Greetings, and welcome to the Newpark Resources Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard with Dennard Lascar Investor Relations. Thank you. Ken, you may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Newpark Resources conference call and webcast to review fourth quarter and full-year 2020 results. Participating from the Company in today's call are Paul Howes, Newpark's President and Chief Executive Officer; Gregg Piontek, Chief Financial Officer; and David Paterson, President of the Fluids business. Following my remarks, management will provide a high level commentary on the financial details of the fourth quarter results and near-term outlook, before opening the call for Q&A. And before I turn the call over, I have a few housekeeping details to run through. There will be a replay of today's call and will be available by webcast on the Company's website at newpark.com. There also will be a recorded replay feature available until February 26, 2021 and that information is included in yesterday's release. Please note that the information reported on this call speaks only as of today, February 12, 2021, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. In addition, the comments made by management during this 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 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 non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP measures are included in the quarterly press release, which can be found on the Newpark's website. And now that behind me, I'd like to turn the call over to Newpark's President and CEO, Mr. Paul Howes. Paul?

Thanks, Ken, and good morning, everyone. Before covering the specifics of the fourth quarter, I'd like to take a moment to reflect upon the progress we’ve made over the past year to advance our strategy. 2020 was a year in which companies around the world faced unprecedented challenges, and I am extremely proud of the resilience of our entire organization. Despite navigating the incredibly challenging market conditions, we remain focused on what we could control and continue to press forward with our strategic imperatives. To that point, I'd like to highlight a few areas of progress. First, our 2020 results demonstrated the flexibility of our capital-light business model, which enabled us to generate positive free cash flow through all phases of the industry cycles. For the full-year 2020, we generated $52 million of free cash flow and reduced our outstanding debt by $73 million, expanding our liquidity and ending the year with only $87 million of total debt, our lowest debt level in more than 20 years. Second, we continue to advance our strategic initiatives to diversify our end markets, demonstrating our ability to expand in the areas that are likely to benefit from the energy transition. More specifically, despite a significant COVID-driven slowdown and customer activities across all end markets in 2020, our Site and Access Solutions business, formerly known as Mats and Integrated Services, delivered 9% year-on-year growth in rental and service revenues from the utility sector. Another key step we took in reshaping the Newpark was the successful repositioning of our Conroe, Texas chemical blending facility. We accomplished this by leveraging our existing assets and chemistry know-how into industrial end markets. In the face of the distressed U.S. oilfield, we successfully ramped up production with disinfectants and industrial cleaning products, delivering $11 million of revenue for the…

Thanks, Paul, and good morning, everyone. I'll begin by covering the specifics of the segments and consolidated financial results for the quarter before providing an update on our near-term outlook. In the Industrial Solutions segment, total revenues increased to $50 million in the fourth quarter, including $8 million from industrial blending, reflecting a full quarter production. Focusing specifically on the Site and Access Solutions business, rental and service revenues increased 26% sequentially to $29 million and outpaced our expectations for the quarter, benefiting from stronger activity from utility sector along the Gulf Coast. Revenues from product sales more than doubled sequentially to $14 million for the fourth quarter, benefiting from the Q4 seasonal strength from the utility sector, although demand remained somewhat suppressed by COVID headwinds relative to the year-end strength seen in prior years. Looking at the Site and Access Solutions revenues in total, more than 80% of our Q4 revenues were derived from non-E&P markets with the utility sector representing the largest end markets. Comparing to the fourth quarter of last year, revenues from the Site and Access Solutions business declined to $12 million, or 22%, driven by a $14 million decline in direct sales attributable to the COVID headwinds on customer purchasing. Rental and service revenues grew 5% year-over-year, reflecting a dramatic shift in end market mix, specifically while E&P customer revenues declined 40% from Q4 of last year. This was more than offset by a 43% improvement from the electrical utility and other industrial end markets, which contributed a quarterly high of $22 million in revenues to the fourth quarter of 2020. Benefiting from the stronger revenues, the Industrial Solutions segment operating income improved $10 million sequentially, contributing $15 million of EBITDA for the fourth quarter. Turning to Fluids Systems. Total segment revenues improved by $12…

Thanks, Gregg. There has been a lot of hard work throughout our global organization over the past year to successfully navigate the market volatility while consistently driving free cash flow. I am proud to say that we have delivered on our commitment to strengthen our balance sheet, positioning the company for success as the global economy recovers. There is clearly more work to be done in our Fluids business and we remain firmly committed to our asset-light business model and improving our returns. As we look ahead at 2021, it's our belief that the underlying fundamentals are improving in both of our segments. As I reflect upon our strategy and longer-term outlook, we are very proud of the progress we've made diversifying our revenues and in particular, the penetration of the utility sector over the last four years. The momentum we have developed is expecting the increase as our brand identity grows in this important market. With this expanding presence, we also believe our Site and Access Solutions business will have increased visibility and opportunity to capture value in the energy transition. Whether it's the connection of wind farms or solar arrays to the grid or the delivery of electricity to power our electric vehicles, our nation’s utility grid is a critical element to the success of America’s energy transition and we are excited by our expanding role. I would also like to highlight that we recently added Michael Lewis to our Board of Directors. Michael joined our Board in January 1 after retiring from Pacific Gas & Electric Corporation. Michael brings over 34 years of electric operations experience, most recently serving as both Interim President and as Senior Vice President for Electric Operations. Prior to joining PG&E, Michael served as Duke Energy's Senior Vice President and Chief Distribution Officer…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And our first question is from George O'Leary with Tudor, Pickering, Holt. Please proceed with your questions.

Good morning, Paul and Gregg.

Good morning, George.

One of your comments struck me as interesting, and I wondered if you could peel back the onion a little bit. You talked about the transmission opportunity, and as we add more renewables, I would imagine that augments the opportunity there. Just given you can put a thermal plant or a dispatchable power plant, you could look at that more even essentially wherever you launch, if maybe an oversimplification. But on the renewable side, it needs to be where the resource exists. So I would assume the transmission opportunity is growing as we add more renewables to the equation. I wondered if you could talk about kind of a total addressable market and then Newpark's role within that and how that may have changed since you guys first started looking at that over time?

Yes. Certainly, George, I’d be happy to answer your question. For the last four years, we've been working diligently to penetrate the utility sector. And with the recent momentum building behind renewables, the tie-ins of solar arrays, wind farms although have fairly long access roads that you have to have some type of environmental protection to be able to go in and out of the properties. And so the addressable market will parallel the growth of the renewables. It's hard to kind of quantify that right now, but we obviously see that as a tailwind kind of wind at our back going forward. So pretty excited about that opportunity. And Gregg, would you like to add to that.

Yes. Just add to that. If you go back a few years and go late 2018, we kind of framed up the opportunity set that we saw in the electrical utility transmission space, and that's really unchanged. And I think what Paul hits on here is, as we continue to see the progress with energy transition, it’s leaning more and more and more on the electrical grid. And so that just heightened the need, the stability of that market and the need for continued investment in that infrastructure.

And then, again, the growth of EVs on the distribution side, you're pulling more and more power and that creates more on the demand side as well. So we've got the upfront side - upstream side on solar arrays and wind and then you got the downstream side in terms of the EVs pulling the power. So we think we're ideally suited. And the other thing that's interesting now that we're getting more – as we grow, we’re getting – reaching more of a critical mass in the space to bring the identity of our business and our products are growing with the big electrical operators. And so our visibility is growing. And with that, we obviously feel better about where we're placed in that market and the success we're going to have going forward.

Great. That's very helpful framing. And then just on the balance sheet side, I think you guys are actually very well positioned on the balance sheet from a debt perspective. But I know there are concerns out there from some investors who go, okay, there’s this near-term maturity although it is convertible. Just talk about the various avenues you have to deal with those converts. You’ve done a great job of generating free cash flow over the last 12 months, but just what's kind of the game plan, what are the different avenues you could pursue? Just help frame that for folks?

Yes. I think I could give – you start with the key piece that’s driven our actions this year and that's been the cash flow generation. And as we framed it up early in the year, we look to lean heavily on working capital reductions to generate that free cash flow. The business has done an outstanding job of working those down. We still have some more work to do on the inventory side. We expect that to be a tailwind. But you see where that has positioned us. And as we mentioned, we closed another small piece of financing earlier this week, another $8 million loan in one of our foreign subsidiaries, that brings our ABL down to single digits. And so it's now a largely undrawn facility. We've got $80-plus million of availability on that facility, and with clear line of sight on - there's another component of that $25 million or so related to our mats that we see coming back in here mid-year. So we see a fair amount of headroom right there. Now what will be – what are our avenues here as we go forward, we'll obviously continue to evaluate. We have talked about the various assets that we have, our operations in the international subsidiaries to add additional kind of small incremental pieces of debt to the extent that we think that that makes sense, and we'll continue to work the free cash flow generation from the business to create additional revenue.

George, I think we feel pretty comfortable that we're going to be able to handle the debt maturity on the convert via our ABL. That's really the solution, and we've done a great job. The operational efficiencies that have been driven in the Fluids business and harvesting working capital has been outstanding and has really put us in a – I think in a really great place.

Super helpful, guys. I'll turn it back over. Thanks for your time.

Thank you, George.

And our next question is from Daniel Burke with Johnson Rice & Company, LLC. Please proceed with your question.

Yes. Good morning, guys.

Good morning, Daniel.

Let me draft off George for a second and revisit the utility markets. I think you all said, overall revenue growth in the mats service rental business directed to the utility end market by 9%. And there were some crosscurrents, obviously, COVID pressures, that you were able to overcome due to, I guess, the hurricane-related bump. But really the question is prospective . So looking at 2021, can you grow utility market double digits again? Or was the hurricane boost sufficient that it might be challenging to repeat that?

No. So this is Gregg. I would say that we definitely have the ability to grow at a double-digit rate in 2021. Again in Q4, we didn't come off a particularly strong quarter in Q4, which benefited from the Gulf Coast work. But you also have to reflect on the fact that that was after two quarters that we’re seeing a pretty meaningful COVID headwind. So you pull that back and look on a year-over-year basis, we're exiting the year on a pretty strong point with growth year-on-year and set up well for continued growth in 2021.

Got it. Okay. Maybe one follow-up to Gregg. I mean, is the exposure to the utility market continues to grow, I mean, is there any change in the appetite of the mix between sales and rentals that you always contemplate? And I know you mentioned that the pretty healthy spill over into Q1 2021, you could see. But this question, I guess, I'm asking over a bit of a longer horizon.

Yes. So, as we move into the utility space, first of all, from our perspective, we'll provide that offering to our customers, whether it'd be a direct purchase or rental, and that really comes back to their specific needs and economics, et cetera. But we are more than happy to provide both. Now what we find is relative to our historical oilfield, the oilfield business was a rental business, I mean because of the short-term nature of it. And what you find here in the utility space is there is a larger purchase component to it. So we would think that over time, that sale component becomes a larger piece of the mix. And if you think about that, that makes sense because they have a longer-term sustained need that they have for the product to maintain their infrastructure.

Yes. The other point too, it's beneficial to continue to sell our products into the utility sector. What it does is, it creates more brand identities, more brand equity. And if you look over a longer period of time and some of the mask advantage then you create a continued need to replenish that fleet. So our goal is to continue to build out the market side of it from the sales perspective, but also they're running parallel, the most efficient operation in terms of access and site solutions.

Got it. Understood. That's helpful guys. And I suppose, let me pivot to you then with the Fluids business. And I guess – the question I'd like to ask is, still kind of hard to see exactly when COVID impacts dissipate internationally. But can you take margins meaningfully above breakeven EBITDA without recovery in the Eastern hemisphere?

Yes. Good morning, Daniel. This is David Paterson. Yes, absolutely. I think the Eastern Hemisphere historically it’s been most profitable parts of business. And we are still seeing some lingering impacts of COVID coming out of Q4 and then Q1 and I think travel disruption, project [indiscernible] are being delayed slightly. And our customers are learning to live with COVID and we are starting to move the volumes and contracts are late in the quarter. We’d see I think stronger tailwind possibly into Q2 and second half of the year. I think with the rich pipeline contracts we have, I think [indiscernible] margins and certainly need to improve, I think Q2 and H2 going forward.

Yes. As we look out here at Q1 in the near-term, obviously the North American land improvement, where we face with the recovery there are key to getting back to that breakeven level. But you look beyond that that international component is a very meaningful piece to driving the profitability going forward.

Okay. All right, guys. I'll leave it there. Thank you for the comments.

Thank you.

[Operator Instructions] Our next question is from Bill Dezellem with Tieton Capital Management. Please proceed with your question.

Good morning, Bill.

[Indiscernible]

We’re having a tough time hearing you.

Bill, real quick, we are having a hard time hearing you here at Newpark. All the other callers [indiscernible] pretty clear. Maybe redial in.

Okay. I'll call on later.

Yes. We’re having hard time. Operator?

There are no further questions at this time. And I'd like to turn the floor back over to management for closing remarks.

All right. Thank you once again for joining us on the call and for your interest in Newpark, and we look forward to talking to you again at the end of the next quarter.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.