teams have already partnered up to sell Davis-Lynch casing hardware into the Oil Sands. That's a new opportunity for us. Our MultiLift, artificial lift, sand protection products to help with fallback of sand and protect electric submersible pumps. So we've seen those already happening. The other opportunity is to leverage our global footprint to pull VariPerm's products through globally. Their sand control and flow control products are used in difficult to produce basins around the world. Last quarter, VariPerm had sales not only in Canada, but also in Latin America and the Middle East. We look to leverage our footprint and customer relationships to help them grow and accelerate that. That's gonna be a longer, longer putt to get revenue growth. That's not gonna happen in months, but think about that in quarters or years. But definitely a way to help us continue to grow our addressable market and increase our revenue per rig working around the world. Lyle, when you think about those pull-through opportunities, whether it's Canada or international, are the types of products that fall into those opportunities, would those have an impact, too, on FET's margins, along with contributing to revenue opportunities? Yeah, if you look at the overall margin for the Artificial Lift and Downhole segment, where VariPerm sits, and where some of our other downhole technologies sit, you mentioned, Jeff, the EBITDA margin in the first quarter being above 20. The contribution margin of those businesses is very strong. So as we see the pull-through, we see a lot of incremental EBITDA margin, which is great, but also we do have our asset-light strategy. So it's not gonna cost us a lot in the way of other capital and other uses of cash to grow that top line. So we should have very strong drop-through from EBITDA to free cash flow, a meaningful measure, and really sets us up for strong free cash flow generation going forward. ... Are there, with the VariPerm acquisition closed, are there other product lines that could represent acquisition opportunities that would have a significant impact on FET's margins and/or just reaching new customers and being able to touch more customer wallets? I think there's a lot of good acquisition targets out there, you know, a lot of privately held companies, similar to VariPerm that have, you know, are experts in their markets, have differentiated products and solutions that target niche markets. I think there's quite a few that we could, over time, add on to our product portfolio, reach more customers, as well as, you know, bolster our key product lines for sure. You know, you mentioned Industrial Logic earlier, is it just fair to think about that as an acquisition needs to either bring new customers or, I'm sorry, new product lines that allow FET to reach more customers with its products, or bring products that just fit from a- and allow FET to provide a more comprehensive technology solution suite to its customers? Is that, is that fair? Yeah, I think we're a great platform to add on, you know, whether it's, you know, within our existing markets or just adjacent to where we sit. So I, you know, I think VariPerm's a great example. It fits really nicely in our downhole product line. It has very similar characteristics to our downhole, but it fits really, really nicely, and I think there's other companies out there that would have that same sort of fit. I think, you know, for us, consolidation can happen, but I think that's less obvious. It's more kind of expanding our touch, our foothold on existing customers. And I think, as Lyle mentioned earlier, we wanna, you know, be able to leverage our global footprint. So I think a lot of these smaller companies that would be potential acquisition targets don't have the international footprint. We've made the investment, and I think we're an ideal, you know, acquisition partner to utilize that footprint. Yeah, when we were talking about addressable market, you highlighted the greaseless cable systems, and the FR120 Iron Roughnecks, and your FastConnect manifolds, and then the PumpSaver Plus, which have been big contributors to that. Are there case studies that you can point to, to how you go about marketing those products and solutions to customers to drive adoption? You know, for a lot of our products, we'll develop case studies, and we'll put the time to it. Other ways, we'll do, you know, proprietary presentations that we'll sit down and detail our, you know, what we've done. I think, you know, with each of our products that where we, you know, expand our addressable market, we need to find a way to help our operator, customers, and service companies be more efficient. And I think that being more efficient, being safer, those are really the key drivers. And so we try to hit on all those points when we do the white papers and when we present around the industry our solutions. The energy transition's been a big focus of a lot of investor attention for a number of years now. How is FET positioned to participate in different aspects of the energy evolution and participate in that value chain? Yeah, I think that's again another differentiation part of our business model. We're a manufacturer, so we produce engineered solutions, and so we have a lot of different ways of participating in energy transition. It's kind of a wide definition, right? But you know, as an example, we have valves that are used in oil and gas, but they're also used in biogas and hydrogen applications as well. You know, our casing hardware business, you know, is, you know, oil and gas, but also, we sell into geothermal and an area we've been active for many years. And we're starting to get inquiries to sell that casing hardware and carbon sequestration. So, you know, I met with our engineering team just yesterday, and he's seeing a lot of increased interest in carbon sequestration, so that's a new one on the casing hardware. But it's about having those solutions that can be applied, you know, in multiple applications. And great example of that is our offshore wind. You know, we have products like our remote-operated vehicles or, you know, ROVs for shorthand, that are dual use for traditional oil and gas, but also the development of offshore wind farms. And so what's really good for us is we have the same client base for both industries. So as offshore demand has increased for traditional oil and gas, it has also increased for offshore wind and has driven the utilization of all vehicles. We're seeing increased inquiries and demand for our ROVs, and this is exciting for FET. Is that in many cases, by your existing customer base? Because a lot of those companies are the ones that are pursuing carbon sequestration and looking at building offshore wind, wind farms, and things like that. It's just an extension of your existing relationships, isn't it? It is, right. And so, you know, we always wanna stay close to our customers. You know, we're evolving, but they're evolving, too. And so we continue to look at, you know, adjacent markets with our customers, where we have core competencies that can be used in new applications. Really good example of that is our specialized radiator business. So we make a unit that is the leading edge product for frack applications. It has high market share, because it's extremely efficient, it's durable, it's reliable, and now we're using these features to supply the dispatchable power generation industry. So early stages here, but we're beginning to open up a brand-new market for FET. Let's touch on the balance sheet. Lyle, we, we talked a little bit earlier from a high level. I think FET, you've, you've talked about expect to generate $100-$120 million of Adjusted EBITDA for full year 2024, and roughly $40-$60 million of free cash flow this year. Lyle, how do you plan to deploy free cash flow to maximize FET's financial flexibility? A great question, and we're really excited about our path forward on the balance sheet. Just to kind of put a little bit of numbers around what you talked about there, Jeff, we did guide EBITDA for a full year basis of $100-$120 million, and free cash flow of $40-$60 million. We look at where we go from here. We ended the first quarter with $120 million of liquidity, combination of cash on hand and availability on our ABL that we talked about earlier. Take the $40-$60 million worth of cash that we would generate this year, add those two things together, we will be in great place to repay the $134 million we have outstanding of our senior secured 9% notes. By the end of that year, the end of this year, we expect to have those paid back, given those two factors, and then we can turn our attention in 2025 to repaying the seller's note. We did put a seller's note in place for the VariPerm acquisition. Total size of that is $60 million, so roughly in line with this year's free cash flow. We would expect that somewhere around the middle of next year we'd be in position to retire that as well. Put that all together, that says, kind of call it a year, a little over a year from now, we'd have no more long-term debt on our balance sheet. Any borrowings would be on our ABL. We'd have ultimate flexibility then to look at how do we return, or what do we do with our cash flow at that point. So first, returning cash to shareholders. Options could be dividends, could be share repurchases. Obviously, any funding of organic growth, if we needed to do that, primarily working capital, like we talked about, or accretive acquisitions. So, thinking about a year from now, leverage low, real opportunity to do more with cash and be flexible, and, something we're excited about, of having that flexibility and ability to return cash back to our shareholders. Lyle, you touched on the VariPerm financing package, which included the seller's note we talked about and some credit facility borrowings, but it also included 2 million shares of common stock. What are the circumstances that drive the willingness for FET to use common stock as a part of a acquisition financing package? No, good, good question. I think as, as we mentioned, we have done a lot to get our balance sheet in the right place, to get our leverage down. And so I think what you should expect from us is a conservative financial leverage focus going forward. So any acquisitions are gonna need to be not only accretive and have industrial logic, but also be able to get across the finish line while maintaining healthy leverage. One way to do that, obviously, is to think about using equity in a deal. We did that in the VariPerm deal, but while doing that, we're able to really dramatically increase our EBITDA per share. So we issued about 20% of our shares outstanding, 2 million shares at that time, and increased our EBITDA in Q1 of this year versus Q1 of last year by 60%. So really accretive to our shareholders on that basis. The other way to think about use of equity is to help the deal get across the finish line. So the buyers, in this case, valued FET equity, the ability to, to get it and sell it out in the market, but also the ability to participate in the upside that can come through the combination. So, so- Lyle, what are the- It'd be conservative leverage, but also in a way, to help us get across the finish line. When you think about the balance sheet impact of something like VariPerm, can you just talk... Give us the metrics that matter most to you when you think about the balance sheet health, and where your—what your tolerances are? Yeah. No, great, great question. Like a lot of companies, we do use and look at net leverage, so net debt relative to EBITDA. You'd see us, we got our net leverage down to nearly 1x before the VariPerm acquisition. Post-VariPerm, just up around 2x, and we definitely wanna drive that back, and are committed to do that here in 2024, and get that leverage back where we started. The other way that we look at it is quantum of debt that we have outstanding, or net debt outstanding, maybe better to say, in relation to our net working capital. So pre the VariPerm acquisition, our net debt was $100 million. Accounts receivable at that time on the balance sheet, about $140 million. So from a stability and protection standpoint, if our business were to get soft, that receivables balance will come down and generate cash to let us service our debt. So looking at debt not only as a function of EBITDA, but also as a function of working capital, which is highly liquid, something that we look at doing. So expect that conservative balance sheet, but using those two metrics as guideposts for us. Neal, I'd like to bring our discussion to a close today, but I wanna ask you if you can just summarize for us how you think FET is positioned to really capitalize on opportunities in today's business environment and build value for the company. Yeah. Jeff, so great to be here, and I appreciated the time today. So, you know, in summary, you know, I think FET is a, is a great company, and an even better investment, and that, that really comes from the world requiring, needing energy. You know, energy is the fundamental building block of economic growth. Demand for energy will propel strong global investment in energy production, and at FET, we will grow our revenue profitably by executing our, our strategy to, to beat the market. And our operating leverage will drive margin expansion, and our capital-light business model will allow us to convert a significant portion of our incremental EBITDA into free cash flow. And with our low capital intensity, we have the ability to, to both maintain a disciplined balance sheet, and over time, return, return cash to our, our shareholders. So exciting time for FET. I think we're in a great position, and I look forward to the years ahead. Neal, Lyle, I think we'll leave it there today. I would like to thank you for taking the time to join us today, and we look forward to hosting another Fireside Chat in the not-too-distant future. Thank you, Jeff. Thank you. Thank you. Thank you.