Good day, and thank you for standing by. Welcome to Quarter 1 2021 NCS Multistage Earnings Conference Call. Please be advised that today’s conference is being recorded. I would now like to transfer the conference over to your speaker, Mr. Ryan Hummer. Please go ahead.

Thank you, and thank you for joining the NCS Multistage First Quarter 2021 Conference Call. Our call today will be led by our CEO, Robert Nipper, and I will also provide comments. We would like to caution listeners that some of the statements made on this call could be forward-looking and to the extent that our remarks today contain information, other than historical information, please note that we are relying on federal safe harbor protections. Such forward-looking statements may include comments regarding our future expectations for financial results and business operations and are subject to known and unknown risks and uncertainties, including with respect to the COVID-19 pandemic and its impact on the global economy, oil demand and our company. I would like to refer you to our press release issued last night, along with other public filings made from time to time with the SEC that outline those risks.

Thanks, Ryan. Welcome to our investors, analysts and employees joining our first quarter 2021 earnings conference call. Our performance in the first quarter was largely in line with the guidance we provided in early March. I'll briefly discuss our results and outlook for each of the U.S., Canada and international markets. Starting with the U.S., our revenue of $7.8 million in the first quarter, slightly outperformed our guidance of $6.5 to $7.5 million, as March revenues exceeded our expectations for both Repeat Precision and our fracturing systems product line. Volumes at Repeat Precision have increased from the lower levels seen early in the first quarter and the upgrades that we made to our plug design have provided the reliability that we and our customers have come to expect. With WTI pricing stabilizing at or above $60 a barrel, we've seen an increase in fracturing systems work in the U.S. as private operators have increased activity in the basins where pinpoint completions using sliding sleeves have demonstrated our operational benefits for our customers. As a result, we expect that we will return to sequential revenue growth in the U.S. in the second quarter. Our Canadian revenue of $20.2 million in the first quarter was near the high end of our guidance of $19 million to $20.5 million despite weather-driven activity reductions from spring break-up starting about a week earlier than normal. I'm very pleased with the initial adoption of our Terrus sleeves for waterflood applications in Canada, as post-completion activity presents an exciting opportunity for NCS. We expect that our Canadian business will exhibit typical seasonality, with a period of low activity through May before recovering in June through the winter drilling season. This stands in stark contrast to last year when rig counts reached multi-decade lows and activity didn't rebound until August or September.

Thank you, Robert. As reported in yesterday's earnings release, our first quarter revenues were $28.5 million, 48% lower than the prior year's first quarter. On a sequential basis, however, revenue in the first quarter was 4% higher than revenue in the fourth quarter of last year with a seasonally driven 45% increase in Canada offset by reductions of 31% and 79% in the U.S. and international markets, respectively. Gross profit defined as total revenue, less total cost of sales, excluding depreciation and amortization expense was $10.2 million in the first quarter or 36% of revenue compared to $23.9 million or 44% of revenue in the prior year's first quarter. For a sequential comparison, gross profit was $11.7 million or 43% of revenue in the fourth quarter of last year. Our gross margin percentage decreased primarily due to the product design changes implemented at Repeat Precision during the first quarter as well as mix impacts related to our geographic revenue contributions. Selling, general and administrative costs were $12.8 million in the first quarter which was $8.1 million or 39% lower as compared to the $20.8 million we had in the first quarter of last year. Our reported SG&A includes share-based compensation and certain nonrecurring expenses including certain litigation costs. In the first quarter, nonrecurring litigation expenses totaled $0.9 million and non-cash share-based compensation expense totaled $1.2 million.

Thanks, Ryan. Before we open up the call for Q&A, I'll close with a couple of brief comments. We believe that we're well-positioned to return our U.S. operations to sequential growth in the second quarter and our fracturing systems activity in the U.S. is levered to smaller operators that have been increasing activity thus far in 2021. We maintain a strong position in the Canadian market, which has exhibited much higher trough activity levels this year as compared to 2020 and is likely to return to normal seasonal activity patterns as we progress through the year. We have the infrastructure in place to support revenue growth in each of our markets without the need to incur additional material SG&A expense. We continue to invest in technology to continually enhance our current products and services to bring new innovations to our customers and to secure and protect our intellectual property. And our strong balance sheet, working capital position, and borrowing base are strategic assets for NCS and support working capital requirements associated with the organic growth. And with that, we'll welcome any questions.

Your first question comes from the line of John Daniel.

The annual guidance is helpful. Just one question. This morning, you alluded to a product tied to post-completion activity. Could you elaborate on that and just what the opportunity is for that type of market?

Could you say that again, John, you kind of broke up a bit.

I'm sorry. You alluded to a product tied to post-completion activity. I was just wondering if you could elaborate on that and the opportunity set.

Yes. So that's our Terrus product line. So it's a sliding sleeve that we have the ability to have multi-positions when we open the sleeve. And one of the things that we can do with it versus just having a sleeve that's open is there a -- just think about it as a metering valve and so what customers do with this is they can run multiple sleeves in their well of Terrus and when they put them into the injection mode, so injecting into a horizontal well, instead of the fluid going wherever the soft spot in the rock is or wherever the breakthrough in the rock is we control the amount of fluid that goes into the well and to each of the compartments. So our customers are actually having a lot of success in their fields using in this type of product and so that's what we're talking about.

Okay. When did you guys introduce that?

We actually introduced the Terrus type system probably close to a year ago but it's fully commercial now.

Got it. And do you see -- I'm assuming that product has opportunities globally not just in core markets. Is that fair?

Yes. It's -- anywhere that there is a secondary recovery going on where in -- with horizontal wells.

We don't have any question at this time. I would now like to hand the conference over to our CEO, Mr. Robert Nipper for closing remarks.

Thank you, Rivi. On behalf of our management team and the Board, we'd like to thank everyone on the call today, including our shareholders and the research analysts who cover NCS but especially our employees. I truly appreciate the enormous effort that our people are putting in and the sacrifices that have been made by everyone at NCS to support the company and each other through this very difficult last couple of years. We continue to operate safely with zero recordable incidents this year. Our team continues to provide excellent service to our customers and is developing new products and services that will enable our customers and is developing new products and services that will enable our customers to be more successful. Our people have done a tremendous job in managing the many challenges that have come with the continued impacts of COVID-19. We are only as good as our people and I believe we have the best team in the industry. We appreciate everyone's interest in NCS Multistage and we look forward to talking again on our next quarterly earnings call. Thanks to everyone.

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